Qual Mgnt and Integrated Sys OL.docx

Qual Mgnt and Integrated Sys OL
Managing the Use of Healthcare Resources Supplemental Reading Utilization Management •
Component of healthcare quality management • Purpose: Eliminate overuse and underuse
of medically necessary healthcare services • Supports a healthcare quality dimension
identified as important by the Institute of Medicine (2001) • Effective healthcare: Provision
of services based on scientific knowledge to all who may benefit but not to those who are
not likely to benefit In the early 1980s, the American Hospital Association defined
utilization management (UM) as planning, organizing, directing, and controlling healthcare
products in a costef- fective manner while maintaining quality of patient care and
contributing to the organization’s goals (Spath 2005, 139). In other words, providers and
payers use UM to eliminate underuse and overuse of medically necessary healthcare
services. Fundamentally, the purpose of UM is to ensure patients receive necessary medical
services at the least cost. Why Manage Utilization? National per capita health expenditure in
the United States from 2007 to 2017 Utilization Use of medical services and supplies,
commonly examined in terms of patterns or rates of use of a single service or type of
service, such as hospital care, physician visits, and prescription drugs Medically necessary
Appropriate and consistent with diagnosis and, according to accepted standards of practice
in the medical community, imperative to treatment to prevent the patient’s condition or the
quality of the patient’s care from being adversely affected Underuse Failure to provide ap-
propriate or necessary services, or provision of an inadequate quantity or lower level of
service than that required Overuse Provision of healthcare services that do not benefit the
patient and are not clearly indicated or are indicated in excessive amounts or in an
unnecessary setting. Defining Appropriate Services • Historically, physicians had
considerable autonomy in recommending healthcare services. • Result: Considerable
variation in use of services among physicians and in different US regions • In early 1990s,
purchasers championed the development of evidence-based clinical practice guidelines to
reduce variation in treatment decisions. Health insurers encouraged the development of
clinical practice guidelines and Use of medical services and supplies, commonly examined in
terms of patterns or rates of use of a single service or type of ser- standardization of care for
UM purposes of reducing the provision of unnecessary services. CMS In theory, healthcare
purchasers, including the Centers for Medicare & Medicaid Services (CMS), pay only for
items and services that are reasonably necessary for the diagnosis and treatment of an
illness or injury. In situations where no practice guidelines exist, decisions are based on the
best available evidence and professional consensus (CMS 2008). CMS’s legal authority to

make coverage decisions stems from section 1862 of the Social Security Act, which states:
“No payment may be made…for any expenses incurred for items or services…which are not
reasonable and necessary for the diagnosis or treatment of illness or injury or to improve
the function of a malformed body member” (U.S. Department of Health and Human Services
2008). CMS and other purchasers go through a rigorous process to decide whether services
are appropriate and should be reimbursed. Highmark Blue Cross Blue Shield (BCBS), one of
the largest BCBS plans in the country, has a thorough process for gathering information,
assessing new technologies, and making coverage decisions. Highmark bases its coverage
decisions on a contractual definition that evaluates medical necessity according to the
following criteria (Hill, Hanson, and O’Connell 2000). The service must be • appropriate for
symptoms, diagnosis, and treatment of a condition, illness, or injury; • provided for
diagnosis, direct care, or treatment; • in accordance with standards of good medical
practice; • not primarily for the convenience of the member or member’s provider; and •
the most appropriate supply or level of treatment that can be safely provided to the
member. Other health insurers, including Medicare, are experimenting with pay-for-
performance systems (control costs directly or indirectly by incenting providers to improve
quality and reduce inappropriate utilization) that provide financial rewards to providers
who achieve certain cost and quality performance expectations (National Committee for
Quality Health Care 2006). As the costs of healthcare delivery continue to increase, no
provider is exempt from UM efforts. Utilization Management (UM) Functions Measurement
How are we doing? Yes Assessment Are we meeting expectations? No Improvement How
can we improve performance? • Measure over- and underuse of health services. • Assess
measurement data to identify improvement opportunities. • Use improvement techniques
to reduce over- and underuse of health services. Required UM Functions • Medicare
Conditions of Participation mandate providers conduct UM. • There are no explicit UM
requirements in Joint Commission standards. • Providers assist health plans with UM
activities by sharing patient-specific information. Measurement and Assessment Utilization
review • Ensure that services are medically necessary and appropriate • Promote delivery
of services in the most cost-effective setting Utilization can be reviewed before a patient
receives services (prospective review), during the delivery of services (concurrent review),
or after the patient receives services (retrospective review). Timing of Reviews •
Prospective • Before delivery of services • Ensures that services to be provided are
appropriate for the patient and will be done in the least costly setting • Concurrent • During
delivery of services • Ensures that services are appropriate for the patient and are provided
in the least costly setting • Retrospective • After delivery of services • Identify opportunities
to reduce over- and underuse of services Utilization Improvement • Any improvement
model may be used to reduce over- and underuse of resources. • Common job aids designed
to promote use of evidence-based patient care practices: • Reminders • Clinical paths •
Standards of care Reminders Purpose: To remind people to perform specific tasks Clinical
Path Purpose: To remind caregivers of interventions and milestones expected to occur
during an episode of care Standards of Care Purpose: To remind caregivers of “ideal”
practices Discharge Planning • Establishes a systematic approach to ensuring effective
utilization of patient care resources and a smooth transition from one environment to the

next • Organizes care activities suited to the patient’s needs • Supports the goal of
patientcentered care, one of the healthcare quality dimensions identified as important by
the Institute of Medicine (2001) The process involves the patient, family, friends, caregivers,
and agencies. For example, after leaving the hospital, patients may need in-home nurse
visits or outpatient physical therapy. Discharge planning activities ensure that patients’
medical needs are anticipated and arranged before they leave the hospital. Discharge
Planning Services Accreditation groups and health insurers, including Medicare, require
healthcare organizations to provide discharge planning services for patients. Discharge
Planning Activity Tasks Initial patient assessment • • • Gather history (social and medical)
Evaluate medical condition and treatment needs Assess support systems (e.g., home
environment, community resources, family needs) Plan for continuing care • • • • Identify
short- and long-term patient care needs Prioritize needs according to input of patient and
family Consider available human, financial, and material resources Update plan according to
patient’s condition Implement plan • • Arrange for services and support that patient
requires after discharge Provide patient and family information about post-discharge
treatment plan, services, and support Evaluate • Follow up with patient or family after
discharge to assess whether plan was successful and to ensure that no problems arose after
discharge that have not been addressed UM Structure Medicare requires providers to have
a defined UM structure that accomplishes specific tasks. • Hospitals have a utilization
review committee with physician members • Utilization review activities for admissions
and continued stays • Discharge planning services Health Plan Utilization Review • National
Committee for Quality Assurance sets accreditation standards, and most state insurance
regulations require utilization review activities. • Clinical professionals are involved in
evaluating over- and underuse of services. • A defined process is established for approving
and denying payment for services. Utilization Management • UM has been a component of
quality management since the inception of Medicare in the 1960s. • The goal is to provide
appropriate patient care in the least costly setting. • Measurement, assessment, and
improvement activities are used to minimize costs and promote effective use of healthcare
resources. Health Administration Press Applying Quality Management in Healthcare: A
Systems Approach 4th Edition Chapter 11 Designing and Implementing Improvements
Copyright 2017 Foundation of the American College of Healthcare Executives. Not for sale.
Health Administration Press Learning Objectives After completing this chapter, you should
be able to • compare and contrast models used for systematic improvement; • differentiate
how, when, and why to use different improvement models; • explain a framework for
implementing improvements in complex systems; and • identify strategies for sustaining
improvement gains. Copyright 2017 Foundation of the American College of Healthcare
Executives. Not for sale. Health Administration Press Systematic Critical Thinking in
Designing Improvements • The most common improvement models used in health services
organizations: • Plan, Do, Check, Act (PDCA) / Shewhart Cycle • Six Sigma • Lean Strategies
Health Administration Press Shewhart Cycle Plan Do Act Study/ Check Copyright 2017
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Administration Press Six Sigma DMAIC Measure Define Control Analyze Improve Copyright

