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Caltrider, J., D. Pattison and P. Richardson. 1995. Can cost control and quality care coexist? Management Accounting (August): 38-42.

Summary by Kevin Wrobel
Master of Accountancy Program
University of South Florida, Summer 2002

HealthCare Cost Main Page | Controllership Main Page | Quality Related Main Page

This article describes the challenges a hospital faces in improving quality and reducing costs. The Children's Hospital in San Diego California experienced pressure from its accrediting body to improve quality and reduce costs in 1992.

What They Did

The hospital decided to implement a continuous quality improvement program that would help them to achieve these goals. The CGI was referred to as the "running ugly philosophy". This program is extremely results oriented and the focus is very narrow. The four steps of implementation are as follows:

1. Define expectations.

2. Form teams to achieve the performance improvements.

3. Select and provide training.

4. Monitor and support the teams in making changes that will lead to improved performance.

How It Worked

The hospital achieved almost immediate results from the pilot teams. The Orthopedics Unit achieved a 20% reduction in costs of treating femur fractures. Patient Registration and Billing reduced billing errors by 50% to insurance companies. The Neonatal unit achieved a 20% reduction in cost per case.

The Neonatal Experience

The neonatal pilot formulated a charter and targeted five areas to improve.

1. Revise intravenous fluid administration protocols.

2. Refine the utilization of supplies and equipment.

3. Eliminate duplication in physician and nurse practitioner ordering practice.

4. Evaluate lab use, blood gas guidelines/protocols.

5. Educate all involved staff and physicians on the areas, and include actual cost data.

The team evaluated the processes that they were currently performing and analyzed their effectiveness. What they found were tasks being duplicated and other wasteful practices. Some methods of analysis the Neonatal Unit used were flowcharting, run charts, fishbone diagrams, among others.

After word about the results in the Neonatal Unit spread around the hospital, un-chartered teams began forming, or formed themselves, and changes began happening dynamically.

The Next Round

The hospital also implemented an ABC study in the Orthopedics Outpatient Clinic to analyze which activities consumed the most resources. It was found that two-thirds of the time required to run the Clinic was devoted to managing financial and medical information. The hospital could then focus on the next round of CGI efforts.

The Hospital's Future Plans

The hospital felt that costs were being reduced, however decided that costs and quality could be improved even faster by a complete process redesign, or the "white board approach".


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