Examining pathways to safety and financial performance in hospitals: A study of lean in professional service operations

• DOI: http://doi.org/10.1016/j.jom.2016.03.001
• Author: Mark A. Vonderembse,David D. Dobrzykowski,Kathleen L. McFadden
• Published date: 01 March 2016
• Date: 01 March 2016

Examining pathways to safety and financial performance in hospitals:

A study of lean in professional service operations

David D. Dobrzykowski

a

,

*

, Kathleen L. McFadden

b

, Mark A. Vonderembse

c

a

Department of Supply Chain Management, Rutgers Business School, Rutgers University, 1 Washington Park, Rm 958, Newark, NJ 07102-3122, USA

b

Dept. of Operations Mgmt. &Info. Systems, College of Business, Barsema Hall 328, Northern Illinois University, DeKalb, IL 60115-2854, USA

c

Information Operations and Technology Management, University of Toledo,2801 W. Bancroft Ave., Toledo, OH 43606-3390, USA

article info

Article history:

Available online 28 March 2016

Accepted by Mikko Ketokivi

Keywords:

Lean

Patient safety

Financial performance

Professional services operations

Hospital operations

abstract

Healthcare operates in a complex professional service environment that faces challenges in delivering

high quality and affordable care ea set of goals that some healthcare professionals believe are incon-

gruous. To consider opportunities to achieve these important outcomes, this study examines the re-

lationships among comprehensive lean orientation, internal integration, patient safety, and financial

performance. This study draws on the professional services operations (PSOs) literature stream to explain

and offer a means of addressing the complexity of healthcare delivery. Grounded in dynamic capabilities,

this study develops a model for improving financial performance and patient safety in hospitals. Using

structural equation modeling, the model is tested with survey data from 211 acute carehospi tals in the

USA that are matched with data from two other sources eobjective patient safety data from the Centers

for Medicare and Medicaid Services and objective net income data from the American Hospital Directory.

Results indicate that although a comprehensive lean orientation has a direct and positive impact on

patient safety, it impacts financial performance indirectly through internal integration. The results have

major implications for enhancing patient safety and financial performance in healthc are service orga-

nizations, and improving operations in PSOs more broadly.

©2016 Elsevier B.V. All rights reserved.

1. Introduction

Patient safety and financial performance have been the focus of

increased attention in healthcare (Li and Benton, 2006; McFadden

et al., 2009). The Institute of Medicine views patient safety as

“freedom from accidental injury,”and claims that medical errors

are responsible for about 98,000 deaths annually (IOM, 200 0, p. 4).

However, a recent study (James, 2013) reports that the number of

deaths associated with preventable medical errors are actually

substantially higher ecloser to 400,000 deaths per year. This

makes medical errors the third leading cause of death, behind heart

disease and cancer. As a result, reducing medical errors ekeeping

patients safe eis receiving substantial attention from hospital ex-

ecutives given the serious adverse impact of these errors on pa-

tients and the notion that many such errors are preventable (IOM,

2000).

The escalating cost of delivering care is another key challenge

that has put pressure on the healthcare industry (Li and Benton,

2006). Healthcare spending, which currently stands at approxi-

mately 17% of Gross Domestic Product (GDP), or nearly $3 trillion,

will account for nearly 20% of GDP,or approximately $4.3 trillion, by

2020 (Kaiser Family Foundation, 2014). This has caused some to

suggest that any discussion of healthcare improvement ought to

include the topic of reducing cost (Hwang and Christensen, 2008).

Hospitals are a major contributor in the “healthcare spending

category,”as they account for approximately 40% of total spending,

making them an important target for cost reduction efforts (CMS,

2011). As such, it is not surprising that healthcare payers, such as

private insurance companies and the US federal government (the

Center for Medicare and Medicaid Services eCMS), have imposed

tighter controls and reduced reimbursements to hospitals, thus

squeezing margins (MPAC, 2012).

To improve patient safety and financial performance, many

healthcare organizations have implemented quality initiatives such

as lean process improvement. This may be because empirical

studies in other operational contexts provide evidence of the

*Corresponding author.

E-mail addresses: ddobrzykowski@business.rutgers.edu (D.D. Dobrzykowski),

kmcfadden@niu.edu (K.L. McFadden), mark.vonderembse@utoledo.edu

(M.A. Vonderembse).

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

http://dx.doi.org/10.1016/j.jom.2016.03.001

0272-6963/©2016 Elsevier B.V. All rights reserved.

Journal of Operations Management 42-43 (2016) 39e51