Chapter 6

Chapter 6.
Reengineering
Chapter 6: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 1
Outline
 Reengineering vs. Other Methods
 Work Design in Health Care Organizations
– Work Design
– Job Design
 Work Measurement-Standard Times
– Stopwatch Time Studies
– Standard and Predetermined Times
 Work Measurement Using Work Sampling
– Determination of Sample Size
– Development of Random Observations Schedule
– Training Observers
 Work Simplification
– Flow Chart
– Work Distribution Chart
– Flow Process Chart
 Worker Compensation
Reengineering vs. Other Methods
 Healthcare managers have often sought
organizational change, restructuring, and
downsizing. Although those methods may
improve the financial base of the organization or
productivity at least temporarily by “cutting the
fat,” namely by reducing the staff across the
board, yet they create other problems. In
particular, reducing staff can lead to major
problems in the quality of care.
 Two other contemporary and popular methods that
aim to improve both performance and the quality
are total quality management (TQM) and
continuous quality improvement (CQI) which are
geared to make incremental changes over time.
Reengineering vs. Other Methods
 Reengineering is a methodology intended to
overcome the difficulty in realizing TQM/CQI
performance over a long duration, as well as
the myopic conduct of organizational change,
restructuring and downsizing.
 To reengineer the system, healthcare managers
must be able to understand work-design, jobs,
job measurement, process activities, and
reward systems – all well known concepts of
industrial engineering. With that knowledge,
they can recognize the bottlenecks in the old
system, identify unnecessary and repetitive
tasks, and eliminate them in the reengineered
system of care.
Importance and Purpose
 Human resources represents over 40%

of healthcare facility budgets
 Productivity and satisfaction of staff
involves an understanding of the work
environment
 Work must be designed so that
employees are happy, organizational
productivity is high, and costs are
minimized
Work Design- A Systems Perspective
Work Design External
Factors
Work Job Design Worker

Measurement •Who? Compensation
•Time Study •How?
•Predetermined •Where? •Time Based
Standard •Output Based
•Work Sampling Job Simplification •Incentive Plans
Job Design
Who does what, how, and where?
 Consistent with organizational

goals
 Write it down!
 Understand and communicate it
 Involve employees and

management
Frederick Winslow Taylor
 Developed Scientific Management
Approach
 Focused on time studies
 Conflicts between labor and

management occurred because
management had no idea how long
jobs actually took
For what types of jobs would this
approach work best? Are there
Methods in Health Care Healthcare applications?
Efficiency School--
Logical and Systematic
 Best for simple, repetitive routine, and
separable tasks
 Healthcare Examples:
– lower level administrative duties
– division of labor
– standardized forms and paperwork
– robots in laboratories
– automation of routine tasks
 Not good for judgmental/unpredictable tasks
Advantages and Disadvantages of Specialization
Management Employees
a. Simplifies training a. Low education/skill

Advantages b. Higher productivity b. Minimum responsibilities
c. Low wage costs c. Little mental effort needed
a. Difficult to motivate a. Monotonous and boring

quality b. Limited opportunities for
Disadvantages b. Worker dissatisfaction, advancement
absenteeism, high turn- c. Little control over work
over, disruptive tactics, d. Little opportunity for self-
poor attention to quality fulfillment
Behavioral School
Satisfaction of Wants/Needs
 Intrinsicand extrinsic motivators
 Specialization leads to monotony and
worthlessness
Socio-technical School Approach
Efficiency School Behavioral School

(Technical Focus) (Human Focus)
Socio-technical School
How can jobs be improved?
 Job enlargement-- give workers a
larger portion of the total task
(horizontal loading-- additional work at
same level of skill and responsibility)
 Job enrichment-- increasing
responsibility for planning and
coordinating tasks (vertical loading)
 Job rotation-- workers periodically
exchange jobs
What are examples of each?

