Whenever changes to a process are made, it is important to identify and quantify the benefits from the changes. Ideally, the potential benefits are identified in advance so the impact of the change can be tested against your anticipated gains. However, post hoc analysis can also be performed to see if changes have made any demonstrable impact.
The key is to show the value achieved by whatever changes have been made. For internal improvement teams as well as external consultants, this is important because it shows the value you and/or your team bring to the organization in the form of cost vs. benefit or return on investment. Needless to say, this is a powerful way to justify your work as well as to identify the need for improvements in other areas.
Value achieved can be direct or indirect, and both can be quantified. Direct value is relatively straightforward to identify and measure. In the course of observations in the accounts payable area of one client, we discovered a stack of vendor credit memos that had not been processed. These credits stretched back over a year, and had simply been forgotten due to staff changes, unclear ownership of these memos, and the whirlwind of daily work. We poured through the stack, prioritized the credit memos by dollar amount and vendor, and worked with the accounts payable team to create a short-term plan to process the credit memos. Because we were working with financials, identifying the value realized from our work was straightforward. We simply added the dollar amount of the unprocessed credit memos to identify the direct savings for the organization, which in this case was over $1 million. To avoid repeating this issue moving forward, we worked with the accounts payable team to create standard work to ensure future credit memos are processed in a more timely manner.
Calculating indirect value is less straightforward, but can and should be quantified nonetheless. Another client wanted to reduce length of stay in their observation unit. The intent was to address capacity constraints while improving patient care and lowering costs associated with patients who needed care but did not need to be admitted to the hospital. The observation unit served patients with conditions such as chest pain, asthma exacerbations, transient ischemic attacks, and congestive-heart-failure exacerbations. After some work with the observation unit staff and hospitalists, the average length of stay was reduced from 41.5 hours to 25 hours. Calculating the value of this time reduction was a matter of multiplying the average number of patients seen in the observation unit each month by the rate per hour for observation patients by the number of hours each day by the number of months. This calculation yielded an estimated yearly savings from the length of stay reduction. We stopped there in terms of value identification—which was over $600,000 per year—but looking more holistically, the improvement in the observation unit had a ripple effect, contributing to shorter wait times in the ED as well as reducing patient admissions, diversions of patients to other hospitals, and patient out-of-pocket expenses.
Regardless of the types of improvements you make, it is important to identify and quantify the value realized by the improvements. This will not only help illustrate the value of your work, but will also help identify other areas of opportunity.
Today’s blog was written by Aaron Fausz, Senior Consulting Director at HPP.
Aaron brings more than 25 years of experience helping organizations align and improve their personnel and technical systems to accomplish strategic business objectives. He currently leads Lean transformation and process improvement consulting engagements for Vizient. Aaron has consulted with leading healthcare organizations across the country, including Denver Health, Mayo Franciscan Health System, University Health Services, Vanderbilt University Medical Center, Henry Ford Health System, and many others. His areas of expertise and professional skills include guiding organizations through strategically driven changes and enhancing business performance, with significant experience in needs assessment, best practice analysis, performance measurement, process improvement, and behavioral change management. Prior to joining Vizient, Aaron worked for Kronos, Aetna, and Executive Learning in support of various change management, organizational development, workforce management, and process improvement initiatives. He holds a Ph.D. in Industrial and Organizational Psychology from the University of Tennessee in Knoxville, Tennessee with a minor in Industrial Engineering.