2017 Foundation of the American College of Healthcare Executives. Not for sale. Health
Administration Press Lean “a focused, short-term project aimed at improving a particular
process” (McLaughlin and Olson 2012) • Steps similar to the PDCA cycle • Often completed
in an accelerated fashion • Three core concepts: standard work, user friendliness, and
unobstructed throughput Copyright 2017 Foundation of the American College of Healthcare
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Consider the effect of an improvement on the rest of the system. Copyright 2017
Administration Press Anticipating Unintended Consequences Copyright 2017 Foundation of
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Implementing Improvements • Small wins • Begin with the end in mind • Creative tension •
Framework for implementation Copyright 2017 Foundation of the American College of
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Framework Breakthrough Vision ge a St Mission/History/ Current Reality p m I d io at t en
le m in s nU a m gS c an rm o f r Pe in s ll W m te s Sy t en m e ur s ea M e Copyright 2017
Administration Press Applying Quality Management in Healthcare: A Systems Approach 4th
Edition Chapter 12 Using Improvement Teams and Tools Copyright 2017 Foundation of the
American College of Healthcare Executives. Not for sale. Health Administration Press
Learning Objectives After completing this chapter, you should be able to • identify strategies
for creating improvement project teams; • describe the role of managers in team decision
making; • differentiate how, when, and why to use common improvement tools; and •
recognize what tools are best to use at each step of an improvement project. Copyright 2017
Administration Press Charter Improvement Projects Improvement Project Charter
Template Copyright 2017 Foundation of the American College of Healthcare Executives. Not
for sale. Health Administration Press Performance Improvement Teams • Assemble a team
of people personally knowledgeable about the process to be improved. • Team size, identity
of members, meeting frequency, and duration are guided by the project purpose and scope.
Health Administration Press Improvement Tools and Techniques • Document the process
with a flowchart Start and end of process Action step Decision step Connects process steps
Health Administration Press Simple Flowchart Time to get up Alarm goes off Too tired? No
Wake up Copyright 2017 Foundation of the American College of Healthcare Executives. Not
for sale. Rework Loop Get out of bed Yes Hit snooze button Health Administration Press
Deployment Flowchart Orthodontist Oral Surgeon Identify need for oral surgery Make
referral Assess patient and plan surgery Perform surgical procedure Continue orthodontia
treatment Copyright 2017 Foundation of the American College of Healthcare Executives.
Not for sale. Procedure summary to orthodontist Health Administration Press Fishbone
Diagram Cause 1 Cause 3 Cause 3.1 Cause 2 Cause 4 Cause 3.2 Copyright 2017 Foundation
of the American College of Healthcare Executives. Not for sale. Problem Health
Administration Press Fishbone Diagram: Example Policies Policy is outdated

Plant/Equipment Not enough hand sanitizer dispensers in patient care areas Sinks not
conveniently located Inadequate resources to monitor hand washing technique Too busy
Staff perceive they are doing a good job already Lack of Not a managefeedback ment
priority Lack of knowledge Procedures Poor attendance at training sessions People
Statement of Problem: Low hand hygiene compliance Health Administration Press Causal
Loop Diagram Copyright 2017 Foundation of the American College of Healthcare
Executives. Not for sale. Health Administration Press Select Improvement Actions Pareto
Chart: Example Pareto Chart 100% 90% 120 80% 70% 100 60% 80 50% 60 40% 30% 40
20% 20 10% 0 0% not enough hand rub sinks not convenient staff perception Number of
observations too busy lack of knowledge inadequate resources Cumulative Percentage
outdated policy percent of total observations number of observations 140 Health
Administration Press Select Improvement Actions • Decision matrix • Force field analysis
Health Administration Press Monitor Progress and Hold the Gains Copyright 2017
Administration Press Top Reasons Improvement Projects Are Not Successful 1. Poor
implementation planning and overly aggressive time lines 2. Failure to create buy-in or
ownership of the initiative 3. Ineffective leadership and lack of trust in upper management
4. Failure to create a realistic plan or improvement process 5. Ineffective, unilateral
communications Copyright 2017 Foundation of the American College of Healthcare
Executives. Not for sale. Health Administration Press Top Reasons Improvement Projects
Are Not Successful 6. A weak case for change, unclear focus, and unclear desired outcomes
7. Little or no teamwork or cooperation 8. Failing to provide ongoing measurement,
feedback, and accountability 9. Unclear roles, goals, and performance expectations 10.Lack
of time, resources, and support from upper management (Longenecker and Longenecker
2014, 150) Copyright 2017 Foundation of the American College of Healthcare Executives.
Not for sale. Patrice L. Spath Diane L. Kelly fo u rth Editio n Applying Quality Management in
HeAltHcAre A S ySt E m S Ap p roAch AUPHA/HAP Editorial Board for Graduate Studies Nir
Menachemi, PhD, Chairman Indiana University LTC Lee W. Bewley, PhD, FACHE University
of Louisville Jan Clement, PhD Virginia Commonwealth University Michael Counte, PhD St.
Louis University Joseph F. Crosby Jr., PhD Armstrong Atlantic State University Mark L.
Diana, PhD Tulane University Peter D. Jacobson, JD University of Michigan Brian J.
Nickerson, PhD Icahn School of Medicine at Mount Sinai Mark A. Norrell, FACHE Indiana
University Maia Platt, PhD University of Detroit Mercy Debra Scammon, PhD University of
Utah Tina Smith University of Toronto Carla Stebbins, PhD Des Moines University Cynda M.
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Cataloging-in-Publication Data Names: Spath, Patrice L., author. | Kelly, Diane L., author.
Title: Applying quality management in healthcare : a systems approach / Patrice L. Spath,
Diane L. Kelly. Description: Fourth edition. | Chicago, Illinois : Health Administration Press ;
Washington, DC : Association of University Programs in Health Administration, [2017] |
Revision of: Applying quality management in healthcare / Diane L. Kelly. | Includes
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(202) 763-7283 To my lifelong friend and companion, my husband Robert O. Brown. —P. S.
To Isabella. —D. K. BRIEF CONTENTS A Note from Diane L.
Kelly………………………………………………………………xv
Preface………………………………………………………………………………………..xvii
Acknowledgments…………………………………………………………………………..xxi Section 1 Quality
Management: A Systems Approach…………………………… 1 Chapter 1. Chapter 2. Chapter 3.
Chapter 4. Chapter 5. Section 2 Setting the Stage for
Success…………………………………………….81 Chapter 6. Chapter 7. Chapter 8. Section 3 Quality
Management Fundamentals…………………………… 3 Role of Policy in Advancing
Quality…………………………. 17 Characteristics of Complex Systems…………………………. 33
Understanding System Behavior……………………………… 49 Visualizing System
Relationships……………………………… 65 Establishing System Direction………………………………….

83 Setting Improvement Goals in Complex Systems……… 107 Fostering a Culture of
Collaboration and Teamwork…. 125 Achieving Quality Results in Complex
Systems………………….. 147 Chapter 9. Chapter 10. Chapter 11. Chapter 12. Chapter 13.
Measuring Process and System Performance……………. 149 Using Data Analytics Techniques
to Evaluate Performance……………………………………… 167 Designing and Implementing
Improvements ………….. 203 Using Improvement Teams and Tools…………………….. 229
Making Healthcare Safer for Patients……………………… 253 Section 4 Practice
Lab………………………………………………………………….. 283 Practice Exercise 1. Reflective Journal
……………………………………285 Practice Exercise 2. The Manager’s
Role…………………………………287 Practice Exercise 3. Dynamic
Complexity………………………………..289 Practice Exercise 4. System
Relationships………………………………..291 Practice Exercise 5. Meeting Customer
Expectations…………………293 vii viii B rief Co n t ents Organizational Self-
Assessment…………………..295 Improving a Performance Gap in Your
Organization……………………………301 Practice Exercise 8. Teamwork and Patient
Safety……………………..309 Practice Exercise 9. Improvement Case
Study………………………….313 Practice Exercise 10. Systems Error Case Study and
Analysis………..319 Practice Exercise 11. Failure Mode and Effects Analysis………………321
Practice Exercise 6. Practice Exercise 7.
Glossary……………………………………………………………………………………..325
Index…………………………………………………………………………………………335 About the
Authors…………………………………………………………………………353 About the
Contributor…………………………………………………………………..355 DETAILED CONTENTS A Note
from Diane L. Kelly………………………………………………………………xv
Preface………………………………………………………………………………………..xvii
Acknowledgments…………………………………………………………………………..xxi Section 1 Quality
Management: A Systems Approach…………………………… 1 Chapter 1. Quality Management
Fundamentals ……………………………. 3 Learning Objectives
………………………………………………….3 Why Focus on Managing
Systems?………………………………..4 What Are Quality and Safety?………………………………………5
Creating a Common Understanding of Quality Methods….7 Three Principles of Total
Quality………………………………….9 Quality Continuum for Organizations…………………………12
Summary……………………………………………………………….14 Companion
Readings……………………………………………….15 Web
Resources………………………………………………………..15
References………………………………………………………………15 Chapter 2. Role of Policy in
Advancing Quality…………………………… 17 Learning
Objectives…………………………………………………17 External Stakeholders Affecting Quality
………………………18 Federal Health Policies and Oversight…………………………20 Private Health
Policies and Oversight………………………….26
Readings……………………………………………….29 Web
Resources………………………………………………………..29