Work Measurement Using Time
Standards
 Time standards are important in
establishing productivity measures,
determining staffing level and
schedules, estimating labor costs,
budgeting, and designing incentive
systems
 A time standard represents the amount
of time needed for the average worker
to do a specific job working under
typical conditions
The First Step. . .
The amount of time it should take a qualified

worker to complete a specified task, working at
a sustainable rate, using given methods and
equipment, raw materials, and workplace
arrangements is called a standard time.
A Standard time can be developed through:

•Stop-watch studies
•Historical times
•Predetermined data
•Work sampling
Stopwatch Time Studies
 Take time over a number of trials (cycles)

 Workers should be educated regarding the
process to avoid suspicion and avoid the
Hawthorn Effect
 Number of cycles to time (i.e., sample size)
– variability in observed times
– desired accuracy
– desired level of confidence for the estimate
Determining Sample Size
Accuracy desired may be explained by the percentage
of the mean of the observed time. For instance, the goal
may be to achieve an estimate within 10 percent of the
actual mean. The sample size is then determined by:
zs 2
( )
n= ax where:
Desired z = number of std. dev.
Confidence Z-value needed for desired
90 1.65 confidence
95 1.96 s = sample std. dev.
98 2.33 a = desired accuracy
99 2.58 x = sample mean
An Alternative Formula
Desired accuracy may be expressed as an amount (e.g.,
within one minute of the true mean). The formula for
sample size becomes:
zs 2
n= ( )
e
where
e = Accuracy or
maximum error
acceptable
To make an initial estimate of sample size, you should
take a small number of observations and then compute
the mean and std. dev. to use in the formula for n.
An Example
A time study analyst wishes to estimate the time required
to perform a certain job. A preliminary study yielded a
mean of 6.4 minutes and a standard deviation of 2.1 min.
The desired confidence level is 95 percent. How many
observations will be needed (including those already taken)
if the desired maximum error is:
a) +/- 10 percent?
b) one-half minute?
zs 2
a) n = ( ) ax b) n = e
zs 2
( )
1.96(2.1) 2 1.96(2.1) 2
= ( .10(6.4) ) = 41.36 n= ( )
0.5 = 67.77
Determining the Standard Time
 Observed Time-- average of observed times

– OT = xi/n
 Normal Time-- observed time adjusted for
worker performance
– NT = OT * PR (where PR = performance
standard measured for the entire job)
– NT = (Ej*PRj) (where PR is measured
element by element)
– PR equals 1 for the average worker; PR< 1 is
for a slower worker
ST = NT * AF
 Standard time equals normal time

multiplied by an allowance factor
 Allowance Factor
– accounts for personal delays,
unavoidable delays, and/or rest breaks
– AFjob = 1+A, where A= allowance
percentage based on job time
– AFday = 1/(1-A), where A = allowance
percentage based on work day
Table 6.1 Typical Allowance Percentages for Varying Healthcare Delivery Working Conditions
Allowance Level Percent
1. Basic-low (personal, fatigue, standing) 11
2. Basic-moderate (basic-low and mental strain) 12
3. Basic-high (basic-moderate and slightly uncomfortable 14

heat/cold or humidity
4. Medium-low (basic high and awkward position) 16
5. Medium-moderate (medium-low and lifting requirements up to 19

20 lbs.)
6. Medium-high (medium-moderate and loud noise) 21
7. Extensive-low (medium-high and tedious nature of work) 23
8. Extensive-medium (extensive-low and with complex mental 26

strain)
9. Extensive-high (extensive-medium and lifting requirement up to 28
30 lbs.)
Source: Adapted from B.W. Niebel, 1988.
The Allowance Factor
 Compute the allowance factor if:

