As Published In February 2007

Healthcare Lean

Quality Care
By Jeff Erickson

The Lean healthcare pioneers at Beaumont Hospital thrive in tough times.

A year ago, Beaumont Hospitals in southeast Michigan purchased its region's first 64-slice CAT scanner so cardiologists could peer into the hearts of patients without the risk of inserting an exploratory catheter. Now, Beaumont is replacing the machine with an even more precise—albeit "phenomenally expensive"—128-slice scanner. How, in an era when insurers are ratchetting down reimbursements, can Beaumont continue to find the money to invest in the most-advanced medical technologies?

Beaumont CIO Paul Peabody and his team found money tied up in the antiquated business processes common to health services across the country. Starting in 2001, Beaumont began a move to Oracle enterprise software for its supply chain, financials, and human resources operations, using the software as a guide to enterprise best practices and the value of bringing Lean business and IT processes to the clinical setting. The experience has changed not only Beaumont's financial picture but also its culture.

The Road to Lean

"Take a good application system, put it on top of a bad process, and you get a bad result faster," says Peabody. It is an adage that could be engraved on Peabody's desk. But how did the CIO and his team get started on the road to Lean? To begin with, they took a site visit to Xerox to understand how they were using Oracle software to run a Lean operation. Next, the Beaumont team carried out an exhaustive analysis of the hospital's current business processes at its two Detroit-area hospitals, as well as its medical centers, nursing center, and other facilities, and compared them to the processes embedded in products such as Oracle Supply Chain and Oracle General Ledger. Then they reengineered the hospital practices to match. "We changed our processes, not the tools," says Peabody. "Oracle has worked with customers in every kind of business, learned the best practices in all of them, and combined them together in its software," he says. "There's no reason for an organization like us to reinvent the wheel." Once Peabody's team of engineers had finished the analysis, they knew precisely what kind of savings they could expect for processes such as ordering surgical staples or hiring a physical therapist.

Snapshot Beaumont Hospitals www.beaumonthospitals.com Employees: 16,000 Oracle products and services: Oracle E-Business Suite, including General Ledger, Fixed Assets, Accounts Payable, Supply Chain, Human Resources, iRecruitment, Advanced Benefits, and Self-Service Human Resources; Oracle Database 10g with Oracle Management Packs; Oracle Application Server; Oracle Portal; Oracle Discoverer Partner software and services: UNIX operating system; Epic Systems' electronic health record; CareerBuilder.com

Drive Change

Using the information provided by Peabody's team, Beaumont took that money out of the following year's budget so managers would have no choice but to meet the goal. "We recognized that you have to put those targets and goals out there, or you don't reach them. It makes everybody focus on achieving what we set out to do. They have to. The money is already gone. That's the way you make it work," Peabody emphasizes. "Hospitals are usually data-rich and information-poor," he adds. "We have vast amounts of information because we're an information business. But getting at that information is an entirely different story. Oracle provides us the structure and the tools to be able to show people the numbers and make our case for change. When we do, they listen."

Another key to successful change, Peabody says, is speaking to clinicians in their own language. "The person who runs our supply chain at the Royal Oak Hospital has a clinical background. She was an assistant director of the OR [operating room] for many years, so she has clinical experience. She has credibility. When she tells physicians that we can get these surgical staples at the same quality for a lot less if we all standardize, they listen."

According to Peabody, shrinking margins make it imperative for healthcare services to use Lean practices. "We wouldn't have been able to do this in the past because the resistance to change was too high," he states. "Today, there is no choice. Our business managers and clinicians know they have to do this because healthcare is at a crossroads. There is not enough money to fund healthcare as it is currently run. Whether it's in the OR or inpatient or outpatient services, if we want to maintain the same type of facilities with our current technology, we have to be able to reduce our costs in the non-value-add areas. That's how you get people to participate, by giving them good information and good reasons why."

Tallying the Results

Six years into the process of bringing Lean to Beaumont's healthcare environment, the results are dramatic. Working with managers and clinicians across the organization, Peabody and his engineers have changed 800 processes to align them with industry best practices. In human resources alone, Beaumont streamlined more than 300 different processes into fewer than 90.

