This case study describes how a healthcare consulting team of process improvement experts, utilizing Lean Techniques, were able to help a home healthcare provider improve annual profitability by $900K, reduce overtime by 50%, increase productivity by 10% and increase revenue by 3%.
Home healthcare is a wide range of healthcare services that are provided in the patient’s home. Home healthcare is usually less expensive, more convenient, and can be just as effective as the care you get in a hospital or skilled nursing facility (SNF). It is also a critical factor in reducing patient readmission during the first 30 days after discharge from a hospital.
Home healthcare can result in greater patient satisfaction, greater patient compliance with treatment and more proactive care, which can improve care quality. The overall cost of home healthcare is lower than that of inpatient facilities according to the Centers for Medicare and Medicaid Services. In addition, Medicare will be adding value-based reimbursements to home healthcare, rewarding agencies for preventive measures that improve patient outcomes.
Home healthcare services over 12 million patients and conducts tens of millions of patient visits annually. Industry revenue is expected to be over $355B by 2020, growing at a 17% CAGR. The home healthcare industry is driven by many of the same pressures that are increasing demand throughout healthcare including shortages of skilled employees and because the Affordable Care Act calls for improvements in quality of care, population health and cost containment, they must find ways to be more efficient and cost effective. The approaches available to them are process reengineering and technology, both at the business level and in-home based technology.
Applying Lean Techniques to Home Healthcare
Situation: A visiting nurse association that is a home healthcare provider owned by a large health system with a staff of 160 clinical providers and 40 providing administrative support wanted to improve the processes they used to administer home healthcare. They had a census of around 800, revenues of $23 million and annual losses on their P&L. Annual home healthcare visits exceeded 190,000 and each visit was losing money. Typical of healthcare, labor was the biggest portion of the cost (75%) and they still needed more capacity to support their growing census. For a home healthcare provider this is a perfect storm: losing money as your demand increases.
Approach: The parent company had been using Lean Techniques for reengineering critical workflows in their hospital. They were realizing significant improvements in hospital and physician practice operations, so the leadership team of the home healthcare provider decided to give the same Lean Techniques a try with the objective of significantly reducing their cost. The first activity was a Lean Assessment. This included a two-day leadership retreat where basic Lean awareness training was presented, each member of the group was interviewed and all pertinent business metrics were collected and presented.
The next step was an Enterprise Value Stream Analysis. The EVSM clarified the challenges faced by the company.
- Operating margin would not support a reinvestment for the agency. They needed to achieve at least a 3% operation margin and reduce cost/visit and cost/hospice day.
- Referral management, patient scheduling accuracy and initiation of service was erratic and inconsistent causing missed, uncovered and “empty” visits. Referral Conversion was only 80%.
- HHCAP scores were low and patient surveys indicated that only 24% of patients were willing to recommend the company’s in-home services.
- Staff was not being used efficiently and did not consistently demonstrate the talent and skills needed to provide care to an ever-expanding patient population.
The EVSM process also included a process to create a future state vision. The Value Stream Map clearly showed the current state and when comparing it with the future state, it was easy to identify the company’s strategic and operating gaps. This focused the leaders in the organization on what needed to be “fixed” and they were insistent that those point solutions be addressed. After much discussion they agreed to redesign multiple business practices and healthcare delivery processes to get things organized and corrected, which led to the development of a comprehensive implementation plan with a 6-month horizon. The plan was developed with the need to:
- Reduce information errors (missing, incorrect, timeliness) which caused missed and uncovered visits
- Define and document standard processes for receiving, evaluating and accepting referrals from the parent company because 40% of referral information was incorrect/incomplete at intake.
- Develop a “Model Team” where Clinical Manager/TA were dedicated to more effectively assign clinical resources and improve patient continuity of care.
Specific improvement goals included:
- Decrease overtime by 50%
- Increase Margin to 4%
- Reduce cost per visit for Home Care by 5%
- Reduce Cost Per Day Hospice 5%
- Improve overall productivity from ~70% to +85%
- Admit 100% of all referred patients within 48 hours
- 100% Multi-Discipline Evaluations completed with 72 hours
- HHCAP –all 10 indicators at/above 90 percent, moving them into Home Health Elite status
- 17% Readmission Rate (from current 18%)
A series of six Kaizen event charters were defined and documented to focus on business and delivery processes to achieve the above goals and objectives. Over the next several months these events were conducted and a number of “just do it” projects that were easily completed by small teams of people were implemented.
After the first pass through the following results were achieved:
- Revenue was increased revenue by 3%
- Margin was improved 2%.
- Cost per visit was reduced by 3%
- Provider productivity improved 10%
- Overtime was reduced by 50%
- Year over year savings exceeded $900,000.
Lean Techniques can be applied to any process in any industry. Group50 has utilized Lean Techniques to redesign business processes and delivery services in dozens of industries including service organizations such as hospitals and home healthcare. Group50’s Healthcare Practice experts understand that the key to the success of the application of Lean in any business is to choose the right tools. While the results were good, additional Kaizen events will be able to deliver additional savings. Follow-up activities are a required part of every Continuous Improvement program.
To find out more about how a Group50 healthcare consultant can help your healthcare system significantly increase productivity and asset management, call us at (909) 949-9083, drop us a line at email@example.com or request more information here.
About the Author: Vincent Polito is Group50’s Healthcare Practice leader with over thirty years of healthcare consulting experience as an executive and healthcare consultant in the design and delivery of Lean, Lean Transformation and Operational Excellence in the Healthcare, Medical Device, Industrial Manufacturing, Aerospace, Textile and Oil and Gas industries. He has held senior management roles in operations, materials, quality, and business development.
Vinnie pioneered Lean techniques in Healthcare. At the forefront of Lean in Healthcare since 2003 he has provided guidance to over 100 hospitals, physician/specialty practices, insurance health plans and home health systems in North America. He has a grasp and appreciates of the mission and complexity of Healthcare. He translates Lean principles and techniques into effective delivery strategies and execution specifically meeting the critical needs and culture of Healthcare. Some his more notable Healthcare clients include, Thedacare, Denver Health, Beth Israel Deaconess, Barnes Jewish, New York Health and Hospitals, and Priority Health. His Lean support of Healthcare has included initiatives for non-clinical organizations including the Institute of Medicine (IOM), the Institute for Healthcare Improvement (IHI) and National Quality Forum (NQF).
Vinnie has led and executed Lean transformation in a diverse range of industries such with a client list of Fortune 500 organizations including Boeing, Alcoa, Lockheed Martin, Rockwell-Collins, Duracell, Owens-Corning, Sandia Labs and Hanes Brands. #group50, #healthcareconsulting, healthcare consulting firm, #healthcare, healthcare consultant
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