References………………………………………………………………31 Chapter 3. Characteristics of
Complex Systems……………………………. 33 Learning
Objectives…………………………………………………33 Systems
Thinking…………………………………………………….35 Dynamic
Complexity………………………………………………..37 ix x Det a iled Co n te n ts
Summary……………………………………………………………….44 Companion Readings
………………………………………………45 Web Resources………………………………………………………..46
References………………………………………………………………46 Chapter 4. Understanding System
Behavior…………………………………49 Learning Objectives…………………………………………………49
A Systems Metaphor for Organizations………………………..49 Lessons for Healthcare
Managers………………………………..52 Going Below the Waterline………………………………………..56
Readings……………………………………………….62 Web
Resources………………………………………………………..62
References………………………………………………………………63 Chapter 5. Visualizing System
Relationships………………………………..65 Learning
Objectives…………………………………………………65 Interconnected Systems
Model…………………………………..67 Three Core Process Model………………………………………..68
Baldrige Performance Excellence Program Framework
………………………………………………………..71 Socioecological
Framework……………………………………….74
Readings……………………………………………….78 Web
Resource…………………………………………………………78
References………………………………………………………………78 Section 2 Setting the Stage for
Success…………………………………………….81 Chapter 6. Establishing System
Direction……………………………………83 Learning
Objectives…………………………………………………83
Purpose………………………………………………………………….84 The Purpose
Principle………………………………………………90
Vision……………………………………………………………………96
Context………………………………………………………………….99
Summary……………………………………………………………..102 Companion
Readings……………………………………………..103 Web
Resources………………………………………………………104
References…………………………………………………………….104 D etailed C ontents Chapter 7.
Setting Improvement Goals in Complex Systems…………107 Learning
Objectives……………………………………………….107 Relationship Between Goals and
Results…………………….109 Setting Improvement Goals in Complex Systems…………111 Types
of Goal Statements………………………………………..114 Critiquing Goal
Statements……………………………………..115 SMART Goals and Complex
Systems………………………..119 Corollaries to Purpose and Goals………………………………120

Readings……………………………………………..123 Web
Resources………………………………………………………123
References…………………………………………………………….123 Chapter 8. Fostering a Culture of
Collaboration and Teamwork…….125 Learning
Objectives……………………………………………….125 Creating a Supportive
Culture………………………………….126 Teams in Healthcare……………………………………………….128
Collaboration and Teamwork…………………………………..129 Mental Models Affecting Team
Design………………………129 Mental Models About Work Team Differences……………131 Tools
for Effective Teams………………………………………..134
Readings……………………………………………..141 Web
Resources………………………………………………………142
References…………………………………………………………….143 Section 3 Achieving Quality Results
in Complex Systems………………….. 147 Chapter 9. Measuring Process and System
Performance……………….149 Learning Objectives……………………………………………….149
Quality Measures and Their Uses……………………………..150 Selecting Performance
Measures……………………………….151 Choosing a Comprehensive Set of
Measures……………….156 Performance Measures and the Quality Continuum……..160
Readings……………………………………………..163 Web
Resources………………………………………………………164
References…………………………………………………………….164 xi xii Det a iled Co n te n ts Chapter
10. Using Data Analytics Techniques to Evaluate
Performance…………………………………………167 Learning
Objectives……………………………………………….167 What Is Data
Analytics?…………………………………………..168 Introduction to Data Analytics
Techniques…………………169 Types of Data ……………………………………………………….170
Applying Descriptive Statistics Techniques………………….171 Graphical
Methods…………………………………………………172 Predictive
Analytics………………………………………………..179 Numerical Summary
Measures…………………………………180 Using Graphical and Numerical Methods to Analyze
Process Performance…………………………………………..186 Bundling and Unbundling Data
According to the User’s Purpose……………………………………………………………191
Readings……………………………………………..200 Web
Resource……………………………………………………….201
References…………………………………………………………….201 Chapter 11. Designing and
Implementing Improvements ……………..203 Learning
Objectives……………………………………………….203 Systematic Critical Thinking in Designing
Improvements…………………………………………………..204 Implementing
Improvements…………………………………..212
Readings……………………………………………..222 Web

Resources………………………………………………………222
References…………………………………………………………….222 Appendix
11.1………………………………………………………225 Chapter 12. Using Improvement Teams and
Tools……………………….229 Learning Objectives……………………………………………….229 Charter
Improvement Projects…………………………………230 Performance Improvement
Teams…………………………….232 Improvement Tools and Techniques………………………….235
Readings……………………………………………..247 Web
Resources………………………………………………………248
References…………………………………………………………….248 Appendix
12.1………………………………………………………250 D etailed C ontents Chapter 13. Making
Healthcare Safer for Patients…………………………253 Learning
Objectives……………………………………………….253 Systems Model of Organizational
Accidents………………..254 Creating High Reliability…………………………………………258
Measuring and Evaluating Safe Performance……………….262 Designing and Implementing
Safety Improvements……..268 Summary……………………………………………………………..273
Companion Readings……………………………………………..276 Web
Resources………………………………………………………278
References…………………………………………………………….278 Section 4 Practice
Lab………………………………………………………………….. 283 Practice Exercise 1. Reflective Journal
……………………………………285 Practice Exercise 2. The Manager’s
Role…………………………………287 Practice Exercise 3. Dynamic
Complexity……………………………….289 Practice Exercise 4. System
Relationships………………………………..291 Practice Exercise 5. Meeting Customer
Expectations………………..293 Practice Exercise 6. Organizational Self-
Assessment………………….295 Practice Exercise 7. Improving a Performance Gap in Your
Organization……………………………………..301 Practice Exercise 8. Teamwork and Patient
Safety…………………….309 Practice Exercise 9. Improvement Case
Study………………………….313 Practice Exercise 10. Systems Error Case Study and
Analysis………..319 Practice Exercise 11. Failure Mode and Effects Analysis………………321
Glossary……………………………………………………………………………………..325
Index…………………………………………………………………………………………335 About the
Authors…………………………………………………………………………353 About the
Contributor…………………………………………………………………..355 xiii A NOTE FROM DIANE L.
KELLY T he quality landscape has changed dramatically since the first edition of Applying
Quality Management in Healthcare: A Process for Improvement (2003). At that time, the
Institute of Medicine reports To Err Is Human (1999) and Crossing the Quality Chasm
(2001) were still relatively new and patient safety was in its early stages. The Premier
Hospital Quality Incentive Demonstration, the precursor to today’s value-based purchasing
initiatives, was just getting started. Transparency was in its infancy. Fast-forward to today.
The concept of systems is widely embraced in healthcare and has become a cornerstone for
driving improvements toward achieving the Institute for Healthcare Improvement’s Triple
Aim. Perverse financial incentives, which punished organizations for reducing utilization by

improving care, are being challenged with a wide array of innovative payment models that
reward improvements in quality, safety, and health promotion. The numerous and often
disparate parts of the US healthcare system are working together to improve the health of
populations, not just to care for sick individuals. The quality, safety, and systems concepts
discussed in this book have become foundational, essential, and timeless. They may be
applied to any type, size, level, or complexity of organizational forms. I would like to thank
the many students whom I have had the privilege to get to know, work with, and learn from
as a result of writing and teaching with this text. I would also like to thank my mentor and
friend, Dr. Arnold Kaluzny. I am delighted that Patrice Spath is collaborating on this fourth
edition so that the book may continue to bring value to future students. Diane L. Kelly,
DrPH, MBA, RN Principal Consultant Quantix Health Capital Columbus, OH xv PREFACE S
everal years ago, I partnered with a physician, Dr. William Minogue, to respond to an article
in a medical journal that bemoaned the lack of successful patient safety improvement
initiatives. The article’s authors suggested a new model was needed for conducting patient
safety investigations because the current way of doing things was not working. At the time, I
was facilitating training workshops for the Maryland Patient Safety Center, where Dr.
Minogue was the medical director. We both agreed that a new safety investigation model
was not the answer. This belief resulted in our coauthoring an article on the subject for
WebM&M, an online case-based forum on patient safety sponsored by the Agency for
Healthcare Research and Quality. Our article began by reminding readers of the insights of
Louis Pasteur, who, throughout his career, “insisted that germs were the cause of disease,
not the body.” Near the end of his life, Pasteur changed his opinion and “declined treatment
for potentially curable pneumonia, reportedly saying, ‘It is the soil, not the seed.’ In other
words, a germ (the seed) causes disease when our bodies (the soil) provide a hospitable
environment” (Spath and Minogue 2008). This lesson, discovered by Pasteur so many years
ago, has application to all quality improvement activities and is reinforced by the topics
covered in this book. The systems in health services organizations must be carefully
nurtured to create a hospitable environment for the many tools and techniques of
improvement to thrive. If the soil is not properly prepared, the seeds of improvement will
not take root or be sustainable. Dr. Diane Kelly, author of the first three editions of this
book, was insightful in taking a systems approach to quality improvement. Dr. Kelly
understood that preparing the “soil” of the organization is just as important as learning how
to use the various quality tools. I am honored to have the opportunity to build on Dr. Kelly’s
contributions in this fourth edition. This book is intended for managers—anyone who
influences the design of healthcare systems for the purpose of improving quality. It is not
necessary to hold the official title of manager in an organization to be instrumental in
creating and supporting higher-quality services. Many frontline, nonmanagerial clinical and
administrative staff members are directly or indirectly involved in xvii xviii Prefa c e
shaping patient care systems and in using improvement techniques to design more efficient,
safer processes. Although the word manager is used liberally throughout this book, it is not
intended to narrow the audience or the purpose. Anyone interested in making
improvements in the quality and safety of health services will benefit from the learning in
these pages. Changes from the Third Edition The emphasis on systems in the third edition is

