2
Based on your knowledge learned in this module concerning the Theory of Constraints, identify and discuss the potential constraints in the case study patient experience process. For each constraint discussed, include what you believe is the limiting factor stopping the process from achieving its goal. Fourth Edition
Healthcare
Operations
Management
Daniel B. McLaughlin | John R. Olson | Luv Sharma
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Library of Congress Cataloging-in-Publication Data
Names: McLaughlin, Daniel B., 1945 author. | Olson, John R. (Professor) author. | Sharma,
Luv, author. | Association of University Programs in Health Administration, issuing body.
Title: Healthcare operations management / Daniel B. McLaughlin, John R. Olson, Luv Sharma.
Description: Fourth edition. | Chicago, Illinois : Health Administration Press ; Washington, DC :
Association of University Programs in Health Administration, [2022] | Includes bibliographical
references and index. | Summary: This book explores the core principles of effective
organizational operations and explains how they can be used to tackle specific challenges in
healthcareProvided by publisher.
Identifiers: LCCN 2021036032 (print) | LCCN 2021036033 (ebook) |
ISBN 9781640553071 (hardcover) ; (alk. paper) | ISBN 9781640553040 (epub)
Subjects: MESH: Quality Assurance, Health Careorganization & administration |
Efficiency, Organizationalstandards | Total Quality Managementmethods |
Decision Support Techniques
Classification: LCC RA399.A1 (print) | LCC RA399.A1 (ebook) | NLM W 84.41 |
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To my wife, Sharon, and daughters, Kelly and Katie, for their love and support
throughout my career.
Dan McLaughlin
To my father, Adolph Olson, who passed away in 2011. Your strength as you
battled cancer inspired me to change and educate others about our healthcare
system.
John Olson
Dedicated to my wife and parents for their never-ending support. Neither this
work, nor any success in my life, could have been achieved without their shine of
wisdom and warmth of love.
Luv Sharma
The first edition of this book was coauthored by Julie Hays. During the final
stages of the completion of the book, Julie unexpectedly died. As Dr. Christopher
Puto, dean of the Opus College of Business at the University of St. Thomas, said,
Julie cared deeply about students and their learning experience, and she was
an accomplished scholar who was well respected by her peers. This book is a final
tribute to Julies accomplished career and is dedicated to her legacy.
Dan McLaughlin and John Olson
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vii
BRIEF CONTENTS
Preface …………………………………………………………………………………………xv
Part I Introduction to Healthcare Operations
Chapter 1. The Challenge and the Opportunity …………………………….3
Chapter 2. History of Performance Improvement ………………………..21
Chapter 3. Evidence-Based Medicine and Value Purchasing …………..51
Chapter 4. Use of Technology in Healthcare Delivery …………………..69
Part II Setting Goals and Executing Strategy
Chapter 5. Strategy and the Balanced Scorecard …………………………..83
Chapter 6. Project Management ……………………………………………..107
Part III Performance Improvement Tools, Techniques, and Programs
Chapter 7. Tools for Problem Solving and Decision Making ………..141
Chapter 8. Healthcare Analytics ………………………………………………167
Chapter 9. Quality Improvement in Healthcare …………………………187
Chapter 10. Lean Healthcare ……………………………………………………223
Part IV Applications to Contemporary Healthcare Operations Issues
Chapter 11. Process Improvement and Patient Flow …………………….251
Chapter 12. Scheduling and Capacity Management ………………………293
Chapter 13. Supply Chain Management ……………………………………..315
Chapter 14. Improving Financial Performance with Operations
Management ………………………………………………………..341
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viii Brief Contents
Part V Putting It All Together for Operational Excellence
Chapter 15. Emerging Trends in Healthcare ……………………………….361
Chapter 16. Holding the Gains …………………………………………………377
Glossary …………………………………………………………………………………….397
Index ………………………………………………………………………………………..403
About the Authors ………………………………………………………………………..443
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ix
DETAILED CONTENTS
Preface …………………………………………………………………………………………xv
Part I Introduction to Healthcare Operations
Chapter 1. The Challenge and the Opportunity …………………………….3
Overview ………………………………………………………………..3
The Purpose of This Book ………………………………………….3
The Challenge …………………………………………………………4
The Opportunity …………………………………………………….10
A Systems Look at Healthcare …………………………………..12
An Integrating Framework for Operations
Management in Healthcare …………………………………..15
Vincent Valley Hospital and Health System …………………17
Conclusion …………………………………………………………….18
Discussion Questions ………………………………………………18
References ……………………………………………………………..19
Chapter 2. History of Performance Improvement ………………………..21
Overview ………………………………………………………………21
Operations Management in Action …………………………….21
Background……………………………………………………………22
Knowledge-Based Management …………………………………24
History of Scientific Management ………………………………26
Project Management ……………………………………………….30
Introduction to Quality ……………………………………………32
Philosophies of Performance Improvement ………………….39
Supply Chain Management ……………………………………….43
