HEALThCARE

Full House
UNDERSTANDING AND EXPANDING CAPACITY IN hEALThCARE

By Robert M. Gerst, Converge Consulting Group Inc.

mergency room (ER) access in the Canadian province of Alberta is facing potential catastrophic collapse as a direct result of a lack of capacity within the system.1 That warning came from Paul Parks, M.D., who at the time was section president of emergency medicine for the Alberta Medical Association, when he wrote an open letter addressed to the provinces health minister and other health officials in October 2010. The predicted collapse never came because of hectic scrambling by Alberta Health Services (AHS) to add temporary capacity. The access crisis was averted, although wait times remain well short of healthcare system objectives. Similar crises are destined to rise again in Alberta and in other Canadian provinces, and not just in emergency care but in acute and extended care settings as well. These crises will return because of the way in which we think about, plan for and ultimately attempt to improve capacity. The healthcare experience puts these lessons into the spotlight because the stakes are high. People can die in congested waiting rooms waiting to see a physician. The lessons, though, are relevant not only to healthcare, but also to government services, oil field production, banking, vehicle assembly or any other organization concerned with process or system capacity. Bean (and bed) counting vs. science

What is the capacity of a 100-bed hospital? The answer is in how you think about it. There are two options. You can think like an accountant or a scientist, but you must choose. You cant have both. The accounting perspective is enumerative. Count the number of beds in a hospital and you have its capacity. In this case, 100 patients (assuming patients are limited one per bed). This type of answer is useful when describing conditions at a particular time, such as reporting on the number of beds in the health system or calculating the occupancy level. This descriptive perspective, however, is useless for those running hospitals (or anything else). Knowing last months conditions doesnt help with the decisions that must be made today. Do we open up additional beds in the overflow unit? Do we add a new wing onto the existing center? Will additional staff working overtime help reduce the current backlog of patients at a reasonable cost? These are not problems of description, but problems of prediction: making decisions in the real world, always with the possibility of being wrong and without the luxury of having time stand still while you enumerate current circumstances. W. Edwards Deming, the famed American management theorist and statistician who brought systems thinking and scientific problem solving to the practice of management, referred to the problems of running things as analytic.2 Analytic questions concern system or process dynamics: how and why the system behaves as it does. Answering analytic questions demands a scientific perspective. An enumerative approach wont work.

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As the analytic perspective concerns system or process dynamics, it cant address the hospital capacity question without the addition of timein this case, the average length of stay. Assuming it were four days, the hospitals capacity would be the number of patients the hospital could hold (100), divided by the average length of stay (four days), or 25 patients/day. A Little law From the analytic and scientific perspective, capacity is understood and always expressed as a rate (never a count, ratio or proportion). This is the rate at which work is done and measured as throughput. The 25 patient/day capacity of our little hospital is the result of a truly remarkable little law, referred to conveniently as Littles Law, not because its little, but because John C. Little of the Massachusetts Institute of Technology proved it back in 1961.3 Throughput (TH) is equal to work in process (WIP) divided by cycle time (CT). TH = WIP / CT In the hospital example, WIP is the number of patients our hospital accommodates, and CT is the average length of stay. What is remarkable and useful about Littles Law is that it applies to all processes, natural or man-made, on any scale. From the smallest microchips to a doctors office and a national healthcare system, Littles Law works. It defines the relationship among the three fundamental performance parameters characterizing all processes. It also provides a convenient way of evaluating actions intended to improve throughput (effective capacity). According to Littles Law, TH can only be increased if: 1. WIP, the amount of work the system can process at one time, is increased (number of beds in the hospital example). 2. CT is decreased (average length of stay in the hospital example). 3. Both. Thats it, there are no other alternatives. A new computer system, for example, can be evaluated quickly and its impact predicted by determining which of the two process parameters, CT or WIP, will be affected and to what degree. If neither CT nor WIP is affected, the new computer system will be a bust. Applying this simple idea can save millions of dollars from pointless IT investments designed to improve TH, but without any hope of doing so. Littles Law also works in reverse. Rather than compute throughput, the rate at which work is completed,

