As the commanding officer of Dr. Eli Goldratt during decades' long service in an infantry unit of the Israeli army, Dr. Klarman became familiar with the very early concepts of OPT and TOC almost three decades ago.

In the course of the last 25 years, he took a major part in the drive to develop, disseminate, and apply TOC. His work included developing the educational materials and simulators used in various areas of TOC education, as well as the implementation work with some of the leading world-class corporations including the likes of Ford, Phillips, Intel, and Microsoft as well as many others.

Some of his works were truly pioneering efforts, like the development of TOC application in the field of intelligence analysis-already in use-or, together with Dr. Issahary of the Dead Sea Works, in applying Six Sigma in concert with TOC.

In the course of the last few years, Dr. Klarman has joined Richard Klapholz in the effort to develop and present a range of TOC solutions in a wide range of business activities, like sales management or customer support and service-a truly pioneering effort.

He holds a PhD in Biochemistry and Biophysics from Tel-Aviv University.

Richard Klapholz is a 17-year veteran in sales, marketing, and customer support of high technology production equipment on the global scene. He currently serves as the President of his firm's 500-employee subsidiary in Asia Pacific.

Mr. Klapholz has held various international sales, marketing, and customer support positions. All have focused on the direct distribution of strategic, high-value capital equipment, like the marketing of innovative products to the graphic arts industry through a direct sales force of 100 salespersons on a pan-European market, OEM sales to commercial and quick printers through the sales forces of Xerox (North America) and Rank-Xerox (Europe). Those sales forces included over 2000 salespersons. He was involved in sales of Dell Computers' equipment to the IT market in Israel, implementing Dell's direct sales, as well as worldwide marketing of automated inspection and imaging equipment to electronic components manufacturers through a global and direct sales channels. This involved managing a salesforce of 50 salespersons, customer support to North American manufacturers, and general management with focus on distribution to Taiwanese accounts in Taiwan and China.

He co-authored a book on sales management using TOC concepts, The Cash Machine. The book was published in 2004 and was later translated into Japanese, Lithuanian, and Chinese.

Mr. Klapholz is a 1992 INSEAD, Fontainebleau, MBA graduate. He became accustomed to TOC during his MBA studies and since then has become addicted to the TOC concepts and Thinking Processes. Mr. Klapholz has implemented TOC concepts in sales and customer support since 1997.

Mr. Klapholz holds a BSc degree in Electronics Engineering from Tel-Aviv University.

CHAPTER 31.

Viable Vision for Health Care Systems

Gary Wadhwa

Introduction.

The use of the Theory of Constraint1 (TOC) in healthcare is growing rapidly; however, little has been reported in the literature. The TOC methodology has been previously applied to health care on a large scale. Knight (2003) first reported the use of Buffer Management (BM) in the British National Health System. Wright and King (2006) later describe the use of TOC in the British health care system in a novel form. Umble and Umble (2006) describe the implementation of TOC BM (the identification and elimination of the major causes of long waits) in three separate implementations in British hospitals. Significant improvements were achieved almost immediately using this methodology in emergency departments and the acute hospital admissions process in each implementation. For example, in the Emergency Department in Oxfordshire Horton Hospital, the pre-implementation percentage of patients processed in under 4 hours typically varied between 50 and 60 percent. In addition, the pre-implementation acute hospital admitting process regularly exceeded 4 hours and frequently exceeded the 12-hour waiting period. Post-implementation, the percentage of Emergency Department patients processed in less than 4 hours increased to about 80 percent in the next few months, then to 91 percent, and then to 95 percent within six months of implementation. In contrast, for post-implementation results in the acute hospital admissions process, 94 percent of the patients were waiting less than 4 hours and the 12-hour waits were eliminated. Similar results were achieved in Oxfordshire Radcliffe.

The purpose of this chapter is to describe the tools, processes, and models used in an implementation of the TOC Viable Vision (VV)2 in a for-profit healthcare practice. A VV project is an approach whereby a company-any for-profit company-maps its strategy of how to achieve net profit within four years equivalent to its annual sales today.

Our approach emphasizes TOC tools for focusing the direction of health care system improvement from top to bottom. TOC Strategy and Tactics Trees (S&T)3 are used to set the strategic direction from the top with tactics underpinning each level of strategic action. TOC Thinking Processes (TP) are used to identify core problems and the action injections needed to resolve them. Then, with constraints identified and using the Five Focusing Steps (5FS), buffers are put in place. Information on buffer penetration is used to sharpen the focus on specific areas for application of Lean and Six Sigma processes. The combining of TOC, Lean, and Six Sigma is a happy marriage of planning and operational methods enabling extraordinary progress. How TOC is employed and how it provides focusing guidance to Lean and Six Sigma will become clear as the story unfolds. The TOC terminology and processes have been presented in other chapters in this handbook. However, in this chapter, I briefly introduce the terminology and concepts.