still evident in this fourth edition. What has changed is an expansion of information about
quality tools, data analysis techniques, and patient safety. As with all editions of this book,
concepts covered in the chapters are supported by real-life examples, illustrations, and
thought-provoking end-of-chapter exercises. Some chapters have been added and others
reordered. The book is now divided into three major sections instead of two. Section 1
provides students with the foundational principles of healthcare quality and explains how
systems affect an organization’s ability to accomplish quality goals. The chapter on the role
of policy in advancing quality (chapter 8 in the third edition) was moved to this section so
students can better appreciate how external forces affect system behavior and relationships
as well as the quality methods used by health services organizations (covered in later
chapters). Some of the material relevant to reliability and patient safety covered in this
section in the third edition has been moved to a new chapter dedicated solely to the topic of
patient safety. Section 2 contains three chapters designed to illustrate what health services
organizations must do to set the stage for success in quality management efforts. Because
teamwork and collaboration are essential for advancing healthcare quality, the teamwork
chapter at the end of the third edition has been expanded and moved to this section
(chapter 8, “Fostering a Culture of Collaboration and Teamwork”). Much of the information
from chapter 10 has been moved to chapter 9 (“Measuring Process and System
Performance”), and some topics have been shifted to other related chapters. The nuts and
bolts of quality management are found in section 3. The chapters in this section are
expansions of topics covered in the third edition. Instructors using the third edition in a
quality course indicated the need for more detailed explanations of quality models and the
tools and techniques of healthcare quality management. In addition, a new chapter has been
added (chapter 10, “Using Data Analytics Techniques to Evaluate Performance”). This
chapter covers basic concepts of healthcare data analytics, including how to use various
statistical and graphical methods for reporting and evaluating Prefac e performance data.
Some of these methods were covered briefly in the third edition, and some of the discussion
is new to the fourth edition. Materials on improvement models, project teams, and quality
tools are greatly expanded from the third edition and now covered in two separate chapters
(chapter 11, “Designing and Implementing Improvements,” and chapter 12, “Using
Improvement Teams and Tools”). In the third edition, the various topics related to patient
safety were dispersed among several different chapters. Now, most of the material
concerning patient safety is in a new chapter (chapter 13, “Making Healthcare Safer for
Patients”). This chapter is focused entirely on systems issues affecting patient safety and
methods for reducing mistakes and preventing patient harm. Health Administration Press
now offers educators the opportunity to build custom textbooks comprising chapters from
several different books. To accommodate this service, the chapters in the fourth edition of
this book have been written to stand alone as much as possible. Within each chapter,
references to material in other chapters have been minimized, or the concepts summarized
and repeated when necessary. Where there are linkages between materials in various
chapters, instructors are encouraged to point out these relationships because the
connections are not as clearly stated as in the third edition. Resources Listed at the end of
each chapter are companion readings and web resources. Instructors can expand students’

learning experience by assigning a companion reading or directing them to explore one or
more of the online resources. These readings and websites are particularly useful in the
chapter on data analysis techniques, if instructors want to cover more than just basic
concepts. The web resources also provide instructors and students with sources of the most
current information on relevant quality management and patient safety topics. Patrice L.
Spath, MA, RHIT President Brown-Spath & Associates Forest Grove, OR xix xx Prefa c e
Instructor Resources This book’s Instructor Resources include explanations of the exercises,
a test bank, and PowerPoint slides. For the most up-to-date information about this book and
its Instructor Resources, go to ache.org/HAP and browse for the book’s title or author
names. This book’s Instructor Resources are available to instructors who adopt this book
for use in their course. For access information, please e-mail hapbooks@ ache.org. Student
Resources For students, end-of-chapter exercises and web resources are available on this
book’s companion website at ache.org/books/qualitymanagement4. Reference Spath, P.,
and W. Minogue. 2008. “The Soil, Not the Seed: The Real Problem with Root Cause Analysis.”
Perspectives on Safety. Agency for Healthcare Research and Quality. Published July.
https://psnet.ahrq.gov/perspectives/perspective/62/ the-soil-not-the-seed-the-real-
problem-with-root-cause-analysis. ACKNOWLEDGMENTS The primary person that I must
thank is Diane Kelly, author of the first three editions of this book. Her contributions to the
learning experience of innumerable students and seasoned professionals have been
outstanding. I am also grateful to the many people over the years who afforded me
opportunities to share knowledge through my books and journal articles. In particular, I’d
like to thank Janet Davis and Audrey Kaufman (the current and former acquisitions
managers at Health Administration Press, respectively) and Richard Hill (senior editor at
Health Forum, a unit of the American Hospital Association). xxi SECTION QUALITY
MANAGEMENT: A SYSTEMS APPROACH 1 CHAPTER QUALITY MANAGEMENT
FUNDAMENTALS 1 Learning Objectives After completing this chapter, you should be able to
• describe the vital role of management in achieving quality patient and client health
services; • differentiate among key healthcare quality characteristics, common approaches
to quality improvement, and total quality principles; and • recognize management practices
and traits as organizations mature along the quality continuum. A mother arrives at the
pediatrician’s office for her daughter’s six-month well-child checkup. As she has for
previous checkups, she arrives 10 minutes early. Her daughter’s scheduled appointment
time of 10:00 am passes and she is still waiting at 11:30 am. The front desk receptionist
politely tells the mother that the pediatrician has been called to an emergency, saying, “I’m
sure you understand. If it was your child, you would want the doctor to attend to her.”
Although the mother understands the reason for the delay, this explanation does not change
the fact that she has to pick up her son from preschool at noon. The mother asks if her
daughter can at least get the immunizations today and have the rest of her checkup at
another time. A clinic nurse hurriedly administers the child’s immunizations while quietly
complaining to the mother that she is often too busy to get a lunch break. Dissatisfied with
the hours wasted at the pediatrician’s office and disappointed with the need to return to
finish her daughter’s checkup, the mother begins to investigate other healthcare options for
her children. While the doctor at her current pediatric clinic seems highly trained and

knowledgeable, the mother has concerns about the organization in which the doctor
practices. The organizational aspects of the pediatric clinic are not meeting the mother’s
expectations. In the broadest definition, an organization is a structured system designed to
accomplish a goal or set of goals. In this example, the care providers and office staff are a
pediatric health services organization designed to deliver healthcare to children.
organization a structured system designed to accomplish a goal or set of goals 3 4 A p p lyin
g Q u a l i ty M a n a g e me n t i n H e a l thc are: A Sy stem s A p p roac h This book focuses
on managing the quality of the structured system in which health services are delivered.
Like any organization, the structured system in the pediatric clinic is a by-product of
numerous variables that affect the design and execution of many interrelated factors. What
are the specific goals of the healthcare organization and how are they determined? Does
everyone in the organization understand and agree with these goals? How are patient
appointments, office workflow, and staff hours scheduled to enable the practice to meet
these goals? How are patient and family needs and expectations taken into account? How
are clinic employees recruited, hired, trained, and evaluated? Does the pediatrician devote
all of her time to the office or does she also have hospital commitments? How is the
pediatrician compensated for services? How does reimbursement influence the office
structure and work systems? Does the practice operate according to a budget? Does the
practice employ an office manager? If so, how is the manager’s role defined? How do the
pediatrician and the staff communicate with each other and with patients and their
families? These are just some of the questions that influence managerial decisions about
how the structured system will operate. In the example, the mother’s experience resulted
from how her pediatrician’s practice addressed such organizational questions. This
mother’s perception of quality had nothing to do with the quality of the medical care. It had
everything to do with the organizational quality of the health services. The focus of this text
is on managing the structured systems of health-related services—within and between
organizations—to provide the highest-quality and safest healthcare. Why Focus on
Managing Systems? Providing the medical care (e.g., performing cardiac surgery) and
producing the service (e.g., maintaining a clean environment) are functions of the clinical
and technical professionals. Creating and managing the structured system in which clinical
and technical professionals work is the role of management. The manager’s perspective and
tactics may vary depending on his organizational level (e.g., senior administrative, middle
management, frontline supervisory) and his scope of responsibilities (e.g., team, project,
department, division, agency, organization-wide). Regardless, all persons holding
management responsibilities in an organization are charged with finding ways to carry out,
coordinate, and improve the organizational functions. As illustrated by the mother’s
experience at the pediatric clinic, patients may not receive the benefits of good medical care
when the system of delivery is poorly managed. Quality is not simply the obligation of
clinical and technical professionals. The task of achieving quality outcomes from healthcare
C h a p te r 1: Q uality Managem ent Fundam entals 5 organizations is a shared
responsibility belonging to those who provide medical care and produce services and the
management professionals who oversee the system. Management determines how and
what organizational goals are set; how human, fiscal, material, and intellectual resources