Big Data and Analytics …………………………………………….44
Conclusion …………………………………………………………….45
Discussion Questions ………………………………………………46
References ……………………………………………………………..46
Chapter 3. Evidence-Based Medicine and Value Purchasing …………..51
Overview ………………………………………………………………51
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x Detai led Contents
Operations Management in Action …………………………….51
Evidence-Based Medicine ………………………………………..52
Tools to Expand the Use of Evidence-Based Medicine …..58
Clinical Decision Support …………………………………………64
The Future of Evidence-Based Medicine and Value
Purchasing …………………………………………………………65
Vincent Valley Hospital and Health System and
Pay for Performance ……………………………………………65
Conclusion …………………………………………………………….66
Discussion Questions ………………………………………………66
Note …………………………………………………………………….67
References ……………………………………………………………..67
Chapter 4. Use of Technology in Healthcare Delivery …………………..69
Overview ………………………………………………………………69
Operations Management in Action ……………………………69
Health Information Technology ………………………………..69
Information Flows and Types of HIT …………………………70
Impact of HITs ………………………………………………………72
Adoption and Assimilation of HITs ……………………………75
Challenges with HIT Use …………………………………………76
Conclusion …………………………………………………………….78
Discussion Questions ………………………………………………78
References ……………………………………………………………..78
Part II Setting Goals and Executing Strategy
Chapter 5. Strategy and the Balanced Scorecard …………………………..83
Overview ………………………………………………………………83
Operations Management in Action …………………………….83
Moving Strategy to Execution …………………………………..84
The Balanced Scorecard as Part of a Strategic
Management System ……………………………………………87
Elements of the Balanced Scorecard System …………………88
Conclusion …………………………………………………………..105
Discussion Questions …………………………………………….105
Exercises ……………………………………………………………..105
References ……………………………………………………………106
Chapter 6. Project Management ……………………………………………..107
Overview …………………………………………………………….107
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xiDetai led Contents
Operations Management in Action ………………………….107
Definition of a Project ……………………………………………109
Project Selection and Chartering ……………………………..110
Project Scope and Work Breakdown …………………………117
Scheduling …………………………………………………………..123
Project Control …………………………………………………….127
Quality Management, Procurement, the Project
Management Office, and Project Closure ………………130
Agile Project Management ……………………………………..134
The Project Manager and Project Team …………………….135
Conclusion …………………………………………………………..137
Discussion Questions …………………………………………….137
Exercises ……………………………………………………………..137
References ……………………………………………………………138
Part III Performance Improvement Tools, Techniques, and Programs
Chapter 7. Tools for Problem Solving and Decision Making ………..141
Overview …………………………………………………………….141
Operations Management in Action …………………………..141
Decision-Making Framework …………………………………..142
Mapping Techniques ……………………………………………..144
Problem Identification Tools …………………………………..148
Analytical Tools …………………………………………………….158
Implementation: Force Field Analysis ……………………….162
Conclusion …………………………………………………………..164
Discussion Questions …………………………………………….164
Exercises ……………………………………………………………..164
References ……………………………………………………………165
Chapter 8. Healthcare Analytics ………………………………………………167
Overview …………………………………………………………….167
Operations Management in Action …………………………..167
What Is Analytics in Healthcare? ………………………………167
Introduction to Data Analytics ………………………………..170
Data Visualization …………………………………………………175
Data Mining for Discovery ……………………………………..181
Conclusion …………………………………………………………..184
Discussion Questions …………………………………………….185
Note …………………………………………………………………..185
References ……………………………………………………………185
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xii Detai led Contents
Chapter 9. Quality Improvement in Healthcare …………………………187
Overview …………………………………………………………….187
Operations Management in Action …………………………..187
Defining Quality …………………………………………………..189
Cost of Quality ……………………………………………………..189
Quality Analytics and Dashboards …………………………….191
The Six Sigma Quality Program ……………………………….193
Additional Quality Tools ………………………………………..208
Riverview Clinic Six Sigma Generic Drug Project ……….213
Conclusion …………………………………………………………..216
Discussion Questions …………………………………………….218
Exercises ……………………………………………………………..218
References ……………………………………………………………220
Chapter 10. Lean Healthcare ……………………………………………………223
Overview …………………………………………………………….223
Operations Management in Action …………………………..223
What Is Lean? ………………………………………………………224
Types of Waste ……………………………………………………..225
The Lean Dashboard ……………………………………………..226
The Lean Toolkit ………………………………………………….228
Kaizen …………………………………………………………………240
The Merging of Lean and Six Sigma Programs …………..243
Conclusion …………………………………………………………..245
Discussion Questions …………………………………………….245
Exercises ……………………………………………………………..245
References ……………………………………………………………246
Part IV Applications to Contemporary Healthcare Operations Issues
Chapter 11. Process Improvement and Patient Flow …………………….251
Overview …………………………………………………………….251
Operations Management in Action ………………………….251
Problem Types ……………………………………………………..252
Patient Flow …………………………………………………………253
Process Improvement Approaches ……………………………254