The Tools for Improvement

Now we examine TOC, Lean, and Six Sigma as the main tools for strategy and process improvement in a health care practice. Each of these is a powerful capability in its own right. Combined they bring together what is needed for dramatic organization results.

Theory of Constraints

Goldratt developed a number of important TOC tools useful in system improvement. The TP are useful in identifying and resolving problems. TOC also provides a performance measurement system (Throughput Accounting, TA) based upon identifying and measuring a few resources (leverage points or constraints) that directly link to overall system performance. In contrast, most traditional cost accounting and some newer accounting systems (activity-based accounting) measure individual departmental performance and assume incorrectly that these reflect global performance of the endeavor. TOC also provides a number of application tools to improve the flow of goods and services and therefore Throughput of the system. New physical process improvement tools (see Sections II and III), like Drum-Buffer-Rope(DBR) scheduling,Critical Chain Project Management (CCPM for multi-project)4, and Distribution/Replenishment for supply chain management and distribution provide system perspectives. Additionally, new marketing (Mafia Offers) and sales (Sales Funnels) approaches (See Section V) capitalize on competitive advantages. These tools have been used quite successfully in for-profit and not-for-profit organizations. One of the latest tools in TOC is called the Viable Vision (VV). As stated previously, in a VV implementation a company combines the use of the previous TOC tools by following logical hierarchical steps provided in an S&T to translate its current sales level into its profit in 4 years. This VV methodology provides hope and direction for any health care system. This methodology has been applied in a small health care company, Oral & Maxillofacial Surgery, a specialty group practice with significant financial results even in the recessionary economy. The company moved from practically no profits after paying doctors and the staff to over $3.5 million in profits per year in less than 8 years. This happened despite the time spent in learning the Lean, Six Sigma, and TOC concepts and selling them to the staff and to the doctors. Furthermore, when the focusing power of TOC points to areas where Lean and Six Sigma can be applied to increase profitability significantly, bottom-line results occur rapidly.

Lean

Lean provides a number of tools generally focusing on waste reduction across the whole value chain thus improving the flow of work (patients, in our case) through and out of the system. Several Lean and Six Sigma tools were utilized in the medical practice VV. Some of these tools with definitions are provided in Table 31-1.

Lean Lean-A holistic and sustainable management philosophy built on minimizing resources used in organization activities and simplifying processes by eliminating non-value-adding steps with a focus on flow of parts and products from entry into the system to receipt by customers. Multi-skilled workers utilize lean methods to reduce time, blockages, and cost.

Value stream mapping-The process of diagramming and analyzing the creation, production, and delivery of a good or service through the value chain to the customer. For a service, the value stream consists of suppliers, support personnel, technology, and the provider and payment process.

Mistake proofing-Error prevention. The study of causes of errors with the focus on the elimination of the cause.

Standard workflow methods-The simplification and standardization of activities, processes, and procedures to increase workflow through an organization. A focus of these methods is the elimination of non-value-added activities.

Five S's-A set of processes (originally part of Lean) designed to clean up and make a work environment safe, efficient, and effective. These processes include: sort, simplify, scrub, standardize, and sustain.

Total preventive/productive maintenance-Worker initiated maintenance activities focused on eliminating equipment breakdowns and the continuing improvement of the equipment.

Total kit-The building of a package of items needed to support a stage in the provider-patient process. For example, having all the necessary items in place so that the doctor is able to respond to the next patient's needs without having to wait or search for any items (patient records, patient plan, supplies, instruments, assistant, etc.).

Setup time reduction-The removal of non-value-added time from the setup process.

Six Sigma Six Sigma-A methodology to decrease process variation and improve product quality and includes the DMAIC and DFSS methodologies.

Design-Measure-Analyze-Improve-Control (DMAIC) process-A Six Sigma improvement methodology based on five interrelated steps: (1) design is the determination of the problem; (2) measure current performance versus the desired performance and causes of performance problems; (3) analysis to identify the core problem; (4) improve by identifying and implementing the problem solution; and (5) control by executing, monitoring, and making corrections to the new process.

Design for Six Sigma (DFSS)-A defect-prevention methodology. The process design of the valueadded activities from product and process design to customer use capturing the voice of customer (VOC) and translating customer needs into quantifiable customer requirements with the objective of making processes and products robust to eliminate defects.

Quality functional deployment-A methodology to ensure that the voice of the customer (customer requirements) is clearly defined and incorporated as a customer need into the service design of the business (functional requirement). For example, a customer may not want to wait more than 10 minutes after filling out paperwork to being shown to the examining room.