are secured, allocated, used, and preserved; and how activities in the organization are
designed, carried out, coordinated, and improved. The material presented in this book is
intended to assist managers in the decision-making processes related to quality and safety
in health services organizations. What Are Quality and Safety? A widely accepted definition
of quality as given by the Institute of Medicine (IOM) is this: “The degree to which health
services for individuals and populations increase the likelihood of desired health outcomes
and are consistent with current professional knowledge” (Lohr 1990, 21). To further clarify
the concept of quality, the IOM (2001) identified the key components of quality care: safe,
effective, patient centered, timely, efficient, and equitable. Patient safety, a key component
of quality care, is defined as, “freedom from accidental or preventable injuries produced by
medical care” (Agency for Healthcare Research and Quality [AHRQ] 2016b). The way
managers in health services organizations define and prioritize quality in the context of
their daily responsibilities is often influenced by their own background and experiences.
For example, a physician manager may emphasize the importance of achieving optimal
patient outcomes through implementation of evidence-based medicine. A nurse manager or
pharmacist may stress the importance of interpersonal skills, teamwork, and patient-
centered care. A manager with public health credentials may take a population-based
approach to improving healthcare quality. Likewise, the educational focus of nonclinical
managers may influence the preferred quality definition and priorities. A manager educated
in a business school may emphasize operations management, whereas someone trained as
an accountant may focus on how quality affects the financial bottom line. A manager with a
health services administration background may stress the importance of organizational
structures and stakeholder relationships. These examples illustrate the assortment of
perspectives and preferences about health services quality and the numerous ways quality
concerns may be expressed in healthcare organizations. The multifaceted nature of quality
poses several additional questions and challenges for healthcare managers: What is quality
in healthcare? Which approach is best? How are the approaches related? Since the early
1970s, Avedis Donabedian’s work has influenced the prevailing medical paradigm for
defining and measuring quality. In his early quality “the degree to which health services for
individuals and populations increase the likelihood of desired health outcomes and are
consistent with current professional knowledge” (Lohr 1990, 21) key components of quality
care quality care is safe, effective, patient centered, timely, efficient, and equitable (IOM
2001) patient safety “freedom from accidental or preventable injuries produced by medical
care” (AHRQ 2016b) 6 A p p lyin g Q u a l i ty M a n a g e me n t i n H e a l thc are: A Sy stem s
A p p roac h writings, Donabedian (1980) introduced the two essential components—the
technical and the interpersonal—that comprise quality medical care. He also identified
three ways to measure quality (structure, process, outcome) and the relationships among
them. Donabedian (1980, 79, 81–83) described the measures in the following way: process
of care “a set of activities that go on within and between practitioners and patients”
(Donabedian 1980, 79) I have called the “process” of care . . . a set of activities that go on
within and between structure “the relatively stable characteristics of the providers of care,
of the tools and resources they have at their disposal, and of the physical and organizational
settings in which they work” (Donabedian 1980, 81) a change in a patient’s current and

future health status that can be attributed to outcome “a change in a patient’s current and
future health status that can be attributed to antecedent healthcare” (Donabedian 1980, 83)
patient experience a patient’s “report of observations of and participation in health care, or
assessment of any resulting change in their health” (AHRQ 2016a) practitioners and
patients. . . . Elements of the process of care do not signify quality until their relationship to
desirable health status has been established. By “structure” I mean the relatively stable
characteristics of the providers of care, of the tools and resources they have at their
disposal, and of the physical and organizational settings in which they work. . . . Structure,
therefore, is relevant to quality in that it increases or decreases the probability of good
performance. . . . I shall use “outcome” to mean antecedent healthcare. The fundamental
functional relationships among the three elements are shown schematically as follows:
Structure → Process → Outcome. For example, in a family medicine group practice, the
number and credentials of physicians, nurse practitioners, physician’s assistants, nurses,
medical technicians, and office staff are considered structure measures. The percentage of
elderly patients who appropriately receive an influenza vaccine is considered a process
measure, and the percentage of elderly patients who are diagnosed and treated for
influenza is considered an outcome measure for this practice. The staff members in the
office (structure) influence the ability of the practice to appropriately identify patients for
whom the vaccine is indicated and to correctly administer the vaccine (process), which in
turn affects the number of patients developing influenza (outcome). If a process measure
has a clearly demonstrated link to an outcome, the process measure may be used as a proxy
measure for an outcome (Parast et al. 2015) When the IOM recognized patient-centered
care as a key component of twenty-first-century healthcare quality in 2001, the Donabedian
model for measuring quality expanded to include patient experience. Patient experience
measures are a subcategory of outcomes that represent the voice of patients— their “report
of observations of and participation in health care, or assessment of any resulting change in
their health” (AHRQ 2016a). For example, a family practice clinic may have a good process
for identifying patients needing an influenza vaccine and qualified staff to correctly
administer the vaccine, yet patients may report their experience to be unsatisfactory if
caregivers do not listen to their concerns and adequately answer questions about the
vaccination. C h a p te r 1: Q uality Managem ent Fundam entals 7 While a health services
manager can easily become overwhelmed by the complexity and extensive range of views
on the topic of healthcare quality, she may also consider this array of perspectives as a vast
pool from which to draw quality-related knowledge and lessons. Creating a Common
Understanding of Quality Methods As with most elements of management, the subject of
quality in healthcare organizations has been the object of numerous trends, fads, and
attempts at quick fixes. Because departments and professionals with “quality”
responsibilities may change their job titles with the latest trend, managers must understand
what is behind the label; in other words, they must understand the philosophy and actions
used to promote quality in an organization. The first step for managers is to develop a
common understanding of quality terminology. Definitions of frequently used terms to
describe quality are provided here. Quality control. Mostly used in the manufacturing
setting, quality control (QC) encompasses “the operational techniques and activities used to

fulfill requirements for quality” (American Society for Quality [ASQ] 2016). In health
services, quality control activities usually refer to equipment maintenance and calibration,
such as for point-of-care and laboratory testing, imaging machines, and sterilization
procedures. Quality assurance. A quality assurance (QA) approach is focused on the outputs
of a process. Products are inspected after they are produced, and imperfect products are
discarded. In some cases, the defect may not be readily noticeable and is replaced at a later
time, as with a new automobile warranty. In service organizations fields such as healthcare,
defects refer to unsatisfactory or defective outputs from a received service. The quality of
the service is inspected after it is received and, if not acceptable, the customer may ask for
the service to be repeated. For example, when the customer discovers that a retail
pharmacy includes only half the number of tablets in a prescription refill, he asks for the
refill to be corrected. Sometimes the service defect is not readily noticeable, as in the case of
a surgical sponge left in a patient after an operation. As the patient’s condition deteriorates,
tests are performed to identify causes of the defective output. The patient must return to
surgery for the defect to be corrected. Hearing QA and QC used interchangeably when
“referring to the actions performed to ensure the quality of a product, service or process” is
not uncommon (ASQ 2016). Quality improvement. A quality improvement (QI) approach,
also referred to as continuous quality improvement (CQI), is focused on the ongoing
improvement of processes as a way to improve the quality of the outputs (i.e., quality
control (QC) “the operational techniques and activities used to fulfill requirements for
quality” (ASQ 2016) quality assurance (QA) actions performed to eliminate defective
outputs quality improvement (QI) “ongoing improvement of products, services or processes
through incremental and breakthrough improvements” (ASQ 2016) 8 A p p lyin g Q u a l i ty
M a n a g e me n t i n H e a l thc are: A Sy stem s A p p roac h total quality (TQ) “a philosophy
or an approach to management that can be char-acterized by its principles, practices, and
techniques. Its three principles are customer focus, continuous improvement, and
teamwork . . . each principle is implemented through a set of practices . . . the practices are,
in turn, supported by a wide array of techniques (i.e., specific step-bystep methods intended
to make the practices effective)” (Dean and Bowen 2000, 4–5) performance management
“an umbrella term that describes the methodologies, metrics, processes and systems used to
monitor and manage the business performance of an enterprise” (Buytendijk and Rayner
2002) Six Sigma a rigorous and disciplined process improvement approach using defined
tools, methods, and statistical analysis with the goal of improving the outcome of a process
by reducing the frequency of defects or failures Lean (or Lean thinking) an improvement
philosophy and set of tools that “is about finding and eliminating waste in all processes”
(Black 2016, 6) reduce the number of defective outputs). Preoperative checklists, sponge
counts, and team briefings are examples of operating room process improvements designed
to prevent defective outputs or surgical complications. By implementing incremental and
breakthrough improvements, QI seeks to produce defect-free outputs and provide
consistent high-quality services. Total quality. The term total quality (TQ), also referred to
as total quality management or TQM, is often used interchangeably with “QI” and “CQI.” This
tendency can cause students and managers to be confused by the two related but different
concepts. Total quality is “a philosophy or an approach to management that can be

