Operations Management - CH 1, 4, 5, 6

Satisficing (CH1)

*The typical outcome* 1. The process of making less than optimal decisions, but are still acceptable because they meet minimal criteria. 2. Satisficing terminates the search for alternatives.

Bottleneck (CH5)

1. A choke point in a process where demand exceeds available capacity. 2. Bottlenecks can be a person, role or step that creates a barrier to work performance and efficiency.

Forecasting (CH5)

1. A collaborative process that estimates and projects the volume of patient demand over a specific period of time. 2. Forecasting is a projection based upon service type, location, and time dimensions. 3. Forecasting in healthcare is typically done in short and intermediate intervals. 4. Longer term forecasting is usually done for strategic planning.

Simulation Model (CH5)

1. A computer application that predicts the behavior or performance of a process.

Operations Research (CH5)

1. A discipline that deals with the use of advanced analytical methods to make better decisions. 2. OR improves the outcomes of decision makers through methods and techniques that comprehensively and systematically produces options, scenarios and forecasts. 3. OR focuses upon improving performance through scientific rigor that leads to higher quality decisions.

Exponential Smoothing (CH5)

1. A form of weighted moving average forecasting that uses exponentially declining weights. 2. Most recent data is weighed the heaviest. 3. Uses alpha, a value between 0 and 1, as the smoothing constant. a. low value alpha when expected average will remain stable b. high value alpha when expected average will likely vary

Balanced Scorecard (CH6)

1. A graphical tracker of the metrics that hospitals use to measure productivity, performance and progress towards a specific goal. 2. Productivity focuses on efficiency. 3. Performance focuses on effectiveness.

Linear Programming (CH5)

1. A mathematical technique designed to generate decisions that optimize resource allocation trade-offs. a. usually focuses on maximizing revenue and minimizing costs

Process Capability Index (CH4)

1. A measure for gauging the extent to which a process meets the customer's expectations. Cp = (upper standard limit - lower standard limit) / 6sigma

Six Sigma (CH4)

1. A method developed at Motorola that improves processes by eliminating defects. 2. Achieving a six sigma level implies near perfection in the operational process of 3.4 defects per million opportunities. 3. Established that the behavior of the activities within a process can be statistically analyzed.

Weighted Moving Average (CH5)

1. A moving average that weighs some periods' data based upon an apparent trend. WMA = sum (weight of N)(demand in N) / sum of weights

Operations Manager (CH1)

1. A person who directs and transforms processes to improve the delivery of an output

Hawthorne Effect (CH5)

1. A phenomenon in which individuals perform differently when they know they are being observed.

Lean Process (CH4)

1. A process that has been improved by becoming faster, more flexible, with less waste, smaller lot sizes and highly customized services, while still meeting the intended requirement. 2. Central concepts are speed and reducing cycle time.

Process (CH4)

1. A set of activities and tasks that are performed in sequence to achieve a specific outcome. 2. Three phases - inputs, outputs, transformation.

System (CH1)

1. A set of connected parts that fit together to achieve a purpose. 2. Healthcare operations and systems management is the set of diverse and inter-related activities that enable the diagnosis, treatment, reimbursement and administrative management of healthcare facilities.

Monte Carlo Simulation (CH5)

1. A simulation that combines probability theory with random number generation and distribution patterns to simulate multiple outcomes.

Wait Times (CH5)

1. A time interval of temporary cessation of service. 2. Wait times can be analyzed and reduced systematically using minimization formulas.

Components of a Process Model (CH4)

1. Activity - task occuring at a specific time 2. Event - the culmination of an activity 3. Time - key parameter of a process; expressed as minutes or seconds 4. Outcome - the consequence or result of the activities or events

Factors Driving Increased Healthcare Costs (CH1)

1. Aging population 2. Increasing cost of medical technology and equipment; fattening of capital budgets 3. Market shortage of key personnel - clinicians - drives up labor costs. 4. Increasing pharmaceutical costs. 5. Diminishing practice and use of managed care models.

Controlling (CH1)

1. All tasks required to monitor and track progress towards goals, ensure performance improvement, making corrections to strategy.