– The allowance is 20 percent of job time.
– The allowance is 20 percent of work
time.
A) AF = 1 + A = 1.20, or 120%
B) AF = 1/(1-A) = 1/(1-.2) = 1.25 =
125%
An Example
The following observed times have been collected with a
performance rating of 1.10. Using an allowance factor
of 15% of job time, determine the appropriate standard
time.
Preliminary Calculations:
n=9
PR =1.10
A = 1.15
Obs Time (min) Obs Time
1 4.20 6 4.18
2 4.15 7 4.14
3 4.08 8 4.14
4 4.12 9 4.19
Methods in Health Care 5 4.15 37.35
The Solution
A. OT = 37.35/9 = 4.15 minutes
B. NT = OT x PR = 4.15 x 1.10 = 4.565 minutes
C. ST = NT x (1+A) = 4.565 x 1.15 = 5.25 minutes
Now, what do: OT, NT and ST represent?
Obs. Time (min) Obs. Time

1 4.20 6 4.18
2 4.15 7 4.14
3 4.08 8 4.14
4 4.12 9 4.19
5 4.15 37.35
What are the problems with time
studies?
 Subjective performance ratings and
allowances
 Only observable jobs can be studied
 Highly costly -- best for repetitive

tasks
 Disrupts worker routine
 May cause worker resentment
Other Methods
 Historical/Standard Elemental Times
– Firms collect data on standard job elements
– Put these data together to determine job
times
– Less costly and disruptive
– Limited applications in healthcare
 Predetermined Standards
– Obtained from trade publications
– Need no performance of allowance factor
– Operations are not interrupted
Work Measurement Using Work
Sampling
 Technique for estimating the proportion of
time that a worker or machine spends on
various activities
 Observers make brief observations of a worker
or a machine at random intervals over a
period of time and simply note the nature of
the activity
 Purpose:
– To estimate percentage of unproductive or
idle time for repetitive jobs
– To estimate the percentage of time spent on
various tasks for non-repetitive jobs
Work Sampling Steps
1) Determine the sample size
2) Train the observers,
3) Develop random sample schedule
4) Take observations, and re-compute the
desired sample size several times if initial
estimates are not reliable
5) Determine the estimated proportion of time
spent on specified activity
Step 1: Sample Size
The goal of work sampling is to obtain an estimate that provides
a specified confidence not differing from the true value by more
than a specified error
CI  pˆ  e
e  z ( pˆ * (1  pˆ )) / n
n  ( z / e) pˆ (1  pˆ )
2
CI = confidence interval,
e = error,
z = number of standard deviations needed to achieve desired
confidence,
p̂  sample proportion (number of occurrences divided by sample size),
n = sample size.
Sample Size, cont.
Example 6.1: A hospital administrator wants an
estimate of X-ray idle time that has a 95.5
percent confidence of being within 4 percent
of the actual percentage. What sample size
should be used?
e = 0.04 z = 2.00 n = (z/e)2p(1-p)
Desired When p is unknown, a
Confidence Z-value preliminary estimate of
90 1.65 sample size can be obtained
95 1.96 using p = 0.5. Then after 20
95.5 2.00 observations, a new estimate
98 2.33 can be obtained.
99 2.58
Solution:
Given: e = 0.04; z = 2.00 (see Appendix A);
p̂ = 0.5 (preliminary).
p̂ = 0.5: n = (2.00/0.04)2 * .50 * (1-.50) = 625 observations.

If for 20 observations, it is observed that the x-ray was breaking down on
average 1 time, the revised estimate is then
p̂ = 1/20 = 0.05.
The revised estimate of sample size is:
p̂ = 0.05, n = (2.00/0.04)2 x .05 x (1-..05) = 118.75 or 119 observations.
Step 2: Train Observers
A comprehensive training program of three steps should be

standardized for all data collectors. Data collectors should be
first educated as to the study’s goals, protocol, collection
procedures, and data submission procedures, and the
guidelines for their behavior. Then, the observers should be
trained in data collection. Training may include sessions using
videotaped activities for practice in identifying and recording
actual nursing services. In the third phase, observers
participate with a project member, in explaining the nature of
the project to those who will be observed, in the observation
setting.
Step 3: Random Observation Schedule
 Need random number for day, hour,

