Applying Throughput Economics to a enhance Hospital System Operating Model

 

Throughput Economics is a business management philosophy proposed by Eliyahu M. Goldratt. It focuses on improving system throughput or the rate at which a business generates money through sales. The main principles of Throughput Economics are:

• The goal of a business should be to maximize throughput or revenue while minimizing inventory and operating expenses. This is in contrast to traditional methods that focus on maximizing utilization or efficiency of resources.
• Throughput is limited by constraints in the system, so efforts should focus on identifying and eliminating these constraints rather than overall efficiency.
• Inventory and operating expenses provide no value to the system and should be reduced. Inventory covers up problems and excessive operating expenses waste money.
• Operational measurements and decisions should be based on their impact on throughput, inventory, and operating expense, not utilization and efficiency metrics.
• Adopting an ongoing process of identifying and eliminating constraints can continually improve throughput.
  
  

The core ideas of Throughput Economics relate to focusing on revenue generation rather than resource efficiency, reducing excess inventory and costs, and constantly improving throughput by eliminating constraints. Implementing these principles is claimed to improve financial performance.

How can we apply the principles of Throughput Economics could potentially be applied to a Trauma Hospital system like Grady:

• Identify the system's constraints. Grady would need to analyze where the bottlenecks are, such as shortages of nurses, doctors, beds, OR availability, testing equipment, etc. Anything limiting the rate of patient care and billing.
• Make processes more efficient. Streamline workflows, improve scheduling, reduce wait times, discharge patients faster, eliminate redundant procedures, etc. to maximize patient throughput.
• Reduce excess inventory and expenses. Limit supplies/devices inventory to necessary levels. Cut unnecessary admin costs. Avoid overstaffing during slow periods.
• Measure throughput metrics. Track revenue per day, patients treated per doctor, revenue per bed, etc. Rather than utilization rates which may be misleading.
• Subordinate everything to throughput. Prioritize decisions based on impact to patient volume and revenue. This may mean delaying equipment maintenance or hiring flex staff to meet demand.
• Continuously identify new constraints. Even if one bottleneck is removed, another will arise as throughput increases. Address each new constraint until maximum throughput is reached.
• Automate where possible. Use technology to reduce manual work and human errors that slow down care delivery. This may increase capacity without adding staff.
  
  

The goal would be to maximize patient volume and revenue generation for Grady in a sustainable way while reducing expenses. Applying these principles could help improve Grady's operational efficiency and financial standing.

What Role Supply Chain Management can play in this effort?

The supply chain can play a critical role in supporting Throughput Economics for the Grady Hospital system in a few key ways:

• Manage inventory levels. Closely monitor and optimize stock of medical supplies and devices to avoid shortages that impact patient care, while also reducing excess inventory that ties up working capital. Lean inventory management boosts throughput.
• Improve procurement efficiency. Streamline the purchasing and supplier relationship processes to quickly obtain supplies and equipment needed to deliver care. Slow procurement leads to delays and shortages.
• Enhance distribution logistics. Optimize the storage, handling and transportation of inventory to ensure the right items are available at the right time across the hospital network. Poor logistics creates bottlenecks.
• Align suppliers with throughput goals. Work collaboratively with vendors and distributors to share demand data, maintain adequate stock, speed up lead times and be flexible on deliveries to support patient volume goals.
• Provide supply chain analytics. Track KPIs like item fill rates, supplier lead time adherence, and inventory turns to identify constraints and continuously improve supply chain performance in support of throughput objectives.
• Invest in supply chain automation. Use technology like inventory management software, e-procurement tools, tracking systems and automated replenishment to reduce manual processes and free up resources to focus on patient care and revenue generation.
  
  

With strategic supply chain management focused on enabling faster, more efficient patient care, the supply function can directly impact key throughput metrics for Grady Hospital. Tight alignment between supply chain and throughput objectives is critical.

What Role Facilities Management can play in this effort?

Facilities management can play an important role in supporting throughput economics for a hospital system like Grady in the following ways:

• Optimize layouts and workflows - Design facility layouts and workflow patterns to minimize travel distances for staff and transport times for patients between units. This reduces delays and allows faster patient processing.
• Enhance operational readiness - Ensure hospital infrastructure like power, lighting, HVAC systems are well-maintained and downtime is minimized. This enables smooth care delivery.
• Manage capacity - Adjust patient room capacity, operating theaters, ER beds etc. to meet changing demand and avoid shortages which create bottlenecks.
• Streamline maintenance - Schedule preventive maintenance during lower demand periods and expedite repairs during high volumes to avoid disrupting patient care.
• Enable flexibility - Allow for modular expansion or reconfiguration of facilities to adapt to evolving constraints and rebalance capacity.
• Enhance productivity - Provide amenities like doctor lounges, overnight rooms, parking etc. to improve staff experience and maximize time focused on patients.
• Leverage space utilization data - Use occupancy rates, patient flow data and foot traffic patterns to identify waste, bottlenecks and improvement areas.
• Support new technologies - Build infrastructure to support medical equipment, IT systems and automation needed to boost throughput.
  
  

With a throughput economics mindset, facilities management can focus on designing, maintaining and operating hospital facilities to directly support patient volume goals and removing constraints. This aligns facilities with the overall goal of maximizing healthcare throughput and revenue.

How can finance, supply chain and facilities management can align with throughout economics mindset to reimagine the way they can improve clinical workflows that improves clinical outcomes and improve revenue to help a sustainable business and operating model ?

Finance, supply chain, and facilities management can align with a throughput economics mindset to reimagine and improve clinical workflows in the following key ways:

Finance:

• Analyze throughput metrics like revenue per patient, per bed, per doctor, etc. rather than utilization rates. Identify constraints driving low throughput.
• Develop budgets and forecasts focused on maximizing patient volume and revenue goals rather than departmental spend.
• Prioritize investments and spending decisions based on impact on boosting constraints and throughput.
  
  

Supply Chain:

• Collaborate with clinical teams to identify supply needs required to achieve patient volume and care targets. Stock accordingly.
• Design logistics networks, inventory policies, purchasing practices focused on ensuring no shortages that could limit patient care and revenue.
• Use analytics to gain visibility into item consumption, care protocols, demand patterns to optimize clinical workflows and supply availability.
  
  

Facilities Management:

• Coordinate with clinicians to design and modify facility layouts and workflows to eliminate bottlenecks and wasted motions that limit patient processing.
• Adjust maintenance practices and capacity to align with patient demand patterns and revenue goals.
• Provide flexible clinical spaces that can adapt to changing constraints and volume requirements.
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Together these functions can take a data-driven, system view to continuously identify and tackle constraints. The shared goal is optimizing clinical workflows and supply availability to maximize sustainable patient throughput and health system revenue generation.