Time and Motion Study (CH5)

1. Analysis of resources consumed to start and finish a process - time and labor. 2. Allows managers to model total time and intensity of effort to complete a process. 3. Required to help identify and understand: a. bottlenecks and minimize wait time b. total cycle time c. Number of activities, procedures or movements d. descriptive statistics of activity

Defect (CH4)

1. Any instance in a process where the customer requirement has not been met.

Functions of Wait Time (CH5)

1. Arrival rate of patients 2. Service rate 3. The number of channels or servers in the process 4. The number of phases in a process.

Role of Technology (CH1)

1. Automate manual processes; leads to faster delivery, less resource uses. 2. Improve transaction processing. 3. Improve the quality of analysis, reports, and decisions.

Decisions (CH5)

1. Choices between two or more alternatives

Comparison of Productivity (CH6)

1. Comparisons of labor productivity among healthcare organizations is not widely done because - a. dearth of published industry reports for utilization and productivity b. perception that material differences exist among many hospitals due to region or specialty

Collect and Analyze - Step in Process Improvement Method (CH4)

1. Conduct data collection through performance improvement specialist or management engineer. 2. Diagram the current process, and engineer the future endstate. 3. Collect information on costs, productivity, quality, service levels, staffing, cycle times, number of steps, number of interactions, and key deliverables. 4. Collect and analyze data from a broad range of time periods and dates.

Five Principles of Measuring and Managing Productivity (CH6)

1. Consistent 2. Reliable 3. Measurable 4. Quantitative 5. Comprehensive

Two Classifications of Process Maps (CH4)

1. Current/as-is 2. Future/to-be

Six Sigma Process (CH4)

1. DMAIC method. Focuses on finding sources of variation through root cause analysis, and eliminating those sources of variation. D - define M - measure A - analyze I - improve C - control

Organizing (CH1)

1. Deciding which tasks will be done, where, when and by whom.

Purpose of Process Maps (CH4)

1. Document the current process to find opportunities for reducing steps, interactions, decision points, reports, and the overall length of process.

Effectiveness (CH6)

1. Doing the right things, as they relate to strategy and planning.

De-bottleneck and Deploy Pilot - Step in Process Improvement Method (CH4)

1. Eliminate constraints to efficiency, and limits to throughput. 2. Seek methods to increase throughput, expand productivity, reduce unnecessary steps. 3. Use statistical process control charts to identify causes of process variation. 4. Implement the initial test of a proposed process under limited conditions to help gauge issues and success in achieving desired goals. a. pilots help identify whether or not the future process will be successful b. if successful under the pilot, more full-scale implementation should occur

Planning - Management Functions (CH1)

1. Establishing goals and a strategy to achieve them.

Value Stream Mapping (CH4)

1. Examines whether a specific task adds value from the customer's perspective. a. does the customer care about the activity b. does the activity transform the end product 2. Color-coded according to customer value-added (green); NVA-R (amber); NVA (red).

Ways to Improve Productivity (CH6)

1. Expand output without changing inputs. 2. Increase outputs and decrease inputs. 3. Reduce inputs with no change in outputs. 4. Adopt a technological breakthrough that eliminates inputs without changing outputs.

Three Steps of Decision Making (CH1)

1. Finding occasions to make decisions. 2. Finding possible courses of action. 3. Choosing among many options.

Steps in Capacity Planning (CH5)

1. Forecast patient demand by time and location. 2. Translate demand into capacity requirements. 3. Analyze current available capacity. 4. Estimate the delta between demand and capacity on a per-hour basis 5. Strategize how to align capacity with demand.

Five Variables in Labor Programming (CH6)

1. Forecasted demand and patient volume/flows (D) 2. Per-unit labor costs (C) 3. Resource or job type and mix (R) 4. Average transaction cycle time (T) 5. Other constraints, e.g., capacity constraints on equipment

Trend Forecasting (CH5)

1. Forecasts that are based on analysis that searches for linear up or down movements in historic data, and extrapolates forward. 2. Effective when demand is fairly consistent over time. y = a + bx

Naive Approach - Type of Quantitative Forecasting (CH5)

1. Forecasts that assume that the next period will have the same demand as the most recent period.

Scientific Management (CH1)

1. Frederick Taylor - "father" of scientific management. 2. Focuses on - a. strong understanding of process behaviors - costs, cycle time, constraints b. expected outcomes and the management systems used to support operations strategy c. managing variability d. quantitative and mathematical approaches to decision making

Globalization - Healthcare Trend (CH1)

1. Global competition for businesses; as hospitals outsource, they can turn to international vendors.

Dimensions of Six Sigma (CH4)

1. Goals - conformance to customer requirements; elimination of defects. 2. Approach - reduction of process variability. 3. Principal tool - statistical process control, run charts, cause-and-effect diagrams. 4. Infrastructure - through formal structure, title and roles. 5. Method - DMAIC 6. Performance metrics - quantifiable, cost of quality; mapped into financial value.