characterized by its principles, practices, and techniques. Its three principles are customer
focus, continuous improvement, and teamwork . . . each principle is implemented through a
set of practices . . . the practices are, in turn, supported by a wide array of techniques (i.e.,
specific step-by-step methods intended to make the practices effective)” (Dean and Bowen
2000, 4–5). As shown by this definition, TQ is a strategic concept, whereas CQI is one of
three principles that support a TQ strategy. Numerous techniques— including performance
management, Six Sigma, and Lean—are available for managers in implementing the
principles of CQI on a tactical level and an operational level. A brief description of these
techniques is provided in the following section with more detail in subsequent chapters.
Performance management. The business literature defines performance management as “an
umbrella term that describes the methodologies, metrics, processes and systems used to
monitor and manage the business performance of an enterprise” (Buytendijk and Rayner
2002). Performance management is also referred to as enterprise performance
management (EPM), corporate performance management (CPM), and business performance
management (BPM). Six Sigma. Six Sigma is a rigorous and disciplined approach using
process improvement tools, methods, and statistical analysis. Its precepts are based on the
philosophy “that views all work as processes that can be defined, measured, analyzed,
improved and controlled” (Muralidharan 2015, 528). Six sigma is a statistical term referring
to the goal of achieving zero defects or failures. Six Sigma quality is considered a “rate of
less than 3.4 defects per million opportunities, which translates to a process that is
99.99966 percent defect free” (Spath 2013, 125). Although the technique originated in
manufacturing, the use of Six Sigma is being encouraged in health services organizations as
a way of achieving high reliability (Chassin and Loeb 2013). Lean. Sometimes called Lean
thinking, Lean “is about finding and eliminating waste in all processes” (Black 2016, 6). This
quality philosophy and set of tools, which also originated in manufacturing, is used to
remove wasted effort from healthcare processes without compromising quality (Chassin
and Loeb 2013). Lean techniques have helped health services organizations C h a p te r 1: Q
uality Managem ent Fundam entals increase patient staff satisfaction, create more efficient
processes, lower expenses, reduce patient wait times, improve capacity management, and
make many other value-added, customer-focused enhancements (Black 2016). The Toyota
Production System (TPS) is a common method of applying Lean in health services
organizations. Organizational effectiveness. Several models or definitions of effectiveness in
management literature exist, and the meanings are derived from the values and preferences
of evaluators (Cameron 2015). From the perspective of TQ, organizational effectiveness
means accomplishing goals. Change management. Whether quality improvement is aimed at
reducing defects, removing wasteful process steps, or achieving better patient outcomes,
the work people do in the organization will be modified in minor and sometimes major
ways. Change management is a “systematic approach that prepares an organization to
accept, implement, and sustain the improved processes” (Chassin and Loeb 2013, 481). A
structure for managing the changes that result from quality improvement efforts is essential
for ensuring that quality does not deteriorate as time passes, staff turnover occurs, and new
priorities emerge. Components of this strategy can include human resources planning,
financial and resource management, and implementation of a control system that involves

measurement and oversight of performance results (McLaughlin and Olson 2012). A phrase
often associated with change management is “sustain the gains.” Exhibit 1.1 provides a
summary of the quality-related terms described in this section and the influence these
concepts have on the actions of healthcare managers. Quality management. Continuously
improving products and services to achieve better performance is often referred to as
quality management. In this book, the term quality management is used to describe the
manager’s role and contribution to organizational effectiveness. Quality management, for
our purposes, refers to how managers working in various types of health services
organizations and settings understand, explain, and continuously improve their
organizations to allow them to deliver quality and safe patient care, promote quality patient
and organizational outcomes, and improve health in their communities. Three Principles of
Total Quality Total quality is based on three principles: customer focus, continuous
improvement, and teamwork. While these topics are explored in depth in later chapters, a
brief introduction to these principles is provided in this section. 9 Toyota Production
System a common method of applying Lean in health services, first developed at the Toyota
Motor Company organizational effectiveness the ability to accomplish goals change
management a “systematic approach that prepares an organization to accept, implement,
and sustain the improved processes” (Chassin and Loeb 2013, 481) quality management the
manager’s role and contribution to organizational effectiveness; how managers working in
various types of health services organizations and settings understand, explain, and
continuously improve their organizations to allow them to deliver quality and safe patient
care, promote quality patient and organizational outcomes, and improve health in their
communities 10 A p p lyin g Q u a l i ty M a n a g e me n t i n H e a l thc are: A Sy stem s A p p
roac h EXHIBIT 1.1 Quality-Related Terms customer the user or potential user of services or
programs external customer a user outside the organization internal customer a user inside
the organization stakeholder “all groups that are or might be affected by an organization’s
services, actions or success” (BPEP 2015, 53) Quality-Related Term Relevant Manager
Actions Quality control Fulfill process requirements Quality assurance Find and repair
faulty processes causing defective outputs Quality improvement/continuous quality
improvement Incrementally and continuously improve processes Performance
management Continuously review, evaluate, and improve performance to meet changing
customer, stakeholder, and regulatory requirements Six Sigma Aggressively improve
processes and reduce variation to achieve zero defects Lean/Lean thinking Seek better
ways to organize human actions and processes to eliminate waste Total quality/total
quality management Manage using a customer focus, continuous improvement, and
teamwork Organizational effectiveness Understand and improve the system to achieve
goals Change management Use systematic methods to transition individuals, teams, and the
organization Customer. A customer is defined as a user (or potential user) of services or
programs. Patients are customers, as are referring healthcare providers, as well as payers
such as patients’ family members and health plans (Baldrige Performance Excellence
Program [BPEP] 2015). External customers are the parties outside the organization, and the
primary external customers for health services providers are patients, families and
partners, clients, insurers and other third-party payers, and communities. An internal

customer is a user inside of the organization. Internal customers have been described as
“someone whose inbox is your outbox.” For example, in a hospital, when patient care is
handed off from one provider to another at shift change, the incoming provider is
considered the internal customer of the outgoing provider. Completing the requisite shift
responsibilities in a timely manner, communicating relevant information, and leaving a tidy
work space demonstrate one’s recognition of coworkers as internal customers. The
contemporary view of quality management expands the concept of “customer” to include
stakeholders and markets in which the organization operates. The term stakeholder is used
to refer to “all groups that are or might be affected by an organization’s services, actions or
success” (BPEP 2015, 53). In healthcare organizations, key stakeholders may include
“customers, the community, employers, health care providers, patient advocacy groups, C h
a p te r 1: Q uality Managem ent Fundam entals departments of health, students, the
workforce, partners, collaborators, governing boards, stockholders, donors, suppliers,
taxpayers, regulatory bodies, policy makers, funders, and local and professional
communities” (BPEP 2015, 53). Customer-focused quality means that key patient and other
customer requirements and expectations are identified and drive improvement efforts
(BPEP 2015). Defining customers and stakeholders is a prerequisite to determining their
requirements and, in turn, to designing organizational processes that meet these
requirements. Continuous improvement. When the manager of an environmental services
department in a large hospital picks up something from the hallway floor and throws it
away in the nearest trash can, her action exemplifies the principle of continuous
improvement. While other hospital employees might walk past the trash, the environmental
services manager realizes the importance of being committed to continuous improvement
for her department and for the hospital; if at any time the manager sees something that
needs fixing, improving, or correcting, she takes the initiative. If managers want to achieve
continuous improvement in their organizations, they must demonstrate continuous
improvement through their everyday actions. The principle of continuous improvement
may also be expressed through managers’ execution of their managerial functions.
Managing by fact and depending on performance data to inform decisions is requisite to this
principle. Though they might vary according to the nature of the work and the scope of
management responsibility, performance data may be reported at various time intervals.
For example, a shift supervisor for the patient transportation service in an 800-bed
academic medical center watches the electronic dispatch system that displays a minute-by-
minute update on transportation requests, indicators of patients en route to their
destinations, and the number of patients in the queue. By monitoring the system, the
supervisor is immediately aware when a problem occurs and, as a result, is able to take
action quickly to resolve the problem. If the number of requests unexpectedly increases, the
supervisor can reassign staff breaks to maximize staff availability and minimize response
times. Each day, the supervisor posts the total number of transports performed the
previous day, along with the average response times. This way, the patient transporters are
aware of the department’s statistics and their own individual statistics, which helps the
transporters take pride in a job that is typically underappreciated by others in the
organization. The daily performance data also enable the supervisor to quickly identify

