Using simple charts, I've helped teams save millions of dollars and often in just a few days. The concept is over 100 years old. It's referenced often in every management book ever written. And it all began with an Italian economist who noticed a simple disparity in incomes. But few people know how to leverage its power in healthcare.
In 1995, I was struggling with the complexities and inherent problems of a huge telecommunications company. Sitting at my desk, I was staring at a vast spreadsheet of facts and figures about postage costs for the company's bills. With a cranky vice president sitting upstairs waiting for my results, I decided to do a simple analysis. There had to be a pattern to the steady increases in postage costs. It wasn't the postal service or ride-along coupons, so it had to be something else.
More and more of the company's bills were being mailed at the 2-ounce rate instead of the 1-ounce rate. Either the postage meters were wrong, or the bills were getting heavier.
On top of this, every month, thousands of bills were returned because of bad addresses. I went through the bins of returned bills looking for any bill over the 1-ounce rate. One by one, I opened them up, looking for the secret to unlock the root cause of increased postage costs.
It took only a few dozen bills to discover the culprit. The company had begun billing for smaller telecommunications companies. Each company got its own page in an already thick envelope. Page by page and company by company, the bill was steadily creeping over the 1-ounce limit. Of course, the product manager who sold the billing service hadn't priced it to cover the increases in postage costs.
Based on my research, a team redesigned the bill to be smaller, lighter, and more readable. In the year after its implementation, postage costs fell by $20 million a year.
What charts did I use to display the problem and garner support for the redesign?
Control charts, Pareto charts, and fishbone diagrams.
I used them again to save $16 million a year in billing adjustments. And again to save $3 million a year in service-order errors. And $5 million a year in denied claims and $24 million in rejected claims for a hospital system.
Isn't it time that you discovered the power of pivot tables, control charts, Pareto charts, and fishbone diagrams to laser-focus your improvement efforts?
INVISIBLE LOW-HANGING FRUIT
When my company first got into the quality-improvement movement in 1990, my Florida Power and Light consultants always spoke about "low-hanging fruit just waiting to be plucked." Two years and tens of thousands of staff hours later, I still hadn't found any low-hanging fruit.