The business of being better: How management principles can improve hospital operations

April 27, 2016
 


The business of being better: How management principles can improve hospital operations

Several years ago, a professor was teaching a course on supply chain management at a top US business school. On the first day of class, he asked his students to introduce themselves and talk a little about what they did for a living.

As the introductions proceeded, the professor heard something that struck him as remarkable. Among the usual smattering of procurement managers, inventory control specialists, and production supervisors was a gentleman who identified himself as a hospital emergency room physician.

The professor held up his hand and paused the introductions. “Wait a minute,” he said, pointing to the physician. “I think I can figure out why everyone else is taking this course. But what are you doing here?”

Article highlights:

  • Laboratorians and other healthcare professionals continue to look to the business world for solutions to operational challenges
  • Applying business principles to hospital lab operations can help you reduce healthcare costs and prevent medical errors
  • Transitioning to a patient-centric model of operations requires the skillful application of proven business solutions
Bill Lovejoy, Ph.D.

Bill Lovejoy, Ph.D.

Raymond T Perring Family Professor of Business Administration; Professor of Technology and Operations, Ross School of Business, University of Michigan

Jeff Myers, M.D., Ph.D.

Jeff Myers, M.D., Ph.D.

Director of Anatomic Pathology
and MLabs; Vice Chair, Clinical
Affairs and Quality,
University of Michigan;
ADASP President

Wally Hopp, Ph.D.

Wally Hopp, Ph.D.

Senior Associate Dean for Faculty
 and Research; Herrick Professor
of Business,
Ross School of Business,
University of Michigan

Searching for operational solutions

That professor was Wally Hopp, PhD, Senior Associate Dean for Faculty and Research at the Ross School of Business at the University of Michigan. The answer the physician gave him was one Dr. Hopp began to hear again and again as an increasing number of healthcare professionals started showing up in his classes.

All were looking outside of medicine for solutions to help them manage the complexity of their operations. They ranged from physicians struggling to dissolve dangerous bottlenecks in the ER to hematologists searching for ways to prioritize daily blood draws for timely discharge decisions. These healthcare professionals had been talking to people in various fields, including operators of nuclear plants, air traffic controllers, and auto industry executives–all searching for actionable solutions.

However, the leap from these industries to healthcare was too great. They weren’t getting the answers they needed. Dr. Hopp resolved to do something about that.

Principled partners

In partnership with Bill Lovejoy, PhD, Raymond T. Perring Family Professor of Business Administration at the Ross School of Business, Dr. Hopp endeavored to help these healthcare professionals. The 2 colleagues began applying business principles to operational challenges in hospitals. This led to process improvements in ERs, pathology labs, radiology departments, and other areas.

It was a huge success, but Dr. Hopp and Dr. Lovejoy wanted to lend their expertise to many more institutions. To do so, they needed to package their knowledge into a systematic framework that anyone could access.

So they wrote a book.

 

On partnering to drive hospital performance

Wally Hopp, Ph.D.

Senior Associate Dean for Faculty

and Research; Herrick Professor of

Business, Ross School of Business,

University of Michigan

A shared value

As they worked on their book, Hospital Operations: Principles of High Efficiency Health Care, Dr. Hopp and Dr. Lovejoy asked themselves if they even had any business writing about health care, given their backgrounds. The answer they came to was “yes.” Because while health care and business are different in many respects, they share a common purpose: creating greater social value.

As Dr. Lovejoy explains: “Other people see business as being connected to a sometimes unsavory pursuit of profits only. Most people don’t understand that the monetary transfers are just incidental to the theory of business. It’s all about creating social value.”

The crucible of competition

Hospital labs can learn a lot from the hyper-competitive world of business. Under constant pressure to increase efficiencies in a free market, industries must innovate to survive. The processes they develop under such conditions may not arise naturally in the comparatively insulated world of health care—but can be extremely beneficial there.

 

On the competitive world vs the healthcare world

Bill Lovejoy, Ph.D.

