OM in the News: Time & Motion Studies and Knee Surgery

“Competitive forces are out of whack in health care,” writes The Wall Street Journal (Aug. 22, 2018). Hospitals are often ignorant about their actual costs. Instead, they often increase prices to meet profit targets. For nearly a decade, Gundersen Health System’s hospital in Wisconsin boosted the price of knee-replacement surgery 3% a year till the list price was more than $50,000, including the doctors. Yet administrators admitted they had no idea what it cost to perform the surgery—the most common for hospitals outside of childbirth.

So during an 18-month review, a Time & Motion expert trailed doctors and nurses to record every minute of activity and note instruments, resources and medicines used. The hospital tallied the time nurses spent wheeling around VCR carts, a mismatch of available postsurgery beds, unnecessarily costly bone cement, and delays dispatching physical therapists to get patients moving. The actual cost? $10,550–everything included. On average, a nurse assistant needed 10 minutes to collect personal items from patients before surgery. A technician took another 20 minutes to insert an IV into patients. Time spent in Gundersen’s operating room—the most expensive minutes of a patient’s hospital visit—averaged 95 to 105 minutes.

On busy days, the hospital had no available beds for knee-replacement patients after surgery. Patients with nowhere to go remained in temporary postsurgical units for as long as 24 hours, prolonging their recovery. Also, the hospital had been exclusively using brand-name cement, premixed with antibiotics. It slashed its cement costs by 57% by switching to a generic, which can be used with the same results. Changes to this series of processes means the knee surgery now costs the hospital an average of $8,700 to perform, an 18% savings. The more Gundersen wrings from its costs, the more profit it earns.

It turns out that on knee-replacement surgery, higher-cost U.S. hospitals spent almost twice the amount lower-cost hospitals spent, despite similar quality and comparable patients.

Classroom discussion questions:

1. What tools in Chapter 10 were likely used in this study?
2. What might be the hospital’s next step to improve operational efficiency?