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OM in the News: Best Practices at the Sanford Health System

May 23, 2014

hospitalIn 2012, waste in the national health care system was measured at $750 billion annually. Driven by tightening margins and increased pressure for positive outcomes, health systems nationwide are looking for ways to maximize resources and trim costs, writes Argus Leader (May 7, 2014).

“It’s not just about cutting costs,” said the CEO of Sanford Clinic in South Dakota. “We do have to cut per-unit costs, but we have to look at standardization, best practices. We have a very fragmented health care system, and that’s where integration and coordination of care is so critical. It’s not just for efficiencies. It’s for best outcomes and eliminating errors and waste.”  The clinic’s approach to becoming more efficient involves the approaches of Kaizen and Six Sigma, tools used in business for process improvement, but the greater goal is to integrate continuous performance improvement into the culture.

The Sanford Health System, of which the clinic is a part, set a goal of finding $100 million in efficiencies this year, with much of the savings coming through better supply chain management. “We looked at cost transformation opportunities, which is tying it back to product standardization; maybe some miscellaneous contracts we have from one region to another that we could consolidate,” added the President of Sanford USD Medical Center. As the system has grown, it has commanded better pricing options from vendors. Various Sanford locations have worked together to identify best practices and streamline products and pharmaceuticals to achieve more savings through buying in bigger quantities.

Agreeing to use a common spine hardware, for example, saved $2.5 million annually. Working with cardiologists to determine the pacemaker of choice across the system saved another $2.4 million. Further, a new asset management system is designed to further optimize staffing and supplies. It will monitor where patients and care providers are to manage patient flow and track equipment.

Classroom discussion questions:

1. Why is OM so important in hospitals?

2. What tools in Chapter 6 can be used to improve hospital quality?


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