and minute, with the number of
digits needed for each number
equaling the number of days in the
study, hours per day, and minutes
per hour.
Table 6.6 Random Numbers
1 2 3 4 5 6 7 8
1 35491937 20651090 30546738 27696713 91854858 26470901 29600381 43662404
2 90089321 75138197 18262296 58506988 53664329 58683691 44072656 72123301
3 74264444 20553216 88880910 32182848 99227273 42091243 00185415 8357505
4 6975941 19701236 59830829 79995795 34330400 63691396 97866058 36093751
5 85104515 28079011 30791869 49069307 25601053 20059512 59647584 82327514
6 49445830 31791906 92435664 55449680 36293078 76826714 89141197 12205275
7 97984536 60317366 21508928 98014497 61529058 44276591 14715726 69340554
8 50991720 74038271 96451777 08764415 56072460 46404128 38033324 01926168
9 64349299 37831506 63182639 04789945 77658452 04272124 48048380 41902751
10 34894237 13116155 43110883 70982790 83397806 76383491 01380231 72811348
Example 6.3: A nursing manager wants to observe the time a
nurse spends in direct and in indirect care over a 5-day
period, on a unit where the shift is 8 hours.
Solution:
 A one digit number will be needed for the day, one digit for the
hour, and two digits for the minute.
 Using Table 6.4, starting from row 4, column 3, we obtain the
random number 59830829.
 The first number is 5. Thus, we determine the day (in this
case, the fifth day of the week, Friday).
 We move to the next number, 9, for the hour; but since activity
is performed 8 hours daily, we discard that number, and move
to the next one, 8. If we assume that the shift starts at 7:00
AM, the number 8 represents 2:00 PM.
 The minutes are derived from the next two digits, 30. Put
together, the first observation is made on the fifth day, 30
minutes into the 8th hour of work, or at 2:30 PM.
 This procedure is repeated for each observation to be taken.
Then the observations should be sorted chronologically by day,
hour and minute.
Example 6.4: The chief of the hospital maintenance technicians wants to
estimate the proportion of time that technicians spend in a part of the
maintenance process. The maintenance office is open 9 hours, starting at
8:00 AM, every day of the week. 20 observations will be taken during a
month-long investigation. Determine the random observation times and
develop an observation schedule, assuming that the serial number of a dollar
bill starts with 25.
Solution:
 Since we know the starting point in Table 6.4 is the 2nd row and 5th column,
the random number is 53664329.
 Next we need to choose the reading direction of the succeeding random
numbers: either by moving to the right on the same row, and when the row
is finished, going down one row and moving from left to right; or by going
down on the same column, and when the column is finished moving to the
next column right and reading from bottom to top.
 For this case, we choose to read in the same column, going down. For days,
read two digits from left to right – select two-digit number, if higher than 31,
then move to the next digit to make a two-digit day observation, and so on.
 Within eight digit numbers, if there are not enough digits to identify day,
hour and minutes for the observation, discard that random number and
select the next one.
 For hours, read single digit numbers from left to right, discard 0 and assign
1=8:00 A.M., 2=9:00 A.M., and so on.
 For minutes, read two digit numbers and discard numbers 60 or over.
Prepare a chronological list of the observation time results by day, hour and
minute, to be given to the data collection team.
Table 6.7 Development of the Schedule for a Work Sampling Study
Observation Random Number Day Hour Minute Notes
53664329 discarded
1 99227273 22 7=2 PM 27
2 34330400 30 4=11 AM 00
3 25601053 25 6=1 PM 01
4 36293078 29 3=10 AM 07
5 61529058 15 2=9 AM 05
6 56072460 07 2=9 AM 46
77658452 discarded
83397806 discarded
7 41697527 16 9=4 PM 52
8 97271339 27 1=8 AM 33
39337813 discarded
75852472 discarded
9 35183489 18 3=10 AM 48
10 08589156 08 5=12 PM 15
Table 6.8 Final Work Sampling Schedule
Observation Day Time
18 04 8:28 AM
17 04 9:21 AM
13 07 8:04 AM
6 07 9:46 AM
10 08 12:15 PM
14 10 2:36 PM
15 11 10:13 AM
12 11 4:08 PM
16 12 11:42 AM
5 15 9:05 AM
7 16 4:52 PM
9 18 10:48 AM
11 19 12:08 PM
1 22 2:27 PM
3 25 1:01 PM
20 26 2:14 PM
8 27 8:33 AM
19 27 1:59 PM
4 29 10:07 AM
Table 6.4 Abridged Patient Care Tasks in a Nursing Unit
Professional Non- Direct Indirect
Patient Care Tasks Professional
1. Ace bandage application * *
2. Admit – patient orientation * *
3. Assist to/from bed, chair * *
4. Bed bath *
5. Bed change – empty * *
6. Bed change - occupied * *
7. Bed pan * *
8. Blood pressure * *
9. Catheterization of bladder * *
10. Census count * *
Table 6.5 Work Sampling Data Collection Form for Nursing Unit
Unit: 4 West Observer: CL Date: 11/02/05 Shift: AM Time: 10:04

