Quest Diagnostics Inc - Process Improvement Leads to Success - Essay Example

Michelle A Cleveland Anonymous May 30, 2006. Quest Diagnostics Inc Process Improvement Leads to Success History of the company states that Dr. Paul Brown launched clinical laboratory testing business in 1967 named MetPath with a vision to offer "high quality, highly automated and cost-effective clinical testing" in New York metropolitan area. Fifteen years later in 1982 the company was bought by Corning Inc. Other companies acquired were Damon in 1993, Maryland Medical Laboratory, Bioran, Nichols Institute in 1994. Corning Inc. spun off lab testing and established Quest Diagnostics as an independent company on December 31, 1996. The company became leading diagnostic testing, information and services with acquisition of the SmithKline Beecham Clinical Laboratories (SBCL) on August 16, 1999. The company offered specialized esoteric testing on both coasts with acquisition of American Medical Laboratories (AML) in 2002. The company acquired Unilab Corporation in 2003 and exhibited its presence in California State. Later in 2005 the company made its presence felt in Kansas and Ohio by acquiring LabOne (Our History). EDGAROnline (Page 1) stated that Quest Diagnostics Inc. is a national leader in the healthcare sector providing diagnostic and allied services. The company leads in clinical laboratory testing, esoteric testing, molecular diagnostics; non-hospital based anatomic pathological services and analysing drug abuse. According to Reuters, the company has more than 2000 patient service centres and 35 principal laboratories in major metros and about 150 smaller "rapid response" laboratories all over the nation with wide range of services and helping physicians detect, diagnose, evaluate, monitor and treat diseases with the help of information technology solutions. The company processed more than 144 million requisitions as of the year ending December 31, 2005 and net revenue of 78% from routine testing and 17% from esoteric testing thus summing up to 95% net revenues for clinical laboratory testing. While the patient services centres collect samples, principal laboratories perform routine testing and the rapid response laboratories also perform routine tests but only "for customers that require rapid turnaround times." In addition to above the company also provides Risk Assessment Services to life insurance industry in the US and Canada and Clinical trial testing in the US, UK, Australia, Singapore and South Africa. The company manufactures and markets diagnostic test kits and systems for esoteric testing through its subsidiary Nichols Institute Diagnostics. According to Quest Diagnostics the company's vision reads as follows "Dedicated people improving the health of patients through unsurpassed diagnostic insights and innovation." The company's mission being "We will be the undisputed world leader of diagnostic testing, information and services" and the values are "Quality, Integrity, Innovation, Accountability, Collaboration and Leadership"(Our Vision, Mission and Values). According to Quest Diagnostics, Nichols Institute was the first laboratory in North America to achieve ISO 9001 certification in 1998 (Our Commitment to Quality). According to QMI Registration services ISO 9001 is based on the following eight Quality Management Principles, which are incorporated within the requirements of the standard, and can be applied to improve organizational performance: 1. Customer focus 2. Leadership 3. Involvement of people 4. Process approach 5. System approach to management 6. Continual improvement 7. Factual approach to decision making 8. Mutually beneficial supplier relationships The standard covers all aspects of an organization's activities, including identifying its key processes, defining roles and responsibilities, policies and objectives, documentation requirements, the importance of understanding and meeting customer requirements, communication, resource requirements, training, product and process planning, design processes, purchasing, production and service, monitoring and measurement of products and processes, customer satisfaction, internal audit, management review, and improvement processes (ISO 9001:2000 An Instrument for Business Improvement). According to Pounds stepwise implementation of ISO by Quest Diagnostics can be stated as follows: 1. Identified a corporate ISO leader. 2. Identified an on-site ISO project leader. 3. Identified an on-site project team (20 - 40 staff) 4. Implemented a standard project plan (approximately 52 steps) 5. Performed staff training (just-in-time method). 6. First lab took 15 months, subsequent labs took 10 months. 