Dimensions of Lean (CH4)

1. Goals - remove non-value-added activities; eliminate waste. 2. Approach - standardization, production flow leveling. 3. Principal tool/method - value stream mapping, Kanban, 5S. 4. Infrastructure - cultural change, "sensei" relationships. 5. Method - plan, do, study, act, ie, PDSA. 6. Performance metrics - not consistent; often results in new metrics.

Pareto Charts (CH4)

1. Graphical representation of the "most vital" issues. 2. From left to right, the first few columns in a Pareto represent the categories or problems that are the highest importance or frequency, based on cumulative percentage. 3. Indicates what the most important, critical, and impactful issues are to the organization.

Quality (CH4)

1. High standards of excellence, and the ability to meet and exceed customer expectations. 2. Healthcare quality revolves around - a. patient outcomes b. patient safety c. finances d. administration e. patient logistics flow f. facilities

Consistent - Principle of Managing and Measuring Productivity (CH6)

1. Hospitals need to measure and manage activity and resources in the same way over time to make trend comparisons. 2. Measuring must also utilize the same units of measure over time.

Forecasting Process (CH5)

1. Identify 2. Model 3. Analyze 4. Adapt

Improve Quality of Customer Service - Goals of HC Ops Mgmt (CH1)

1. Improving quality requires the reduction of medical errors, improved patient safety and higher levels of patient satisfaction. 2. Higher quality services and outcomes leads to higher reimbursement, which increases market share and profit margins. 3. Operations managers must balance cost reduction efforts against their impacts upon overall quality. 4. Trends - evidence based care, LSS

Qualitative Forecasts (CH5)

1. Includes market research, executive opinion, Delphi methods and subjective judgements about future demand. 2. Useful for gauging potential demand of new products that have no history or relationship with other products, and cannot be statistically estimated.

Strategies to Manage Capacity Constraints (CH5)

1. Increase capacity through capital purchases, hiring more labor, contracting for additional services, or increasing facility size. 2. De-bottleneck 3. Reduce demand where possible and profitable 4. Transfer capacity from other areas

Mintzberg's Management Themes (CH1)

1. Informational 2. Decisional 3. Interpersonal

Three Elements of Productivity (CH6)

1. Labor 2. Capital 3. Management

Principles of Forecasting (CH5)

1. Level of hierarchy 2. Decompose the forecast 3. Time horizon 4. Apply quantitative techniques 5. Simplicity first, avoid complexity; more variables does not always make the forecast better 6. Use reliable data sources 7. Cleanse the data using business rules, and logic 8. Causal relationships; avoid making predictions on predictions 9. Exception reporting 10. Graphical analysis of trends 11. Apply insight and intuition - TLAR 12. Use unconstrained data that may be artificially different due to extenuating circumstances in the time period it was collected 13. Measure errors and accuracy levels

Types of Labor Optimization Programming (CH6)

1. Linear programming 2. Simulations 3. In healthcare there has been minimal adoption of optimization techniques.

Management (CH6)

1. Management executes basic decisions about staff levels, compensation, motivation, location, technology and priorities. 2. Management determines the tradeoff between capital and labor, and which to invest more heavily.

Comprehensive - Principle of Managing and Measuring Productivity (CH6)

1. Measurement should use multiple factors to more accurately describe the cost behavior and resource consumption of a process or function.

Evidence-based Medicine - Healthcare Trend

1. Medicine that applies the scientific method to medical practices, and seeks to quantify the true outcomes associated with certain medical practices by applying statistical and research methods.

Report and Adjust - Step in Process Improvement Method (CH4)

1. Monitor and track performance continuously throughout the pilot and initial roll-out. 2. Feedback and adjustment is necessary for at least 3 to 6 months following implementation.