The Science of Lines: Queuing Theory ……………………..264
Process Improvement in Practice ……………………………..276
Conclusion …………………………………………………………..290
Discussion Questions …………………………………………….291
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xiiiDetai led Contents
Exercises ……………………………………………………………..291
References …………………………………………………………..292
Chapter 12. Scheduling and Capacity Management ………………………293
Overview …………………………………………………………….293
Operations Management in Action …………………………..293
Hospital Census and Rough-Cut Capacity Planning ……294
Staff Scheduling ……………………………………………………296
Job and Operation Scheduling and Sequencing Rules ….300
Patient Appointment Scheduling Models …………………..304
Advanced-Access Patient Scheduling …………………………307
Conclusion …………………………………………………………..311
Discussion Questions …………………………………………….311
Exercises ……………………………………………………………..311
References ……………………………………………………………312
Chapter 13. Supply Chain Management ……………………………………..315
Overview …………………………………………………………….315
Operations Management in Action …………………………..315
Supply Chain Management ……………………………………..316
Tracking and Managing Inventory ……………………………316
Demand Forecasting ……………………………………………..319
Order Amount and Timing …………………………………….324
Inventory Systems …………………………………………………331
Procurement and Vendor Relationship Management ……333
Group Purchasing Organizations ……………………………..334
Care Coordination and Supply Chain Challenges ………..334
Strategic View ………………………………………………………335
Conclusion …………………………………………………………..336
Discussion Questions …………………………………………….336
Exercises ……………………………………………………………..337
References ……………………………………………………………338
Chapter 14. Improving Financial Performance with Operations
Management ………………………………………………………..341
Overview …………………………………………………………….341
Operations Management in Action …………………………..341
Environmental Pressures on Financial Performance ……..343
Conclusion …………………………………………………………..355
Discussion Questions …………………………………………….357
Exercises ……………………………………………………………..358
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xiv Detai led Contents
Note …………………………………………………………………..358
References ……………………………………………………………358
Part V Putting It All Together for Operational Excellence
Chapter 15. Emerging Trends in Healthcare ……………………………….361
Overview …………………………………………………………….361
Operations Management in Action ………………………….361
Introduction ………………………………………………………..361
Patient-Centered Care ……………………………………………362
Blockchain and Decentralized Applications in
Healthcare ………………………………………………………364
Virtual Care …………………………………………………………367
Home Health ……………………………………………………….368
Care Providers Involvement in Population Health ……..371
Other Advancements in Healthcare ………………………….372
Conclusion …………………………………………………………..375
Discussion Questions …………………………………………….375
References ……………………………………………………………375
Chapter 16. Holding the Gains …………………………………………………377
Overview …………………………………………………………….377
Approaches to Holding Gains ………………………………….377
Which Tools to Use: A General Algorithm …………………382
Data and Analytics ………………………………………………..390
Operational Excellence …………………………………………..390
The Healthcare Organization of the Future ……………….393
Conclusion …………………………………………………………..394
Discussion Questions …………………………………………….394
Case Study …………………………………………………………..394
References ……………………………………………………………395
Glossary …………………………………………………………………………………….397
Index ………………………………………………………………………………………..403
About the Authors ………………………………………………………………………..443
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xv
PREFACE
This book is intended to help healthcare professionals meet the challenges and
take advantage of the opportunities found in healthcare today. We believe that
the answers to many of the dilemmas faced by the US healthcare system, such as
increasing costs, uneven quality, and the opportunity of emerging technologies,
lie in organizational operationsthe nuts and bolts of healthcare delivery. The
healthcare arena is filled with opportunities for significant operational improve-
ments. We hope this book encourages healthcare management students and
working professionals to find ways to improve the management and delivery
of healthcare, thereby increasing the effectiveness and efficiency of tomorrows
healthcare system.
Many industries outside healthcare have successfully used the pro-
grams, techniques, and tools of operations improvement for decades. Lead-
ing healthcare organizations have now begun to effectively employ the same
tools. Although numerous other operations management texts are available,
few focus on healthcare operations, and none takes an integrated approach.
Students interested in healthcare process improvement have difficulty seeing
the applicability of the science of operations management when many texts
focus on industrial applications rather than on patients, providers, and payers.
This book covers the basics of operations improvement and provides an
overview of significant trends in healthcare. We focus on the strategic imple-
mentation of process improvement programs, techniques, and tools in the
healthcare environment, with its complex web of reimbursement systems,
physician relations, workforce challenges, and governmental regulations. This
integrated approach helps healthcare professionals gain an understanding of
strategic operations management and, more important, its applicability to the
healthcare field.