Observed Prof. Non- Prof. Non-Prof. In Communication with On
Staff Direct Prof. Indirect Indirect Break
Patient Staff Physician
Name& Title Direct
G. Smith, RN √ √
V. Black, RN √ √
E. Mason, RN √
Z. Sander, RN √
P. Bills, RN √ √
Work Sampling Steps
4) Take observations, and re-compute the
desired sample size several times if initial
estimates are not reliable
5) Determine the estimated proportion of time
spent on specified activity
Advantages of Work Sampling
 Observations less susceptible to short

term fluctuations
 Little or no work disruption
 Workers are less resentful
 Less costly and time-consuming
 Many studies can be conducted

simultaneously
 Useful for non-repetitive tasks
Disadvantages of Work Sampling
 Less detail on elements/tasks of a job

 Workers may alter patterns
 Often no record of method used by worker
 Observers may fail to adhere to random

observation schedule
 Not useful for short, repetitive tasks
 Much time required to move from

observation area to observation area to
ensure randomness
Nobody likes to do things the hard way!
Work Simplification
 Work Simplification-- process of changing work

methods:
– Eliminate unnecessary parts of work
– Combine and rearrange parts of work
– Simplify work when possible
 Work Simplification Tools
– Flow Chart
– Work Distribution Chart
– Flow Process Chart
– Layout Chart
Figure 6.4 Commonly Used Flow Chart Symbols
Start/Terminate
On page connector
Process Off page connector
Document
Decision
Preparation Manual
Operation
Figure 6.5 Flow Chart for Emergency Room Specimen Processing
Initial Process After Improvement
Patient Patient
Entry Entry
Triage: No Triage:
end No end
need blood? need blood?
Yes
Nurse draws Nurse draws
blood blood
MD orders MD orders
lab lab
IS order IS entry
entry label & package Lab
Label & Results

package Lab Accession &
arrive in ER analysis
(end)
Accession &
Verification
analysis
IS double
entry
MD
terminates
lab order
(end)
The Work Distribution Chart
 Shows what a department does to identify
each of its major activities and to pinpoint the
contribution of each employee to those
activities
 Must be specific!
 Spotting Trouble
– Which activities consume the most time?
– Are tasks evenly distributed?
– Is there under-specialization?
– Are employees assigned too many unrelated
tasks?
– Are talents utilized efficiently?
Table 6.9 Partial Work Distribution Chart for Nursing Unit
Activity Hours Nurse Manager Hours Nurse I Hour Nurse II Hour

s s
Patient admissions 12 Coordination with 8 2 2
Admissions Dept.
Communications 16 Physicians and 8 Patient family 4 Patient family 4

patient family
Direct patient care 48 8 Medication 20 20
administration
Indirect patient care 16 Monitor charts 4 Meals 6 Update Charts 6