it also works when analyzing what must be done to accommodate the arrival rate of work. TH is replaced with the Greek symbol , but the rest of the law stays the same: = WIP / CT Lets use an example provided by Little himself.4 Suppose we have a maternity ward with an average arrival rate of = 5 mothers per day. Average length of stay is 2.5 days. Plug these values into Littles Law: 5 mothers/day = WIP / 2.5 days and you get an average WIP (number of mothers in the ward) of 12.5. In consideration of motherhood, lets round it up to 13. This is the average number of beds we must have to accommodate the demand. Littles Law only provides the average system levels, so we should plan for more than 13 beds in the ward to accommodate variation in arrival rate. Mothers dont arrive conveniently five times a day. Sometimes less, sometimes more. Nor do they stay precisely 2.5 days in each and every case. (The impact of this variation is covered later). Nevertheless, Littles Law provides the foundation or starting point for any rational capacity planning effort. The impact of ignoring Littles Law As simple as it is, Toyota built one of the most admired production systems in the world around this notion. Trying to improve the performance of a system or process, or increase capacity without an appreciation of Littles Law is much like trying to design an airplane without understanding Newtons laws of motion. Yet, this is precisely what is done in healthcare capacity planning and improvement activities across Canada, as well as many other industries. In the 1980s, initial efforts at improving hospital efficiency in Alberta focused on the system in Calgary. The three-member Calgary Facilitation Group on Health Services was headed by the former provincial treasurer with accounting giant Price Waterhouse providing the analysis and making recommendations. Not surprisingly, this effort took an accounting perspective, focusing on the number of beds rather than throughput. Occupancy levels and bed per population ratios were calculated and compared to other jurisdictions.5 Occupancy levels in Alberta tended to be lower than other provinces, while bed-per-population ratios were higher. This painted a picture of inefficient operations. The solution was rationalization, taking redundant beds out of the system to improve the accounting numbers. These efforts are best remems I X s I g M A F or U M M A g A Z I N E

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bered in Alberta by the demolition of the Bow Valley Center (the General) in a nationally televised event that became a symbol of government determination to gain efficiency and reduce costs by increasing utilization (occupancy rate). This accounting-based, enumerative approach continues to define healthcare capacity planning in Alberta and Canada. The results have been as spectacular as the Generals demolition. In Alberta, utilization rose from about 70 to 95% by 2008.6 AHS currently claims a occupancy rate in acute care facilities exceeding 100%.7 Similar utilization and efficiency improvements have been reported for everything from extended care facilities to family physicians, laboratories and clinics. This increase in utilization has decimated system efficiency and capacity, producing skyrocketing system costs, increasing patient wait times, and the potential catastrophic collapse referred to by Parks. Enumerative understanding confuses occupancy with efficiency, and efficiency with capacity. Increasing utilization only creates bottlenecks and inefficiencies. It gets worse because of variation. Variation, capacity and wait time Littles Law provides the foundation for rational capacity planning and improvement, dealing with longer run averages of a stable system. Building on

Figure 2. Systems view of relationship between utilization and cycle time

Cycle time increases dramatically with increased utilization.

Cycle time 0%

Utilization

100%

Figure 1. Enumerative view of relationship between utilization and cycle time

0%

Utilization

100%

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Non-feasible region

Cycle time is constant for all levels of utilization. Cycle time

this foundation requires understanding and managing variation. In the real world, variation is ubiquitous. The arrival rate for expectant moms isnt precisely five per day, nor is the length of stay at the hospital precisely 2.5 days. The longer-run average requirement might be 13 beds, but clearly we better have a few extra beds for those days when arrival rates or lengths of stay turn out higher than expected. The enumerative perspective largely assumes variation away, and because of this, understands cycle time and throughput to be constant for any utilization levels below 100%. In the maternity ward example, the average length of stay is believed to remain at 2.5 days, regardless of whether our occupancy (utilization) is 60 or 95%. See Figure 1. This traditional view isnt consistent with the way things actually work. In the real world, cycle times increase dramatically with increases in utilization yielding a different perspective. Why is this so? Why does variation produce such dramatic increases in cycle time and corresponding declines in throughput? The answer is that while our average occupancy may be 60%, it will vary. Sometimes, it may be as low as 10% and as high as 100%, at which point people will have to wait for treatment. This effect will become more pronounced if average utilization rises to 80% because the proportion of time where utilization is at 100% will be greater, as will the backlog of patients,