documented complaints and to address them within 24 hours, which in turn increases
employee accountability and improves customer relations. On a monthly basis, the
department manager and the shift supervisors review the volume of requests by hour of the
day to determine whether employees are scheduled appropriately to meet demand. 11
customer-focused quality a type of quality in which key patient and other customer
requirements and expectations are identified and drive improvement efforts 12 A p p lyin g
Q u a l i ty M a n a g e me n t i n H e a l thc are: A Sy stem s A p p roac h continuous
improvement steady, incremental improvement in the organization’s overall performance
teamwork a team process involving the “knowledge, skills, experience, and perspectives of
different individuals” (Health Resources and Services Administration 2011, 3) The manager
also reviews the statistics sorted by patient unit (e.g., nursing unit, radiology department) to
identify any issues that need to be explored directly, manager to manager. The manager
reviews the monthly statistics with his administrator, and the annual statistics are used in
the budgeting process. A performance management system such as this promotes
continuous improvement, which is defined as steady, incremental improvement in the
organization’s overall performance. Teamwork. When the terms teamwork and quality are
used together, management is usually referring to cross functional or interdisciplinary
project teams. Healthcare organizations seeking to make changes in complex processes or
activities that involve more than one discipline or work area often use a team approach.
Quality improvement is fundamentally a team process in which significant and lasting
improvements rely on the “knowledge, skills, experience, and perspectives of different
individuals” (Health Resources and Services Administration 2011, 3). In relation to quality
management, managers should also consider teamwork when they carry out functions
inherent in the managerial role—in particular, organizational design, resource allocation,
and communication. Designing and implementing decision-making, documentation, and
communication processes (which ensure individuals and teams have the information they
need, when they need it, to make effective and timely clinical and organizational decisions)
reflect a manager’s understanding of the quality management principles. For example, in
one hospital, the manager of the materials management department negotiates with a
supplier to obtain surgical gloves at a discounted rate compared with the rate of the current
supplier. The decision is made based on vendor and financial input. The first time the new
gloves are used, however, the surgeon rips out the fingers of the gloves while inserting his
hand. Had the manager embraced the concept of teamwork in her approach to decision
making, she would have sought out information and input from the patient care team—the
people who actually use the product and know the advantages and disadvantages of
different brands of gloves. Quality Continuum for Organizations Quality management is not
a single event; rather, it is an organizational journey. Progress along the journey may be
viewed on a continuum, with one end representing traditional or early attempts at quality
and the other end representing more mature approaches (exhibit 1.2). Regulatory,
accreditation, and cost-control pressures, as well as consumer activism, are accelerating the
quality journey of health services organizations. These external factors are described in
more detail in the next chapter. C h a p te r 1: Q uality Managem ent Fundam entals Less
Mature Developing More Mature Quality priorities Complying with quality requirements of

external stakeholders is an operational imperative Internal quality improvement is one of
three or four strategic priorities Internal quality improvement is the organization’s top
strategic priority Quality scope Internal customers Internal and external customers and
stakeholders Internal and external customers and stakeholders and the community served
Quality transparency Key quality measures not reported internally throughout the
organization and not reported publicly Key quality measures reported internally
throughout the organization; few reported publicly Key quality measures reported
internally and publicly; reports include benchmark data from best practice organizations
Quality methods No organizationwide approach to quality improvement Data-driven,
statistical methods used in some improvement initiatives Managers trained in data-driven,
statistical methods that are used for all improvement initiatives Performance measures
Only measures used are those required by external stakeholders In addition to measures
required by external stakeholders, internal measures are used to evaluate quality priorities
of managers In addition to measures required by external stakeholders, internal measures
linked to the quality goals of the organization are used Information technology (IT) There is
little or no IT support for quality activities IT supports some quality activities, but many are
still paper based IT support is provided for all quality activities Source: Adapted from
Chassin and Loeb (2013). 13 EXHIBIT 1.2 Quality Continuum for Healthcare Organizations
14 A p p lyin g Q u a l i ty M a n a g e me n t i n H e a l thc are: A Sy stem s A p p roac h
Although a healthcare organization may occupy a point anywhere along this maturity
continuum, the goal of quality management is to continually strive toward the most mature
end of the continuum. An understanding of the quality continuum in health services
organizations begins to explain differences in operations and outcomes in organizations
that all claim to be “quality organizations,” such as • how an organization can be successful
at quality projects but not attain a quality organizational culture; • why some organizations
have adjusted better than others to current oversight practices of regulatory groups and
accreditation agencies; • why implementing clinical practice guidelines does not in itself
guarantee healthcare quality; • why operations management efforts, independent of clinical
context, may not yield expected results; and • why, without leadership’s involvement in
establishing a quality philosophy and strategy for the entire organization, only pockets of
excellence may be found in an organization. Summary Achieving organizational
effectiveness requires leaders to combine the knowledge of management and quality to
understand and improve the organization. This chapter has introduced various terms and
approaches to help managers establish a common vocabulary for quality in their
organizations. The path to becoming a mature, quality organization is a process
characterized by transitions in managerial philosophy, thinking, and action. Exercise 1.1
Objective: To explore the current state of healthcare quality in the United States.
Instructions: • Go to the AHRQ website (https://nhqrnet.ahrq.gov/inhqrdr) and find the
most current version of the National Healthcare Quality and Disparities report. • Read the
Executive Summary. • Browse the rest of the report. C h a p te r 1: Q uality Managem ent
Fundam entals • Based on your brief review of this report, summarize the state of
healthcare quality and disparities in the United States in one or two paragraphs. Companion
Readings Health Resources and Services Administration. 2011. Quality Improvement. US

Department of Health and Human Services. Published April. www.hrsa.gov/
quality/toolbox/508pdfs/qualityimprovement.pdf. Institute of Medicine (IOM). 2001.
Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC:
National Academies Press. Web Resources Agency for Healthcare Research and Quality:
www.ahrq.gov American Society for Quality: www.asq.org National Association for
Healthcare Quality: www.nahq.org Public Health Foundation: www.phf.org References
Agency for Healthcare Research and Quality (AHRQ). 2016a. “Domain Framework and
Inclusion Criteria: Domain Definitions.” Updated March 17. www.quality
measures.ahrq.gov/about/domain-definitions.aspx. ———. 2016b. “Patient Safety Network
Glossary.” Accessed June 25. www.psnet .ahrq.gov/glossary.aspx. American Society for
Quality (ASQ). 2016. “Quality Glossary.” Accessed June 25.
www.asq.org/glossary/index.html. Baldrige Performance Excellence Program (BPEP).
2015. 2015–2016 Baldrige Excellence Framework: A Systems Approach to Improving Your
Organization’s Performance (Health Care). Gaithersburg, MD: US Department of Commerce,
National Institute of Standards and Technology. Black, J. 2016. The Toyota Way to
Healthcare Excellence: Increase Efficiency and Improve Quality with Lean, 2nd ed. Chicago:
Health Administration Press. Buytendijk, F., and N. Rayner. 2002. “A Starter’s Guide to CPM
Methodologies.” Research Note TU-16-2429. Stamford, CT: Gartner, Inc. 15 16 A p p lyin g Q
u a l i ty M a n a g e me n t i n H e a l thc are: A Sy stem s A p p roac h Cameron, K. 2015.
“Organizational Effectiveness.” In Wiley Encyclopedia of Management, vol. 11, 1–4.
Published January. http://onlinelibrary.wiley.com/
doi/10.1002/9781118785317.weom110202/abstract. Chassin, M. R., and J. M. Loeb. 2013.
“High-Reliability Health Care: Getting There from Here.” The Milbank Quarterly 91 (3): 459–
90. Dean, J. W., Jr., and D. E. Bowen. 2000. “Management Theory and Total Quality:
Improving Research and Practice Through Theory Development.” In The Quality Movement
and Organization Theory, edited by R. E. Cole and W. R. Scott, 3–22. Thousand Oaks, CA:
SAGE Publications. Donabedian, A. 1980. Explorations in Quality Assessment and
Monitoring. Vol. 1 in The Definition of Quality and Approaches to Its Assessment. Chicago:
Health Administration Press. Health Resources and Services Administration. 2011. Quality
Improvement. US Department of Health and Human Services. Published April.
www.hrsa.gov/ quality/toolbox/508pdfs/qualityimprovement.pdf. Institute of Medicine
(IOM). 2001. Crossing the Quality Chasm: A New Health System for the 21st Century.
Washington, DC: National Academies Press. Lohr, K. N. (ed.). 1990. Medicare: A Strategy for
Quality Assurance. Washington, DC: National Academies Press. McLaughlin, D. B., and J. R.
Olson. 2012. Healthcare Operations Management, 2nd ed. Chicago: Health Administration
Press. Muralidharan, K. 2015. Six Sigma for Organizational Excellence: A Statistical
Approach. New York: Springer. Parast, L., B. Doyle, C. L. Damberg, K. Shetty, D. A. Ganz, N. S.
Wenger, and P. G. Shekelle. 2015. “Challenges in Assessing the Process–Outcome Link in
Practice.” Journal of General Internal Medicine 30 (3): 359–64. Spath, P. L. 2013.
Introduction to Healthcare Quality Management, 2nd ed. Chicago: Health Administration
Press. CHAPTER ROLE OF POLICY IN ADVANCING QUALITY 2 Learning Objectives After
completing this chapter, you should be able to • describe the types of oversight
organizations that influence healthcare quality; • recognize how public and private policies