TABLE 31-1 Lean and Six Sigma Tools with Brief Definitions Lean tools,5 when applied to strategically important areas identified through TOC processes, cause breakthrough results. However, the focusing power of TOC via BM and the TP are needed to focus attention where it counts. In the current Total Quality Management (TQM) movement, its tools are applied everywhere without the focus of TOC to spotlight where action will do the most good. Disappointing improvements without significant improvements in Throughput or in customer satisfaction is the result. These unfocused improvement efforts result in increases in OE only.

Six Sigma

Six Sigma6 is a statistical methodology that organizations use to reduce variations in their processes. Several health care organizations are attempting to apply these techniques combined with Lean (e.g., Virginia Mason Hospital in Seattle) but they have not used TOC. Six Sigma and Lean could benefit from the focusing power of TOC, pinpointing the best opportunities for application.

Undesirable Effects of the Current Health Care System

We now examine the areas in healthcare that need improvement. The health care system is in a crisis in this country and around the globe. To understand the problems of our current health care system better, the differing perspectives of the various stakeholders should be examined. The health care debate in the United States is surfacing an influential "voting public" perspective as people try to affect the direction of government action. However, numerous stakeholders exist. Their perspectives are important and include: Patients Doctors Insurers Hospitals Business owners Government The current system pits one stakeholder against another on various vital issues.

Patients' Perspective

From the patients' perspective, the cost of health care is increasing every year; millions of people are without health care coverage because they cannot afford health insurance. Surprisingly, frequently for those who can afford insurance, the quality of service compared to other service industries is less than desirable, and the response to emergency or urgent care is poor. Patients waste a lot of time in queues waiting to get comprehensive care, being passed from one health care stakeholder to another.

Doctors' Perspective

Doctors are frustrated with the increases in their liability insurances and the low reimbursements from third-party insurers. Whenever possible, most doctors perform procedures that have low risk despite their training and experience in treating highly specialized high-risk procedures. Several towns and cities have trouble finding specialized trauma surgeons to treat patients with facial bone fractures. Sometimes patients have to wait several hours before being transported to an academic medical center for treatment. In some states a few years ago, obstetricians and gynecologists stopped delivering babies because the courts were awarding millions of dollars (exceeding their malpractice insurance coverage) for poor outcomes in medical malpractice suits. Most surgeons and physicians moved from high-risk states that award high settlements in malpractice suits to low-risk states. Others reorganized their practices to do only low-risk procedures. Most oral and maxillofacial surgeons are highly skilled in facial injuries and reconstructive surgeries. Once they go into private practice, they soon realize both the high risk of performing these procedures and the poor reimbursement from insurance companies. As a result, they limit themselves to low-risk, high-profit, in-office procedures. While treating patients, a doctor has to weigh many variables and interactions of those variables when coming up with diagnosis and treatment plans. It takes years to learn these skills and develop intuition or judgment regarding treatment of complex diseases. The doctors are forced to multitask. They constantly face the conflict of either pleasing the insurance companies by cutting costs by not conducting expensive tests or pleasing the hospitals by ordering expensive tests. They also can refer patients with high-risk surgery to specialists versus performing the surgery themselves and facing malpractice suits if anything goes wrong. Most for-profit health care practices manipulate their mix of patients by focusing only on patients with lower treatment cost and lower risk. These choices further put them in conflict with other medical practitioners or hospitals that end up seeing these high-risk patients in emergency rooms.

Insurers' Perspective

As medical costs rise, most large insurance companies and regional HMOs are forced to focus on cost containment. They make it hard for doctors to get approval for diagnostic tests like MRIs, PET scans, and even routine CT scans-in some cases, physicians personally have to call another physician at the insurance company to get approval for diagnostic tests. Medicare and Medicaid reimbursements are decreasing for health care providers due to budgetary cuts and financial crises in the state and national governments. Insurance companies are following suit with government cuts and further reducing reimbursements. Health care services that require more cognitive ability like family medicine, internal medicine, and pediatricians are hit the worst by these cost-cutting initiatives. These services perform very few invasive procedures. Invasive procedures are reimbursed at a higher rate than noninvasive cognitive decision-making procedures. With each reimbursement cut, these professionals are forced to see a larger number of patients in a short time to compensate for the lower reimbursement. Government is making insurance companies a scapegoat for most of the health care system problems.

Hospitals' Perspective

These cost-cutting initiatives are also hurting hospitals, especially the community-based hospitals and some teaching hospitals. Many hospitals are restructuring to remain viable. A few years ago, the hospitals were buying out private practices and developing integrated health care models. Now several hospitals are outsourcing their emergency room departments by allowing physicians to buy out the practice. Similarly, laboratory and radiology services have been separated from the hospital. Some teaching hospitals have restructured specialty services like orthopedics, neurosurgery, plastic surgery, otolaryngology and head, neck surgery, cardiology, hematology and oncology, oral and maxillofacial surgery, dentistry, and pathology, allowing the departments to run independently like for-profit private practices.

Business Owners' Perspective