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adding to the average cycle time. This backlog or wait time contributes to the total cycle time of the process reducing effective capacity and throughput. See Figure 2. The amount of time spent waiting in line, (CTq), is a function of the variability in arrival (ca) and processing times (ce), the level of utilization (u) and the time it takes to treat the patient (te) expressed in the model of wait times (Figure 3). While looking complex, the model breaks down into three basic terms: variation, utilization and processing time. There are some interesting implications to this modern, systems view of capacity: 1. If there is no variation, there is no wait time. No variation means the variation term goes to zero as does the wait time (CTq). The system behaves as the accountants expect. But in the real world, some variation always exists, explaining why things never turn out as planned. In Alberta, each year brings the latest wait time statistics accompanied by surprise and apologies from the minister and AHS officials at the number of targets missed. Ironically, this years failure to meet targets was blamed on more people than expected wanting access.8 2. Reducing variation reduces wait times and improves access. Variation can never be eliminated, but it can be managed and reduced. Do that and you improve access. This is why reducing variation is a key component to modern production systems and improvement strategies such as continuous improvement, lean and lean Six Sigma. One way to reduce variation is to stream like services together. Thats why having distinct maternity wards makes sense. Its also why consolidating functions that break the service stream into separate entities (lab services, imaging,

LITTlES LAW AND VARIATION

Figure 3. Time spent waiting in line

Coefficient of variation for arrival times.
2 2 ca + ce CTq = 2

For some, Littles Law is a little too simple for its own good. How can such a basic formula describe so much? It always gets the most heads scratching. People get the math, but cant accept the implications. I have been told that Littles Law is just too weird and too counterintuitive to understand. Yet, intuitively, we use Littles Law all the time to help us with capacity planning issues in our daily lives. In my home province of Alberta, for example, say you have to drive from Calgary to Edmonton (the two largest cities in the province) to visit your mother-in-law. The distance between the two (WIP) is 300 km. If you drive 100 kilometers per hour (TH), how long (CT) will it take you to get there? Three hours. I bet you gured that out before you nished the previous sentence. If mom is expecting you at 1 p.m., you must leave by 10 a.m. Of course, there could be snarls. Perhaps its Mothers Day so there is a lot of trafc slowing things down. How does that work anyway? Like this: The highway between Edmonton and Calgary at 100% occupancy is 62,500 cars (assuming an average vehicle length of 4.8 meters). That is the number of cars that would t if laid out bumper-to-bumper between the two cities. How fast will those cars will be moving? A 100 km per hour? Not likely. The result would be gridlock. Why? Variation: If there was no variation in speed whatsoever and if cars were controlled by some supercomputer from a science ction movie, we could travel bumper-to-bumper at 100 km per hour with no problem. In the absence of variation, then, enumerative thinking and the accounting numbers make sense. For those of us still stuck on planet Earth, however, the enumerative perspective on capacity always produces gridlock. R.M.H.

Coefficient of variation for processing times.

)(

u 1u

)t

Variation term. Utilization term. Increases in the relative Increasing utilization amount of variation increases wait time increases the patient and costs. wait time and costs.

Processing time: The expected cycle time if there is no wait.

diagnostics and treatment) doesnt. Much of the Mayo Clinics success in blending high quality with low cost is built on the idea of streaming patients through a clinic without interruptions arising from fragmentation of the workflow.9 3. Increasing utilization always increases wait timesdramatically. If utilization is at 70%, u is equal to 0.7, and our utilization term in the wait time formula will be 0.7 / (1 0. 7), or 2.3. Increase utilization