Linear Programming - Labor Optimization (CH6)

1. Most commonly used. 2. An optimization technique that seeks to either minimize or maximize an objective function, given a set of variables and constraints. 3. Typically five sets of variables that drive quantitative models

Leading (CH1)

1. Motivating employees, building support for ideas, accomplishing things through people. 2. Providing direction; managing change.

Adjusted Patient Day (CH6)

1. Multifactor index that takes the patient day, and adds the relative value of other services produced during that day such as lab tests, surgical procedures, physical therapy etc...

Types of Quantitative Forecasting Techniques (CH5)

1. Naive approach 2. Moving averages 3. Exponential smoothing 4. Simple univariate 5. Linear regression

Most Common Metrics of Hospital Productivity (CH6)

1. Number of nurses or physicians per bed. 2. Hospital man-hours per discharge or visit. 3. Capital cost per discharge. 4. Total general service cost per discharge. These are activity indicators, not necessary productivity indicators. Indicators must be adjusted based upon geography, case mix.

Patient Day (CH6)

1. One patient, occupying one hospital bed, for one day.

Continuously Improve Business Processes - Goals of HC Ops Mgmt (CH1)

1. Operations managers must find ways to execute business processes while improve process efficiency and efficacy. 2. Trends - outsourcing, globalization

Improve Productivity - Goals of HC Ops Mgmt (CH1)

1. Ops managers must achieve higher levels of output from all employees and company assets. 2. Trends - IT, mobile devices, asset and patient tracking systems.

Bounded Rationality (CH1)

1. People have a limited capacity to understand and evaluate all options available. 2. Two components - a. search b. satisficing

Efficiency (CH6)

1. Performing tasks with minimal waste and resource consumption. 2. Efficient health services delivery requires higher levels of output at the same quality standards, with fewer inputs over time. 3. The relationship between capacity and output is called productive management.

Steps in the Process Improvement Method (CH4)

1. Plan and prioritize 2. Collect and analyze 3. Benchmark 4. De-bottleneck and deploy pilot 5. Report and adjust

Four Key Management Functions (CH1)

1. Planning 2. Organizing 3. Leading 4. Controlling

Reduce Costs - Goals of HC Ops Mgmt (CH1)

1. Primary role of the operations manager is to take costs out of the healthcare system by finding waste, improving utilization, and stabilizing and reducing the overall cost of delivering services. 2. Trends - standardization, optimization, resource tracking systems.

Plan and Prioritize - Step in Process Improvement Method (CH4)

1. Prioritize based upon potential gains in cost, quality, patient satisfaction, or some other performance category. 2. Plan using project timelines, cross-functional teams, and target goals.

Characteristics of Complex Decision Processes (CH1)

1. Problematic preferences 2. Unclear technology 3. Fluid participation

Measurable - Principle of Managing and Measuring Productivity (CH6)

1. Productivity managers must ensure that business workflow is readily measurable and can be consistently calculated at the same time and using the same unit.

Two Types of Forecasts (CH5)

1. Qualitative 2. Quantitative

Three Perspectives of Decision Making (CH1)

1. RATIONAL perspective of a search and selection among limited alternatives, and the desire to maximize decision outcomes and adjust for risk. 2. ORGANIZATIONAL perspective emphasizes satisficing; decisions are the outputs of organizational processes, not individual processes, and includes adapting strategy to the environment. 3. POLITICAL perspective states that decisions are the result of bargaining among individuals attempting to achieve their own personal goals.

Goals of the Healthcare Operations Manager (CH1)

1. Reduce costs 2. Reduce variability and improve logistics flow 3. Improve productivity 4. Improve quality of customer service 5. Continuously improve business processes

Extrinsic Pressures Affecting Healthcare Margins (CH1)

1. Reimbursement practices 2. Fragmented industry 3. Federal health policy 4. Lack of information 5. Managed care mechanisms 6. Consumer apathy 7. Competitive structure 8. Incentive misalignment

Reliable - Principle of Managing and Measuring Productivity (CH6)

1. Reliability means that the productivity yield stable and uniform results over time. 2. Hospitals must ensure that systems used to measure do not change, are measured over the same period, and consider all resources.