Discharge planning 14 2 6 6
Scheduling & Adm. 4 4
Miscellaneous 10 Supervisory 4 Emergency 2 2

meeting 2 coverage
Sessions with
trainees
TOTAL 120 40 40 40
Flow Process Chart
 Records a procedure in a graphic form, using a
sort of shorthand to simplify and unify the
record
– Ensures every significant detail of the work
process in its proper sequence is recorded
– Highlights inconsistencies and redundancies
 Can eliminate, combine, change (sequence,
place, person), or improve activities
Operation Inspect
Store
Move Delay
Figure 6.3 Flow Process Chart for Emergency Room Specimen Processing
OPERATION MOVE INSPECT DELAY

Patient Entry
Triage
RN draws blood
Specimen waits for MD order
Order entry
Label and package
Sent to lab
Accessioning process
Lab analysis
Verification by lab/IS entry
S e n t to E R
MD terminates lab order
Now the important part!
Worker Compensation
 Compensation schemes:
– Time based-- most common in healthcare
– Output based-- more difficult to
operationalize, yet pay is related to efforts
 Incentive Systems
– Profit sharing plans-- receive % of profits
– Gain sharing plans-- receive a % of the
value (i.e., cost savings) realized through
increases in productivity
The End

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Chapter 6.

 Human resources represents over 40%

Work Job Design Worker

 Consistent with organizational

 Understand and communicate it

 Involve employees and

 Conflicts between labor and

a. Simplifies training a. Low education/skill

a. Difficult to motivate a. Monotonous and boring

Efficiency School Behavioral School

What are examples of each?

The amount of time it should take a qualified

A Standard time can be developed through:

 Take time over a number of trials (cycles)

 Observed Time-- average of observed times

 Standard time equals normal time

Allowance Level Percent

1. Basic-low (personal, fatigue, standing) 11

2. Basic-moderate (basic-low and mental strain) 12

3. Basic-high (basic-moderate and slightly uncomfortable 14

5. Medium-moderate (medium-low and lifting requirements up to 19

7. Extensive-low (medium-high and tedious nature of work) 23

8. Extensive-medium (extensive-low and with complex mental 26

 Compute the allowance factor if:

Obs. Time (min) Obs. Time

 Highly costly -- best for repetitive

 May cause worker resentment

p̂ = 0.5: n = (2.00/0.04)2 * .50 * (1-.50) = 625 observations.

A comprehensive training program of three steps should be

 Need random number for day, hour,

1 35491937 20651090 30546738 27696713 91854858 26470901 29600381 43662404

2 90089321 75138197 18262296 58506988 53664329 58683691 44072656 72123301

3 74264444 20553216 88880910 32182848 99227273 42091243 00185415 8357505

4 6975941 19701236 59830829 79995795 34330400 63691396 97866058 36093751

5 85104515 28079011 30791869 49069307 25601053 20059512 59647584 82327514

6 49445830 31791906 92435664 55449680 36293078 76826714 89141197 12205275

7 97984536 60317366 21508928 98014497 61529058 44276591 14715726 69340554

8 50991720 74038271 96451777 08764415 56072460 46404128 38033324 01926168

9 64349299 37831506 63182639 04789945 77658452 04272124 48048380 41902751

10 34894237 13116155 43110883 70982790 83397806 76383491 01380231 72811348

2. Admit – patient orientation * *

3. Assist to/from bed, chair * *

5. Bed change – empty * *

6. Bed change - occupied * *

10. Census count * *

Unit: 4 West Observer: CL Date: 11/02/05 Shift: AM Time: 10:04

 Observations less susceptible to short

 Workers are less resentful

 Less costly and time-consuming

 Many studies can be conducted

 Less detail on elements/tasks of a job

 Often no record of method used by worker

 Observers may fail to adhere to random

 Much time required to move from

 Work Simplification-- process of changing work

Process Off page connector

Label & Results

Activity Hours Nurse Manager Hours Nurse I Hour Nurse II Hour

Communications 16 Physicians and 8 Patient family 4 Patient family 4

Indirect patient care 16 Monitor charts 4 Meals 6 Update Charts 6

Scheduling & Adm. 4 4

Miscellaneous 10 Supervisory 4 Emergency 2 2

OPERATION MOVE INSPECT DELAY