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to 95% and the utilization term rises to 19an eightfold increase. Moderate increases in utilization yield extreme increases in cycle time and corresponding drops in throughput (effective capacity). Of course, the reverse is also true. Decrease utilization and wait times will drop and access will improve. 4. 100% utilization means a system crash. When any system hits 100% utilization, u is equal to 1 and the utilization term in the wait time formula becomes infinity, producing equally long wait times. This is a system crash. Of course, healthcare systems dont crash like computers, but the correspondence between the reported occupancy rates of 100% by AHS and Parks prediction of imminent system collapse provides a convenient real-world confirmation of the link between theory and practice. 5. Pursuing utilization as an objective always increases costs, decreases efficiency and usually ends with a system crash. This is the logical outcome of any thinking that sees utilization as an end to itself. This means that efficiency improvement efforts in Canada, focusing on increasing occupancy, have literally manufactured the access time crisis and at great cost. Millions have been spent making things worse. Utilization is a means to enda strategy. Like any strategy, leaders, capacity planners and improvement specialists must consider the impact on overall system efficiency at different utilization levels. Trade-offs must be considered in any rational effort to improve capacity or system functioning. Balancing the scales, facing reality These trade-offs mean there is a balancing act to improving system performance and capacity. Variation on one side of the scales is balanced against increasing waste on the other.10 This waste is comprised of: 1. Longer cycle times (CT). 2. Lower utilization (effective WIP). 3. Declining (TH). See Figure 4. Variation exists in all processes, presenting system management with a bill that must be paid. Rational capacity and performance improvement must decide how best to pay it, either with lost throughput, lower utilization or longer cycle times. The best approach to improving system capacity is to attack variation itself. Organizations such as Toyota pursuing strategies such as lean, lean Six Sigma and continuous improvement have reduced costs and cycle times and increased utilization and throughput by removing variation in the process and empha-

Figure 4. Improving system performance and capacity

Managing variation

Lost throughput. Lower utilization. Longer cycle (wait) time. Variation

sizing a smooth flow of operations. Specific techniques, such as demand smoothing, line-balancing, single-piece flow, kanban, just-in-time, constant WIP (CONWIP) and cellular organization, all work by reducing variation. An interesting variation reduction technique is pursuing small, flexible operations that respond to variation better than big, inflexible ones. For this reason, two smaller hospitals will generally be more efficient than one big one, and two slower diagnostic machines will tend to outperform one fast one. This contrasts with the enumerative cost-benefit analyses and economies of scale assumptions held by many managers. But thats only because enumerative thinking operates under the assumption that variation doesnt exist. Service organizations, including health services, cannot always employ the variation reduction techniques used in industry, or at least, cannot employ them to the same extent. For example, doctors cant order people to stay healthy. They do, but patients dont listen. Nor can hospital administrators demand that patients show up at the emergency ward in evenly spaced time increments. How do you deal with variation when it cannot be directly managed? Those in charge must choose between the lesser of three evils: lost throughput, lower utilization and longer cycle (wait) times. There is no alternative. At times, lowering utilization may be the best, lowest-cost option to improving overall system performance and capacity in the face of unmanageable variation. This is why pursuing utilization as an objectivea good unto

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itselfproduces high costs and inevitable capacity crises. Recent capacity problems limiting healthcare access to Albertans are largely attributable to the way in which we have chosen to think about and improve capacity. The enumerative thinking of the accountant produces detailed, accurate descriptions of conditions. This is important and valuable work. When this thinking is applied to making system improvements, however, it is inevitably destructive. This is why Taiichi Ohno, the genius behind the Toyota Production System, said: It was not enough to chase out the cost accountants from the plants. The problem was to chase cost accounting from my peoples minds.11
POStSCRIpt In response to a series of crises that hit the healthcare system in Alberta in 2010, including one that gave rise to Parks comments, investigations were ordered by the Alberta government and undertaken by the Health Quality Council of Alberta (HQCA). In the report that followed, the HQCA concluded that AHS should stop trying to maximize utilization and instead aim for utilization targets of about 85 to 90%.12 This will help, but relief will be temporary because the thinking hasnt changed. Utilization is still treated as an objectivea target to be hit rather than a means to an end. Like so many performance targets, this occupancy level was pulled from thin air without any analysis or consideration of process and system dynamics. This irrational approach to capacity planning will increase costs, and ultimately, produce the same access crisis it was intended to fix. ANOtHeR pOStSCRIpt Shortly after the original article was completed, an Alberta fatality inquiry released a report, which concluded that lengthy emergency wait times at The Grey Nuns Hospital in Edmonton contributed to the death of Samuel Takyi.13 On March 13, 2013, urogynecologist Jane Schulz, M.D., reported that three women had died while awaiting urinary tract surgery at Urogynecology Clinic at the Lois Hole Hospital for Women.14 Despite AHS claims that its capacity improvement efforts increased clinic efficiency by 20%, the wait list continues to grow and stands at 1,000 women. The wait time is three years. REFERENCES AND NOTES 1. Matt McClure, Hospital Waits Hit Historic Worst in Calgary, Calgary Herald, Oct. 23, 2010. 2. W. Edwards Demings continuous improvement has evolved into various, largely analytic improvement programs such as Six Sigma and lean that have become increasingly familiar to those working in healthcare. Deming disliked these packaged programs because he thought they acted as a substitute for thinking. Although Deming was the first to formally define the distinction between enumerative and analytic studies in the sciences, he was not the first to notice the distinction or its importance to the theory of knowledge. These go back to the time of Anaximander (555 B.C.). The importance of the distinction has been noted many times since Henri Poincare, Charles Darwin and Richard Feynman. The confusion between enumerative and analytic studies continues today and is a source of significant harm in society and organizations. The best description of the distinction is found in On Probability as a Basis for Action, American Statistician, November 1975, Vol. 29, No. 4. It is also discussed in Demings other writings including Out of the Crisis, Massachusetts In-