Four Steps of Benchmarking (CH4)

1. Select organizations for comparison. 2. Collect or observe data and processes. 3. Identify sources of differential performance. 4. Incorporate benchmarks into performance scorecards and management processes.

Fixed Staffing (CH6)

1. Some departments have staffing levels that are fixed and cannot be adjusted.

Contract Labor (CH6)

1. Staff hired from external sourcing agencies. 2. Contract labor hours must also be considered when evaluating productivity.

Process Time (CH4)

1. The actual time spent performing work; true productive time.

Capacity (CH5)

1. The amount of resources or assets that exist to serve the demand. e.g., available beds, rooms, staff, supplies, facility space

Quality Management (CH4)

1. The application of quantitative and qualitative methods to ensure that health services completely meet the requirements that they are designed to satisfy.

Time Horizon (CH5)

1. The business process should dictate the forecasting horizon. 2. Short time horizons provide more reliable results. 3. Typically, forecasting more than 3 to 6 months away is not optimal.

Benchmarking (CH6)

1. The comparison of KPIs relative to other organizations, or the process of seeking best practices with the intention of applying them to one's organization.

Continuous Improvement (CH4)

1. The constant focus on achieving better outcomes through the use of analytical methods and tools.

Outsourcing - Healthcare Trend (CH1)

1. The contracting of an outside firm to perform services that were once handled internally. 2. Successfully used in healthcare for - cafeteria, bookstore, investments, and nursing services. 3. Relies on the notion that a hospital should focus on core competencies.

Effective Capacity (CH5)

1. The design capacity adjusted for expected utilization rate. Ce = Cd x U Ce = effective capacity Cd = design capacity U = utilzation

Logistics (CH1)

1. The efficient coordination and control of the flow of all operations, including patients, personnel and resources. 2. Operations managers must improve logistics and throughput by using streamlined processes and facility designs to increase capacity, workflow and throughput.

Capital (CH6)

1. The investments in assets to offset labor, or assets used to produce more assets.

Competitiveness (CH1)

1. The management's ability to respond to environmental changes, and competitor's actions. 2. Driven by innovation - the continuous search for a way to do new things or the current thing better.

Design Capacity (CH5)

1. The maximum stated or theoretical output from a resource.

Operations Effectiveness (CH1)

1. The measure of how well the organization is run. 2. Considers the efficiency of resource inputs and usage, and the effectiveness of overall management in achieving desired goals.

Base Staffing (CH6)

1. The minimum required staff level for a particular service or department regardless of the level of demand for that service.

Capacity Planning (CH5)

1. The planning process for aligning capacity with demand. 2. Analyzes whether any shortages or excesses exist.

Management Decision Making (CH1)

1. The process in which decisions are made and reflects the major processes involved in managing the work of the organization. 2. Decisions are the output of the process and are a choice among alternatives.

Benchmarking - Step in Process Improvement Method (CH4)

1. The process of identifying best practices and comparing performance relative to other similar organizations. 2. Two forms - a. firsthand observations b. direct comparisons of secondary published data

Revenue Cycle Management (CH5)

1. The process of processing claims, settling payment and generating revenue. 2. It should be an analytical method that determines prices that leads to greater demand, higher utilization, and maximizes margins.

Debottlenecking (CH5)

1. The process of systematically identifying and eliminating obstacles and inefficiencies. 2. Must thoroughly understand capacity and demand to determine where bottlenecks exist.

Decision Making (CH5)

1. The process that an organization uses to make decisions.

Labor (CH6)

1. The productive work conducted by the employees. 2. Dependent upon education, skill level, motivation, work environment, and leadership. 3. Typically, changing the education level will affect the volume of labor required. 4. Labor is one of the most controllable costs.

Capital Substitution (CH6)

1. The purchase or execution of a capital purchase to replace or reduce a labor input. 2. ROI models must analyze cost and anticipated benefit; benefits must be greater than costs.

Healthcare Operations Management (CH1)

1. The quantitative management of the supporting business systems and processes that transform resources into healthcare services. 2. Resources, or inputs, are labor, capital, technology, equipment, space, and information . 3. Healthcare services, or outputs include the production and delivery of health services.