"By far the most impressive thing that we've done so far is the supply chain," says Peabody. "I wish all the projects that IT worked on had this kind of return on investment, because it's phenomenal." According to Peabody, less efficient healthcare organizations will spend between 32 and 35 percent on supplies. The most efficient come in at around 19 percent. "When we implemented Oracle, we went after that," says Peabody. "We're not at 19 percent yet, but we're getting awfully close to it." Peabody and his team have taken US$50 million in expenses out of the organization in the five years since they began operating the Oracle system. "A lot of that is cumulative," says Peabody, "so that it's not a one-time savings. It's a continual savings."

What has that meant for day-to-day operations? Peabody provides an example: "We opened up a new wing with 430 beds and 25 ORs," he says. "We built a very customer-friendly, patient-friendly atmosphere. It has a big atrium. It looks like you're walking into a Ritz hotel—a lot of open space. But in order to have that, we had to get rid of the nursing station storage areas where we used to store medical supplies. New business processes allowed us to use just-in-time delivery, which we found was also good for the entire organization."

Material management staff at both Beaumont hospitals now uses handheld devices to reorder supplies on a daily basis. The supplier delivers the next day. The system automatically matches what was ordered and what was received, generates an electronic invoice, and then pays it with an electronic fund transfer. The new process eliminates inventory on hand. "We sold a warehouse that we don't need anymore because we don't carry inventory," says Peabody. "We don't have inventory turns to worry about," he adds. "What's the current stock? What's the old stock? What kind of inventory obsolescence do we have to deal with? We don't have those issues anymore."

Recruiting and Rewarding

Other benefits have come in recruiting and managing HR processes for Beaumont's 16,000 employees. "We used Oracle to make sure we're maximizing our efficiency in terms of hiring," says Peabody. Beaumont has partnered with recruitment and career-advancement Web site CareerBuilder.com to use its widespread network to attract the nurses and technical experts they need. The leads are entered into Oracle iRecruitment.

Going to total electronic benefits with Oracle Advanced Benefits and Oracle Self-Service Human Resources has given Beaumont a better way to interact with employees. "Now our employees are able to go in and make selections through the Web," says Peabody. "It's a very efficient, effective way to re-up for benefits every year. Benefit packages change quite rapidly; if we couldn't do this electronically—if we had to send out mailings—it would be an enormous task to go through open enrollment every year."

Moving Forward

In the six years since Peabody and his team started bringing Lean practices to Beaumont, they have streamlined financials and the revenue cycle. Equally important, Peabody believes, is the change in culture. "Over time we have developed a huge amount of trust, respect, and cooperation between the IT department and the end user departments," Peabody says. "We're even being called in on things that don't really have an IT solution, where departments are just looking for help with process flow."

In this atmosphere, Peabody and his team are taking the next step: clinical software. "We're linking our hospitals, physicians, and patients with a Web-based electronic health record from Epic Systems," says Peabody. "We're very excited. This is where we begin getting really, really efficient at sharing patient information and providing the next level of healthcare quality."

For More Information Oracle Solutions for Healthcare

Epic Systems provides an Oracle database that Beaumont's Oracle software will access to provide analysis and reporting. "Between Oracle and Epic Systems, we will have more than 90 percent of our enterprise information in two databases," says Peabody. Beaumont will also be migrating from UNIX to Linux using Oracle Real Application Clusters and Oracle Grid Control to further increase efficiency in its data center.

Even as the healthcare industry is feeling the pinch of lower reimbursements and more-costly medical technologies, Beaumont is strong and moving in the right direction. "You see, it isn't squeezing, it's freeing," says Peabody. "It's taking off the load of inefficiency and finding the energy and money to provide better healthcare."

