By:
Group 11
Eric Green, Kayla Little, Zachary Nunn
East Carolina University
OMGT6213-601
June 17, 2015
I.
Virginia Mason Medical Center at the Millennium Virginia Mason Medical Center (VMMC) operated for decades as a physician partnership, which distributed operating surplus among the physicians in an annual bonus program. The partners provided the capital and shouldered the debt for clinic growth, but in 1986 VMMC restructured its organization into a single nonprofit entity to help expand its services and technology. Once VMMC became a nonprofit entity, the physicians became employees and an internal administration with oversight by a public board ran the medical center. Every three years physicians elected department chairs and every four years the CEO. In 1998 and 1999, VMMC lost revenue for the first time in the center’s history, which turned out to be losses in the double digit millions. Staff morale was low due to the large loss of money and there were several hospitals within a one-mile radius providing fierce competition. Throughout the 1990’s, VMMC tried to implement Total Quality Management (TQM) but executives felt that the process emphasized top-down management and it found little traction. In response to economic downturn, VMMC trimmed cost such as academic spending for travel time and research. Roger Lindeman was the CEO throughout 2000; after he stepped down, physicians elected internal medicine physician, Dr. Gary Kaplan, to occupy the position. Kaplan immediately eliminated the electoral process for appointing leaders; instead the CEO chose department chairs and the board chose the CEO. Within six months of Kaplan being appointed CEO, he sought to consolidate less profitable business lines and grow highly profitable lines. VMMC closed several programs, reduced mental health provider services, renegotiated contracts with payers and examined productivity by service lines; however, they were still not satisfied with the long-term economic sustainability of their traditional management initiatives. In addition to the abundance of financial problems, a report issued by the Institute of Medicine stated that experts estimated 98,000 deaths any given year are a result of medical errors in hospitals, now VMMC is also faced with heightened safety concerns.
Gary Kaplan’s Goal at Virginia Mason Gary Kaplan recognized that change at VMMC was imminent in order to turn the medical center around. His goal was to become the quality leader in the healthcare industry; within two years of being appointed CEO, Kaplan developed a new strategic direction, which focused on putting the patient first. To acquire the position as the quality leader, Kaplan planned to improve the health and well being of patients while placing emphasis on teamwork, integrity, service, and excellence. VMMC’s new goal was to be implemented using techniques from the Toyota Production System (TPS), whose goals of putting the customer first, focusing on quality and safety, and committing to the employees were very similar to those of VMMC’s. In trying to achieve these new objectives, Kaplan instituted a no-layoff policy so that employees would improve productivity without the fear of becoming so efficient they were overstaffed. In addition to the no-layoff policy, VMMC also instituted several methods to reduce waste, increase efficiency, and promote safety such as value-stream mapping, rapid process improvement workshops, 5S, 3P, everyday lean, patient safety alert systems, and bundles.
Effect of the Physician Compact
One of the first decisions made by Kaplan as CEO was the initiation of the physician compact. The physician compact was to be an explicit deal between the physicians and the VMMC organization. Kaplan wanted to rid VMMC of the old implicit compact, which was about entitlement, protection, and autonomy. The new physician compact divided the responsibilities of VMMC into two