Variability (CH4)

1. The range of possible outcomes of a given process. 2. Also defined as the amount of dispersion around the mean, or the inconsistency of results. 3. The greater the variability, the less control that exists. 4. Standard deviation and variance are the statistical measures for variability.

Productivity (CH1)

1. The ratio of outputs to inputs.

Inputs (CH6)

1. The resources used in the delivery of the outputs. e.g., time, costs, labor hours, materials, capital

Process Engineering (CH4)

1. The scrutiny of current process to identify value creation opportunities, and to find value through increasing capacity, reducing costs and reducing variability. e.g., eliminating hand-offs or steps in a process

Time Series (CH5)

1. The set of values or observations at successive points in time.

Operational Excellence (CH1)

1. The term that describes a business strategy that focuses exclusively on maximizing operational effectiveness.

Transition Time (CH4)

1. The time interval needed between productive work to perform cleanup, conversion or changeover. 2. Prepares the resource to switch from one state to another. 3. One of the largest components of healthcare waste and inefficiency.

Transit Time (CH4)

1. The time spent being transported from one department to another.

Wait Time (CH4)

1. The time spent waiting because of lines formed in a facility.

Idle Time (CH4)

1. The time when patients and staff are not performing work, due to downtime or breaks.

Standardization - Healthcare Trend (CH1)

1. The use of consistent procedures, resources and services to achieve consistent results across multiple departments. 2. Common standards of supplies, information systems, personnel and operational processes.

Quantitative - Principle of Managing and Measuring Productivity (CH6)

1. The use of data and numbers to measure productivity, cost and efficiency.

Productive Hours (CH6)

1. The work hours of an FTE that can be controlled by management, and directly contribute to patient care. 2. Includes regular paid hours, overtime, call-back hours, training, orientation.

Outputs (CH6)

1. The yield that results from operations management or the conversion of a process. 2. Outputs are the result of the work conducted through process and automation. e.g., procedures, visits, units, acitivity

Nonproductive Hours (CH6)

1. Time when the employee is not engaged in their normal work. 2. Includes vacation, sick time, holiday pay. 3. Pay for additional wage premiums, on-call obligations, shift differential, or bonuses should not be considered when calculating labor productivity.

Quantitative Forecasts (CH5)

1. Two types: univariate and multivariate. 2. Univariate quantitative forecasts estimates demand using a single variable. 3. Multivariate quantitative forecasts use more than one variable to project future demand. a. most common is multiple regression

Challenges to Decision Making in Healthcare (CH1)

1. Unclear goals - conflicting clinical, financial, educational, societal/community goals; unclear prioritization. 2. Complex organizations - complex matrix environments; lack of "command and control". 3. Ambiguous relationships - unsynchronized relationships, continuous power struggles. 4. Multiple formal power bases - business managers, physician leaders, nursing leaders.

Requirements to Maintain Efficient Operations (CH5)

1. Understand demand. 2. Align capacity and resources with demand. 3. Debottleneck to improve throughput. 4. Track patient and asset flows.

Moving Average (CH5)

1. Uses a specific, rolling period, e.g., 3 months, to continuously adjust average forecasts. MA = sum of data in N periods / N periods

Reduce Variability and Improve Logistics Flow - Goals of HC Ops Mgmt (CH1)

1. Variability is the inconsistency or dispersion of inputs and outputs; leads to inconsistent results. 2. Ops managers look for the most efficient and optimal paths for resource flow. 3. Improving flow requires achieving higher throughput or yields for the same level of resource input. 4. Throughput is the rate or velocity at which services are performed or goods are delivered. 5. Trends - integrated service delivery, analytics, supply chain management

Functions of Healthcare Operations Management (CH1)

1. Workflow processes 2. Physical layout 3. Capacity design and planning 4. Physical network optimizations 5. Staffing levels and productivity management 6. Supply chain management 7. Quality, planning and process improvement

Exponential Smoothing Equation (CH5)

Ft = F(t-1) + alpha(At-1 - Ft-1)

Multifactor Productivity Equation (CH6)

Multifactor Productivity = Outputs / Sum of Inputs Each factor must be measured on the same scale or unit of measure.

Productivity Equation (CH6)

Productivity = Outputs / Inputs Productivity = Sum of Outputs / Sum of Inputs