7. Cost of Certification:$10,000 - $15,000 8. Ongoing annual costs:$8,000 - $12,000 Following are the benefits from ISO: a. Management Planning: Setting clear organizational goals and alignment around those goals. b. Quality Planning: Places customer defined outcomes as the goal of the organization c. Process Management: This is where most errors and problems occur. Removes department barriers d. Document Management System: Document Management System. Controls document and records at all levels e. Measurement and Improvement System: Process and customer measures are embedded in the lab operation. f. Supplier Management System: Supplier performance is monitored and they are accountable to meet quality measures. g. Design Control System We learn following important aspects from implementation of ISO ISO represents a cultural change to the organization. Resistance to change is normal. Must establish & communicate clear need and benefits. Key integrated components for success. Clear and visible management participation is required. Solid tools for process management at all levels of the organization. Solid document management at all levels of the organization. Solid measurement system to know how you are doing. Solid training and competency for all staff. Solid supplier management process. Solid design control process Minimal recognition of ISO by Hospital and Physician clients (Quest Diagnostics' Experience:Non- Regulatory Quality Standards). According to Quest Diagnostics Ken Freeman held various financial and management positions at Corning Inc. from 1972 and joined Corning Clinical Laboratories in 1995. At the end of 1996 Ken Freeman became the Chairman and CEO of Quest Diagnostics (Quest Diagnostics Announces Succession Plan) According to the Institute of Medicine about 98,000 people died annually in US hospitals due to medical errors which may be diagnostic, treatment, preventive and other types of errors (TO ERR IS HUMAN: BUILDING A SAFER HEALTH SYSTEM). Kathleen Truitt in an interview to Sten Westgard stated that "Having seen the outstanding results that Six Sigma produced for companies such as Motorola, Sony and GE, Ken saw an opportunity for Quest Diagnostics to lead healthcare services to a new level of quality." Thus steps were initiated by Ken Freeman to implement Six Sigma and raise the quality of healthcare services with a typical goal of reduction in defects by 50% of each of Six Sigma project. According to EDGAROnline "Six Sigma is a management approach that requires a thorough understanding of customer needs and requirements, process discipline, rigorous tracking and measuring of services, and training of employees in methodologies so that they can be held accountable for improving results." Whereas Quest Diagnostics describes Six Sigma in simple terms as a data centred approach of process improvement leading to "virtual perfection." Surya N.Mohapatra stated that health care industry "must strive to perfection" with an ultimate aim of providing a perfect result with through rigorous statistical and financial analysis leading to reduction in problems, decline of costs and improvement in customer satisfaction. Six Sigma stands for 3.4 defects per one million opportunities 3 Sigma 66,800 defects per one million opportunities 4 Sigma 6,210 defects per one million opportunities 5 Sigma 233 defects per one million opportunities 6 Sigma 3.4 defects per one million opportunities (What is Six Sigma Quality). Quest Diagnostics News stated that the goal of Six Sigma is reduction of errors or defects to 3.4 per million or 99.9996% error free work i.e., a perfect work. This can be achieved by process identification and process improvement making use of facts and data. Clear concept and understanding about Six Sigma among the employees of an organisation at all levels can help achieve and maintain Six Sigma quality and also help its implementation in newer projects. Six Sigma must become a part of day- to-day life of each and every employee. According to Eric Mattenson Quest Diagnostics initiated 900 Black belt projects and 1200 Green belt projects among the nine processes which were identified as the customer facing, such as specimen collection, specimen transport, specimen processing, specimen preparation, specimen testing, result reporting, billing, sales processes and product development. 515 Black belt projects had already been completed to end of December 2003 with 80% exceeding the "project success" threshold having attained more than 50% defect reduction. About 40% of the projects achieved a remarkable 70% or greater error reduction. "Operational plan of each business unit includes process improvement, customer satisfaction, employee satisfaction and financial goals for the year". Totally 2100 Six Sigma projects have been encompassed into the Quest's operational plan (Six Sigma Revisited). Dr. Carl Garber in an interview to Sten Westgard stated that at Quest a more realistic approach was being adopted by reducing the defects to 50% to achieve a Six Sigma for every process. Dr. Garber mentioned a rule of thumb required in Six Sigma projects: To achieve 3 Sigma performance, usually only obvious changes and corrections are required. To achieve 4 Sigma performance, processes must also be improved. To achieve 5 Sigma, the design of the processes must be improved. Finally, to achieve 6 Sigma performance requires rigorous tools and a design for perfection. Dr. Garber stated that in 2003 for every dollar invested on Six Sigma project the company got returns of 3 dollars and in 2004 the position improved to 4 dollars. Six Sigma was applied to the problem of bad debts and results were too good to believe, it reduced from 7.0% in 2000 to 4.5% in 2004. The company had trained 22 master black belts, 125 black belts and 1300 green belts (Quality Management Cocktail). According to Pounds stepwise implementation of Six Sigma by Quest Diagnostics can be stated as follows: 1. Identified a corporate Six Sigma leader. 2. Identified Master Black belts as on-site project leaders. 3. Identified and trained on-site Black belts. 4. Implemented a standard project plan. 5. Identified and initiated Six Sigma projects. 6. Identified and trained Green belts. 7. 