Raymond T. Perring Family

Professor of Business Administration

Professor of Technology and

Operations, Ross School of Business

University of Michigan

 

Benefits beyond the bottom line

Applying business principles to hospital operations can increase efficiencies and turn high costs around. Click each of the examples below to learn more about these benefits.

The industrial evolution

Healthcare is ripe for the strategic application of business principles to operational challenges. One reason, according to Dr. Hopp and Dr. Lovejoy, is that healthcare is transitioning from a siloed industrial phase to an integrated, customer-centric one. It is an evolution most businesses have already gone through.

On the evolution of healthcare

Wally Hopp, Ph.D.

Senior Associate Dean for Faculty

and Research; Herrick Professor of

Business, Ross School of Business,

University of Michigan

3 high-efficiency principles

Dr. Hopp and Dr. Lovejoy detail 3 business principles that can be applied to hospital operations to increase efficiency. Read through the following descriptions, and consider how you might apply these principles in your lab.

Principle #1:
The physics of process flow

As hospital laboratorians, you’re constantly managing flows: the flow of specimens through the lab; the flow of reports back out to physicians, and the flow of patients themselves. All of these flows are governed by physics. When properly understood, physics can be managed to deliver more efficient quality care.

 

 

On the competitive world vs the healthcare world

Bill Lovejoy, Ph.D.

Raymond T. Perring Family

Professor of Business Administration

Professor of Technology and

Operations, Ross School of Business

University of Michigan

Principle #2:
Bring value to your customer

Dr. Jeff Myers, Director of Anatomic Pathology and MLabs and Vice Chair of Clinical Affairs and Quality at the University of Michigan, collaborated on Hospital Operations. He stresses the importance of laboratorians adhering to a fundamental business axiom: bring value to your customer—as defined by your customer, not you. Which, in the case of hospital labs, is the patient.

On bringing value to patients

Jeff Myers, M.D., Ph.D.

Director of Anatomic Pathology 

and MLabs; Vice Chair, Clinical 

Affairs and Quality, 

University of Michigan; 

ADASP President

Principle #3:
Create positive lean

A principle that Dr. Hopp and Dr. Lovejoy have been working on passionately is the notion of creating positive lean. What this means is that an organization makes a conscious effort to create a work culture that is both efficient and motivational. Instead of advancing efficiencies at the cost of employee morale, those forces actually facilitate greater engagement under a positive lean model.

On positive lean and higher purpose

Wally Hopp, Ph.D.,

Senior Associate Dean for Faculty

and Research; Herrick Professor of

Business, Ross School of Business,

University of Michigan

 

 

A shared commitment to solving complex problems

On the business side of things, Dr. Hopp and Dr. Lovejoy believe there are many more principles from industry that can be applied to improving healthcare. On the clinical side, Dr. Myers has seen the application of business principles in action and is a firm believer in the positive difference they can make in labs. He appeals to all of us to embrace these principles as a means of overcoming today’s operational challenges.

While business may have a somewhat negative connotation in medicine, I think we have to evolve past that and understand that there are principles—many of which were unknown to me until we got to work together on the book—that when appropriately applied solve a lot of these problems.

 

Jeff Myers, M.D., Ph.D.
Director of Anatomic Pathology and MLabs; Vice Chair, Clinical Affairs and Quality,
University of Michigan;
ADASP President

Read “How to inspire innovation” to learn about other innovative business principles, such as leading from your position and working at the top of your job description.

 

For a deeper look at how Dr. Hopp and Dr. Lovejoy applied business principles to improve operational efficiencies, read “Laboratory hematology case study”.


Additional learnings from the resource center

Previous Article
Outreach success from the start: 6 lessons from a CFO
Outreach success from the start: 6 lessons from a CFO

Pursue your own successful outreach program with help from a CFO who has done it himself.

Next Article
How to inspire innovation: A passionate and pragmatic approach
How to inspire innovation: A passionate and pragmatic approach

Learn how to move beyond budgetary concerns and inspire innovative thinking in your lab.