stitute of Technology Press, 2000, and The New Economics, Massachusetts Institute of Technology Press, 2000. 3. Taiichi Ohno developed a version of the law independently and used it as the basis for developing elements of the Toyota Production System, including kanban. Laws, however, are named after those that prove them. Nevertheless, this means that Littles Law forms the intellectual foundation of what is generally referred to as lean. 4. John D.C. Little and Stephen C. Graves, Littles Law, which appeared in Building Intuition, International Series in Operations Research and Management Science, Vol. 115, pp. 81. 5. This approach of performing enumerative calculations and comparing them with other jurisdictions is not only used in capacity planning, but also is ubiquitous in the Canadian healthcare system. For example, the Canadian Institute for Health Information relies extensively on ranking hospitals and jurisdictions. It confuses accounting with science by taking advantage of the truism that in any set of ranked numbers, some will be higher than others and half will be below average. This is not a basis for sound inference or decision making but rather for a curriculum of high school statistics. 6. Utilization rates varied considerably across the system. The figures represent crude averages based on written reports and interviews with healthcare administrators in Alberta. 7. Health Quality Council of Alberta, Review of the Quality of Care and Safety of Patients Requiring Access to Emergency Department Care and Cancer Surgery and the Role and Process of Physician Advocacy, February 2012, http://kinwahlin.wordpress.com/2012/03/02/reviewof-the-quality-of-care-and-safety-of-patients-requiring-access-toemergency-department-care-and-cancer-surgery-and-the-role-andprocess-of-physician-advocacy-health-care-quality-council-of-al. 8. Kelly Cryderman, Health Minister Says Alberta Wont Meet Emergency Room Wait Time Targets, Calgary Herald, Feb. 16, 2012, www. calgaryherald.com/news/alberta/minister+says+alberta+meet+ emergency+room+|wait+time+targets/6159892/ storyhtml#ixzz27cjjmusq. 9. Atul Gawande, The Cost Conundrum: What a Texas Town Can Teach Us About Healthcare, The New Yorker, June 1, 2009, www.newyorker. com/reporting/2009/06/01/090601fa_fact_gawande#ixzz27cmiojeb. 10. W. Edwards Deming, The New Economics, Massachusetts Institute of Technology Press, 1994, pp. 190-206. Increasing the variation in any system always increases waste in that system. A good demonstration of this is the funnel experiment. 11. Tony Vinas, Lean Accounting Being Driven by a Lean Business Philosophy, American Institute of Certified Accountants Inc., February 2007. 12. Health Quality Council of Alberta, Review of the Quality of Care and Safety of Patients Requiring Access to Emergency Department Care and Cancer Surgery and the Role and Process of Physician Advocacy, see reference 7. 13. R.A. Philp, A Judge of the Provincial Court of Alberta, Report to the Minister of Justice and Attorney General Public Fatality Inquiry into the death of Samuel Takyi, http://justice.alberta.ca/programs_services/ fatality/documents/fatality-report-takyi.pdf. 14. Karen Kleiss, Health Minister Promises Action on Waiting List, Edmonton Journal, March 21, 2013, www.edmontonjournal.com/ health+minister+promises+action+waiting+list/8134874/story.html.

WHat dO YOU tHINK Of tHIS aRtICle? Please share your comments and thoughts with the editor by e-mailing james.bossert@bankofamerica.com.

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