Life-Saving Information Dr. John Quackenbush, of the Dana-Farber Cancer Institute, is helping to create a unified set of knowledge about cancer. The human cost of cancer is staggering—6.7 million people died of cancer around the world in 2002, a number expected to rise to 10.3 million in 2020. And while progress is being made in diagnosis and treatment, medical researchers are struggling to merge the latest discoveries, case studies, treatment records, and other data into a unified body of cancer knowledge. In 2006, the Dana-Farber Cancer Institute hired Dr. John Quackenbush to do just that. Profit talked with the computational biologist about the data integration issues he faces while working toward a cure for cancer. Oracle has made a US$1 million Commitment Grant to support Dr. Quackenbush's work at Dana-Farber. PROFIT: You worked on the Human Genome Project. Were you able to bring lessons from that to Dana-Farber? QUACKENBUSH: One of the things I learned from the Human Genome Project is that technology has transformed the way we look at—and try to understand—biology and disease. Genomic technologies have allowed us to move from studying one or two genes at a time to examining tens of thousands of genes in a single assay. But while we've changed the rate at which we can amass data, we haven't necessarily gotten better at analyzing that data. My group and I have been working to develop methods that address the problem of analyzing these large-scale data sets. So how do we look at data that's coming from tens of thousands of human genes—the state of those genes in cancer and in healthy individuals—and make some sense out of it? In order to get a handle on all of the data we can now generate, we do not necessarily need to reduce its scale but rather to integrate it with other data and information resources to facilitate its interpretation. PROFIT: What can medical doctors and researchers hope to get from integrated medical data? QUACKENBUSH: We have samples provided by patients who consent to allow us to use these to investigate the cause of their disease. Effectively analyzing the data we generate requires that we have access to clinical information about those patients, including their diagnosis, the results of any tests they had, and their final outcome. But we also have years of research captured in the biomedical literature and a host of publicly accessible databases that can give us insight about the mechanisms of the disease we are studying. What we hope to do is to bring all of this information together into a central repository where we can integrate it and begin to build useful data models that will allow us to ask sophisticated questions that will inform us about the disease state and disease processes. Our hope is that such an information-intensive approach, focused on bringing it together appropriately and mining it effectively, will allow us to predict outcome, predict response to therapy, and try to identify people who are at risk for recurrence for disease. Developing such prognostic and diagnostic tools would have great potential for impacting the way in which we treat and manage disease—and here at Dana-Farber, the way in which we treat and manage human cancer. And of course we are also interested in applying the same approaches to try to develop better therapeutics and to understand the mechanisms that lead to disease. PROFIT: How does this new approach benefit patients? QUACKENBUSH: Our group is studying gene expression profiles in ovarian cancer, which is a fairly deadly form of cancer. Ovarian cancer tends to be detected late and the overall survival rates are fairly poor. There is a class of platinum-based drugs that are used in chemotherapy, and while many patients initially respond well, the majority eventually becomes resistant to therapy. What we hope to do is to identify those patients likely to become resistant early in the process so that they can make better-informed decisions about whether to go ahead with treatment or seek alternative treatments. And even more, we hope that our analysis will provide insight into the mechanism responsible for resistance so that we can devise better therapeutic protocols. PROFIT: Does this introduce any privacy concerns? QUACKENBUSH: The Health Insurance Portability and Accountability Act (HIPAA) was designed to protect patient confidentiality, but in many ways it limits researchers' access to much of the patient data we need for our analysis. There are procedures that do allow us to gain approved access to the data in ways that safeguard patient privacy by eliminating any identifying information about the individual patients. But even still, we want any data we use to remain as secure as possible, and we hope that the data warehouse we are proposing to build will set new standards in providing access to the clinical data we need for research purposes while increasing its security. PROFIT: But navigating these challenges is worth the effort? QUACKENBUSH: Definitely. Technology, in some sense, has turned medical research from a pure laboratory science into an information science. What we are trying to do is to leverage the fact that we can generate historically unprecedented amounts of information about disease by combining it with the growing body of knowledge that we as a community have assembled. When Dana-Farber set out to create a strategic plan for medicine and research in the twenty-first century, a cornerstone of that plan was the development of computational biology to improve the way we collect, manage, and analyze data. But the motivation for developing the strategic plan was a commitment to our patients and to developing better ways to treat and cure cancer. What has impressed me since coming here is that this commitment pervades the faculty, staff, and administration at Dana-Farber. And the reason that we will be successful is that our patients and the local community have supported us in our mission. A few days after I moved here, I was driving to work and I passed a lemonade stand where a little girl was collecting money for the Jimmy Fund—a charity that supports Dana-Farber. I stopped and bought a glass from her and asked her why she was doing this. She told me that the doctors at Dana-Farber cured her friend in class and she wanted to help us cure others. When we have support like that, we can't fail.