encourage quality improvement at the organizational, community, and national levels; and •
identify resources to maintain current knowledge about policy changes, new initiatives, and
updates on current initiatives. T he most visible or well-known topics of healthcare policy
tend to be those related to funding, payment, and access. Examples include Titles XVIII and
XIX, the Social Security Act amendments of 1965 that created Medicare and Medicaid; the
Balanced Budget Act of 1997 that created the Children’s Health Insurance Program (CHIP);
and the Patient Protection and Affordable Care Act of 2010 (ACA). There are many other
public and private policies that play an integral role in ensuring the quality of healthcare
services. Licensure is an example of how healthcare quality is affected by public health
policies. Physicians, nurses, nurse practitioners, pharmacists, physical therapists, and other
care providers must have licenses to practice their professions. These requirements are
guided by the statutes and rules outlined in the professional practice acts and occupational
licensing bodies of their respective states. There are many other examples of how public
and private policies influence healthcare quality. The Americans with Disabilities Act
requires health facilities to have ramped sidewalks to the front door and Braille numbers on
the elevator buttons. Sprinklers in the ceilings, signs labeled “fire exit,” and alarm-activated
doors that close automatically are mandated by state building codes and the fire safety
requirements of state regulations and private health facility oversight groups. Inappropriate
or excessive radiation exposure to patients and healthcare personnel during diagnostic
exams is prevented when facilities comply with the requirements of the Occupational Safety
and 17 18 A p p lyin g Q u a l i ty M a n a g e me n t i n H e a l thc are: A Sy stem s A p p roac h
licensure status granted by a governmental body and confirming minimum standards
accreditation “a public recognition by a healthcare accreditation body of the achievement of
accreditation standards by a healthcare organization, demonstrated through an
independent external peer assessment of that organization’s level of performance in
relation to the standards” (Smits, Supachutikul, and Mate 2014, 66) certification a form of
external quality review for health services professionals and organizations; when applied to
individuals, it represents advanced education and competence; when applied to
organizations, it represents meeting predetermined standards for a specialized service
provided by the organization (Rooney and van Ostenburg 1999). EXHIBIT 2.1 Types of
Healthcare Quality Oversight Organizations in the United States Health Administration and
private oversight entities. The safety and efficacy of medications are investigated by the US
Food and Drug Administration before they are released for patient use. Considering the
Donabedian (1980) model for measuring quality (structure, process, outcome), policy
initiatives have historically targeted the quality of the structural elements of the healthcare
delivery system, such as people, physical facilities, equipment, and drugs. Outcome
measures, such as infant mortality rates and life expectancy, and aggregate process
measures, such as immunization rates, have been collected for many years by the public
health infrastructure at state, national, and international levels. Current health quality
policy initiatives target outcomes and processes at the organization, provider, and
population levels. This chapter discusses the increasingly important role of public and
private policies on healthcare quality by providing a brief overview of health policy
concepts, explaining the role of quality oversight bodies, and introducing several healthcare

quality initiatives that demonstrate the use of public and private policies to drive system
change and improvement. External Stakeholders Affecting Quality A variety of external
stakeholders—federal, state, and local government agencies and private organizations—set
quality expectations and assess and monitor services delivered by health plans, health
facilities, integrated delivery systems, and individual practitioners. Types of quality
oversight organizations are summarized in exhibit 2.1. External stakeholders use three
primary approaches to influence healthcare quality: licensure, accreditation, and
certification. Licensure is granted by a governmental body and represents minimum quality
standards, while accreditation and certification are granted by nongovernmental State
licensing bodies. States, typically through their health departments, have long regulated
healthcare delivery through the licensure of healthcare institutions such as hospitals, long-
term care facilities, and home health agencies, as well as individual healthcare practitioners
such as physicians and nurses. States also license, through their insurance and health
departments, financial “risk-bearing entities,” including both indemnity insurance products
and those managed care products that perform the dual function of bearing risk (like an
insurer) and arranging for or delivering healthcare services (like healthcare-providing
entities). (continued) C h a p te r 2: Role of Polic y in A dvanc ing Q uality Private sector
accrediting bodies. Accrediting bodies set standards for healthcare organizations and assess
compliance with those standards. They also focus on the operation and effectiveness of
internal quality improvement systems. In some functional areas, state and federal
governments rely on or recognize private accreditation for purposes of ensuring
compliance with licensure or regulatory requirements. Medicare and Medicaid compliance.
For a healthcare entity to receive Medicare or Medicaid reimbursement, the entity must
meet certain federally specified conditions of participation (CoPs) or other standards. The
Centers for Medicare & Medicaid Services (CMS) promulgates CoPs for hospitals, home
health agencies, nursing facilities, hospices, ambulatory surgical centers, renal dialysis
centers, rural health clinics, outpatient physical therapy and occupational therapy, and
rehabilitation facilities. CMS also establishes standards for the participation of managed
care organizations contracting under the Medicare program. US Department of Labor.
Oversight of certain aspects of employer-provided health plans is performed by the US
Department of Labor. The Employee Retirement Income Security Act of 1974 sets minimum
federal standards for group health plans maintained by private-sector employers, by
unions, or jointly by employers and unions. The department oversees plan compliance with
the following legal requirements of plan administration: reporting and disclosure of plan
features and operations, fiduciary obligations for management of the plan and its assets,
handling benefit claims, continuation coverage for workers who lose group health coverage,
limitations on exclusions for preexisting conditions, prohibitions on discrimination based
on health status, renewability of group health coverage for employers, minimum hospital
stays for childbirth, and parity of limits on mental health benefits. Individual certification
and credentialing organizations. The American Board of Medical Specialties (an umbrella
for 24 specialty boards) and the American Osteopathic Association have certification
programs that designate certain medical providers as having completed specific training in
a specialty and having passed examinations testing knowledge of that specialty. The

Accreditation Council for Graduate Medical Education, sponsored by the American Medical
Association and four other organizations, accredits nearly 7,700 residency programs in
1,600 medical institutions across the United States. For nursing, the American Board of
Nursing Specialties sets standards for the certification of nursing specialties. The largest
numbers of nurses, both in generalist and specialist practice, are certified by the American
Nurses Credentialing Center on the basis of practice standards established by the American
Nurses Association. Source: Data from President’s Advisory Committee on Consumer
Protection and Quality in the Health Care Industry (1998). 19 EXHIBIT 2.1 Types of
Healthcare Quality Oversight Organizations in the United States (continued) 20 A p p lyin g
Q u a l i ty M a n a g e me n t i n H e a l thc are: A Sy stem s A p p roac h organizations.
Accreditation and certification represent optimal quality standards for organizations or
advanced education and competence for individuals. Quality oversight organizations are
vital stakeholders of health services organizations. Their standards, regulations, and
conditions of participation (CoPs) increasingly drive system change and improve quality of
care and services. Details on the specific laws, regulations, and impact of healthcare quality
may be found in other texts dedicated to health policy and healthcare management. In the
next sections, a few key examples of external stakeholders (public and private) and how
they influence healthcare quality are provided. Because the priorities and expectations of
external stakeholders are constantly changing, students and managers charged with quality
responsibilities will need additional resources to learn about the most current
requirements of all stakeholder groups affecting their organization. The web resources at
the end of this chapter are useful for this purpose. Federal Health Policies and Oversight
public policy “authoritative decisions made in the legislative, executive, or judicial branches
of government that are intended to direct or influence the actions, behaviors, or decisions of
others” (Longest 2010, 5) health policies policies that “pertain to health or influence the
pursuit of health” (Longest 2010, 6) The federal government is a vital stakeholder of health
services organizations. Its regulations, CoPs, and health policy priorities are increasingly
being used to drive system change and improve quality of care and services. Details on
specific laws and regulations that affect healthcare quality may be found in other texts
dedicated to health policy. This section presents a few key examples that illustrate the role
of policy in system improvement. A brief background on the evolution of these initiatives is
also provided so readers may appreciate the influence of history on the current healthcare
quality landscape. The US government serves the following generic purposes: “to provide
for those who cannot provide for themselves, to supply social and public goods, to regulate
the market, and to instill trust and accountability” (Tang, Eisenberg, and Meyer 2004, 48).
To accomplish these purposes, the government uses public policy or “authoritative
decisions made in the legislative, executive, or judicial branches of government that are
intended to direct or influence the actions, behaviors, or decisions of others” (Longest 2010,
5). Some of these public policies are considered health policies because they “pertain to
health or influence the pursuit of health” (Longest 2010, 6). Health policies are crafted to
influence health determinants, which in turn influence health. The ACA (US Department of
Health and Human Services [HHS] 2015) was the most significant legislation resulting from
public health policy since enactment of the Medicare and Medicaid programs in 1965.

However, the federal government’s influence extends beyond the ACA. In 2011, the HHS
published National Strategy for Quality Improvement in Health Care. This document
outlined the National Quality Strategy, a road map C h a p te r 2: Role of Polic y in A dvanc
ing Q uality 21 for achieving affordability, better care, and healthy people and communities.
The recommendations in this document affect all healthcare stakeholders—patients;
providers; employers; health insurance companies; academic researchers; and local, state,
and federal governments (HHS 2011). Each year, the road map is reviewed and revised as
needed to reflect current priorities and performance results (Agency for Healthcare
Research and Quality [AHRQ] 2016b). The three broad aims of National Strategy for Quality
Improvement in Health Care guide the local, state, and national efforts to improve health
and the quality of healthcare. These aims include the fol…

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