2000 - 2003:330 Black belt & 1245 Green belt projects complete. We learn following important aspects from implementation of Six Sigma: A cultural change to the organization Better Six Sigma results from ISO certified facilities Management participation required. Project selection and alignment required for success. Sharing of key learnings essential to overall success. Effective and practical statistical and team management tools. Hospital and Physician recognition of Six Sigma is growing. Following are the benefits from Six Sigma: Highly evolved tool (statistical and team management) for improvement Extremely customer focused Focus on specific problems Focus on data and not opinion Focus on the root cause analysis Focus on sustaining the gain Focus on risk assessment Proven Results (Quest Diagnostics' Experience:Non- Regulatory Quality Standards) Dr. Mohapatra stated that the main objective of the company was to increase the effectiveness of process improvement by introducing Lean Six Sigma. Lean supplements by adding powerful tools and methods to Six Sigma with focus on speed and flow of processes reducing the wastage. A combination of these two methodologies is expected to give the most valued services to its customers. According to Maureen Harte "Lean integrates processes to make definite products a definite way, within a definite time, at a profitable cost." Lean techniques can be implemented perfectly in laboratories wherein the products are easily defined. Among the three quality management techniques - ISO, Six Sigma and Lean, the last one (i.e., Lean) removes wastage by a most radical quality improvement management technique. 1. Firstly Lean technique insists on individual processing with a first in, first out, single piece flow. Thus discouraging batching technique, this generally is followed in most of the clinical laboratories. Batching leads to wastage of time and samples and makes it difficult to detect errors in large batch. 2. Lean implementation is very rapid and can take only 3 months, whereas Six Sigma can take 6 months and ISO certification can take years and thus Lean aims at rapid implementation. 3. Thirdly a drastic change is observed in pre-lean and post-lean laboratory. Mapping tools such as value stream mapping (VSM) and process mapping are used by Lean to identify waste and also understand the working and optimize the whole value stream. Another important tool adopted by Lean technologists is video recording of a process and analysing second by second to improve the process. Physical movement of medical technologists is optimized and ergonomics is given due importance to minimize the movement. Then the Lean consultants would define a "pulse" of the process, wherein the number of steps or processes to be completed per minute of a shift is defined. The results of Lean projects generally lead into soft dollar savings in terms of staffing (Quality Management Cocktail). In my concluding remarks I would like to state that all the three management approaches offer advantages and can complement each other. As stated by Sten Westgard "ISO provides the broad goals. Lean eliminates the gross waste in a value stream, and what process steps remain are the best targets for Six Sigma improvements." It is clear from the above explanation that Quest has used ISO for staff training, Management planning, Quality planning, Process Management, Document Management System, Measurement and Improvement System, Supplier Management System and Design Control System. The Process Management stage, wherein most errors occur would have effectively been used by Six Sigma to reduce them and bring about perfection. Similarly Supplier Management system must have been modified to optimize the availability of materials from inventory, thus making good use of Lean technique. On the other hand both ISO and Six Sigma are customer focussed hence they can complement very well. Lean helps in optimal utilisation of resources including staff. Thus it is obvious that Quest Diagnostics has taken advantage of all the three approaches leading ultimately to customer satisfaction, best quality services and optimal usage of resources. Works Cited "Our History" Quest Diagnostics. Retrieved on May 26, 2006. "Quest Diagnostics Inc." EDGAROnline (Page 1). Retrieved on May 25, 2006. "Company Profile for DGX." REUTERS Retrieved on June 1, 2006. http://www.investor.reuters.wallst.com/stocks/company-profile.asprpc=66&ticker=DGX "Our Vision, Mission & Values." Quest Diagnostics Retrieved on June 1, 2006. "Our Commitment to Quality." Quest Diagnostics Retrieved on June 1, 2006. "ISO 9001:2000 An Instrument for Business Improvement." QMI Registration Services. Retrieved on June 2, 2006. Pounds.George. "Quest Diagnostics' Experience:Non- Regulatory Quality Standards." Retrieved on June 1, 2006. "Quest Diagnostics Announces Succession Plan; Surya N. Mohapatra, Ph.D., to Succeed Kenneth W. Freeman as CEO in 2004." Quest Diagnostics. Retrieved on June 1, 2006. "TO ERR IS HUMAN: BUILDING A SAFER HEALTH SYSTEM." Institute of Medicine (1999). Retrieved on June 1, 2006. "Interview with a Black Belt-Interview by Sten Westgard.Kathleen Truitt, Quest Diagnostics Black Belt." INTERVIEW. Retrieved on June 1, 2006. "What is Six Sigma Quality" Quest Diagnostics. Retrieved on June 2, 2006. "Six Sigma Revisited" Quest Diagnostics NEWS. Volume XVIII, No.4, Winter 2004. Retrieved on June 1, 2006. "Quality Management Cocktail ISO, Lean, and Six Sigma. Looking for light at the end of the CLIA tunnel." Guest Essay. Retrieved on June 1, 2006. Read More