Poor hospital management is one reason why health care costs in the U.S. are the highest in the world. According to a 2009 Boston Globe article by Scott Allen, “hospitals have overtaken prescription drugs as the main reason insurance bills go up each year.” But better logistics practices, particularly in the area of how patients are flowed through a hospital, could lead to significant improvements.

If hospital executives concentrated on the logistics of moving patients smoothly through the hospital, they could make hospitals better places to work, safer environments for patients, and cheaper to operate. The manufacturing, retail and 3PL sectors have all adopted advanced supply chain management principles. But the health care industry, which accounts for 17 percent of the U.S. economy, lags far behind in this area. Eugene Litvak, a professor of health care management at Boston University, has been a key proponent of changing that. According to the Globe artice:

In hospitals, nobody expects – or even wants – “fast” care, but everyone in the building benefits when the flow of patients from one part of the system to another is smooth. Backups in one part of the hospital can cause backups in others, leaving, for example, patients sitting for hours in the waiting room or highly trained surgical teams cooling their heels with no patient. A smoothly flowing hospital saves time and money, but it also reduces stress on the staff and the risk of mistakes. Unfortunately, the typical US hospital is a model of bad flow: The average emergency room wait, for example, is four hours.

The problem?  

Nearly every department is run separately, making today’s hospital a nest of competing kingdoms rather than a smooth-running, cooperative organization. Hospitals often have limited power over doctors, who can schedule patient appointments without regard to the hospital’s needs.

As a result, Litvak says, American hospitals only think they’re overcrowded because they have a chronic problem managing their flow. Patients simply pile up at certain times. In 2006, for instance, US hospitals were typically only 65 percent full, far less crowded than the 84 percent occupancy in Britain and the 90 percent occupancy of Canadian hospitals. But when US hospitals get much more than 65 percent full, the whole system starts to become stressed. Then, to boost their capacity, hospitals expand, at an average cost of $1 million per new bed.

James M. Anderson, the CEO at Cincinnati Children’s helped implement Litvak’s ideas. As a former president of a company that manufactures valves, he was “underwhelmed by the level of efficiency he saw” when he joined Cincinatti Children’s. To bring about the culture change, he allied himself with a key transplant surgeon in the hospital. This doctor had noticed how inefficiency was adversely affecting his patients. For no obvious reason, he found that the nurses who cared for his young transplant patients “sometimes had a lot more time to lavish on the children” and other days these children got almost no attention. Further, hospital officials “discovered that the busy nights were caused, not by the random distribution of accidents and illnesses in Cincinnati, but by the way the hospital assigned operating room time to surgeons for scheduled surgery. Since a child who has just received a new liver needs near constant attention, this was no small matter, raising the risk that the child’s vital signs could plummet while the nurse is off caring for other patients.”

In 2004, Litvak became a consultant for the hospital. The article goes on to say:

Armed with a branch of mathematics known as queuing theory, Litvak began to rearrange Cincinnati Children’s Hospital. He told administrators that a lot of the delays throughout the hospital traced back to the lack of control over operating room time. He recommended that some operating rooms be set aside for emergencies only so that scheduled operations would not be disrupted. He also suggested that administrators take charge of assigning times for nonemergency surgeries to spread them out evenly. And he asked that surgeons notify the intensive care unit if their patients would need ICU care after the operation, giving the nurses time to plan.

Doctors now care for more patients in less time; there are fewer aggravations and logistical conflicts for staff and patients alike. The hospital says the improvements in efficiency have given it a boost in capacity equivalent to a $100 million, 100-bed expansion and boosted income from treating patients by even more. Doctors and nurses – many of them initially skeptical – generally like the system, too, because their schedules became more predictable. And Children’s officials say the changes have also made their hospital safer by reducing the times when nurses and doctors are under extreme stress. Cincinnati Children’s estimates that these and other streamlining measures will allow the hospital to generate an additional $137 million in revenue this year from treating more children with the same levels of staffing in surgery and other departments.

In short, “the American approach to health care has always been to focus overwhelmingly on the search for cures while devoting far less energy to practical matters like finding the best way to get cures to patients.” But clearly, supply chain management matters too.