How This Book Is Organized
We have organized this book into five parts:
1. Introduction to Healthcare Operations
2. Setting Goals and Executing Strategy
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xvi Preface
3. Performance Improvement Tools, Techniques, and Programs
4. Applications to Contemporary Healthcare Operations Issues
5. Putting It All Together for Operational Excellence
Although this structure is helpful for most readers, each chapter also stands
alone, and the chapters can be covered or read in any order that makes sense
for a particular course or student.
The first part of the book, Introduction to Healthcare Operations,
begins with an overview of the challenges and opportunities found in todays
healthcare environment (chapter 1). We follow with a history of the field
of management science and operations improvement (chapter 2). Next, we
discuss two of the most influential environmental changes facing healthcare
today: evidence-based medicine and value-based purchasing, or simply value
purchasing (chapter 3). We conclude this part with an overview of technology
in healthcare with an emphasis on the electronic health record (chapter 4).
In part II, Setting Goals and Executing Strategy, chapter 5 highlights the
importance of tying the strategic direction of the organization to operational
initiatives. This chapter outlines the use of the balanced scorecard technique
to execute and monitor these initiatives toward achieving organizational objec-
tives. Typically, strategic initiatives are large in scope, and the tools of project
management (chapter 6) are needed to successfully manage them. Indeed, the
use of project management tools can help to ensure the success of any size
project. Strategic focus and project management provide the organizational
foundation for the remainder of this book.
The next part of the book, Performance Improvement Tools, Tech-
niques, and Programs, provides an introduction to basic decision-making
and problem-solving processes and describes some of the associated tools
(chapter7). Most performance improvement initiatives (e.g., Six Sigma, Lean)
follow these same processes and make use of some or all of the tools discussed
in chapter 7.
Good decisions and effective solutions are based on facts, not intuition.
Chapter 8 provides an overview of data analysis techniques to enable fact-based
decision making. This includes a discussion of the newer tools of big data:
advanced analytics and operational dashboards.
Quality tools such as Six Sigma and Lean are specific philosophies or
techniques that can be used to improve processes and systems. Quality improve-
ment using Six Sigma methodology (chapter 9) is the latest manifestation
of the use of quality improvement tools to reduce variation and errors in a
process. The Lean methodology (chapter 10) focuses on eliminating waste in
a system or process.
The fourth section of the book, Applications to Contemporary Health-
care Operations Issues, begins with an integrated approach to applying the
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xviiPreface
various tools and techniques for process improvement in the healthcare environ-
ment (chapter 11). We then focus on a special and important case of process
improvement: patient scheduling in the ambulatory setting (chapter 12).
Supply chain management extends the boundaries of the hospital or
healthcare system to include both upstream suppliers and downstream custom-
ers, and this is the focus of chapter 13. The need to bend the healthcare
cost inflation curve downward is one of the most pressing issues in healthcare
today, and the use of operations management tools to achieve this goal is
addressed in chapter 14.
Part V, Putting It All Together for Operational Excellence, concludes
the book with a discussion of both emerging trends in healthcare delivery
(chapter15) and strategies for implementing and maintaining the focus on
continuous improvement in healthcare organizations (chapter 16).
Many features in this
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Chapter 5, Case 2
Chapter 5, Case 2
Helen is a 45-year-old African American female who separated two months ago from her husband of 25 years after he had an extramarital affair. In addition to running the household and managing 18-year-old fraternal twins, she works part-time at a local dry cleaning business. Helen started experiencing increased anxiety, lack of ability to fall asleep, and daytime tiredness over the last three months. The symptoms have progressed over the last four weeks to increasing sadness, inappropriate guilt, poor appetite, and decreased energy levels. Helen is struggling to maintain her usual activities and is starting to feel that life is not worth living, but she has not had any suicide ideation per se. Helen has no personal or family history of psychiatric illness. She uses alcohol once or twice a month but not to excess. Helens medical history is significant for lower-extremity neuropathy of unknown origin.
Questions:Remember , At all times, explain your answers.
Summarize the clinical case.
What is the DSM5 diagnosis? Identify the rationale for your diagnosis using the DSM5 diagnostic criteria.
According to the clinical guidelines, which one pharmacological treatment is most appropriate to prescribe? Include the medication name, dose, frequency and rationale for this treatment.
According to the clinical guidelines, which one non-pharmacological treatment would you prescribe? (exclude psychotherapy modalities) Include the risk and benefits of the chosen rationale for this treatment.
Include an assessment of medication’s appropriateness, cost, effectiveness, safety, and potential for patient adherence.
Use a local pharmacy to research the cost of the medication. Use great detail when answering questions 3-5.
Submission Instructions:
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