Viral leadership Featured

8:00pm EDT April 25, 2008

Mike Murphy is committed to the idea that quality and continuous improvement drive comprehensive business results.

Murphy, president and CEO of Sharp HealthCare, is so convinced about his theory that since 2001, he hasn’t led just one major quality initiative at Sharp, he’s led multiple projects using Malcolm Baldrige evaluation criteria and Lean Six Sigma improvement processes to make sweeping changes at the not-for-profit health care organization.

Murphy has also engaged the expertise of quality gurus from General Electric and the Disney Institute, and he’s even given new clout to the voice of the customer by inviting unhappy patients to speak about their experiences to Sharp’s management team.

“When I looked at the feedback from our stakeholders, who are the patients, physicians and employees, all the data pointed to the fact that we were doing OK, not great,” Murphy says. “I knew we could do better. I think focusing on quality is the right thing to do, and then everything else you need to accomplish just falls in line.”

Focusing on quality also aligned the organization with emerging trends in the health care industry, which means pushing providers and executives toward a greater focus on quality. Many health insurance carriers are now measuring patient satisfaction with their health care providers and posting that information on their Web sites, and many private and government health plans have initiated or announced plans to reimburse providers through pay-for-performance systems.

In addition, there’s extreme competition for health care workers, and it’s only forecasted to get worse as the baby boomers retire. That situation presents huge challenges for Murphy because Sharp is one of the largest employers in San Diego County with more than 14,000 employees, who are in the driver’s seat when it comes to choosing employers.

By starting with a focused plan, listening to feedback and then implementing Lean Six Sigma programs, Murphy has been able to make quality the engine that drives Sharp HealthCare.

Start with a master plan

When Murphy took the helm at Sharp in 1996, he found a health care organization in the midst of a huge financial crisis. After succeeding in turning the organization around, Murphy says the timing was finally right to get serious about quality at Sharp HealthCare.

“We had just been through some very challenging times,” Murphy says. “It was 1999, and for my first three years in the job, all my efforts had been focused on making financial improvements. Now, it was finally time to look at strategic planning and where we could go from here. The strategic plan is a vital component to launching a quality initiative because all of your improvement activities need to be focused around achieving your organization’s vision and goals.”

Murphy had his eye on the Malcolm Baldrige award from the outset and created a new vision for the organization that doubled as a quality master plan.

The Baldrige award is given annually by the president of the United States to businesses that are judged to be outstanding in seven areas: leadership; strategic planning; customer and market focus; measurement, analysis and knowledge management; human resource focus; process management; and results.

Murphy named his plan “The Sharp Experience.” The plan featured six pillars of excellence: quality, service, people, finance, growth and community, which mirror the seven evaluation criteria for the Baldrige award.

The plan became the center of Sharp’s quality improvement universe around which all improvement projects orbited. Murphy employed a number of different quality improvement methodologies, some concurrently, including the Baldrige and Lean Six Sigma processes. Keeping the plan at the center of all quality improvement activities eliminated confusion among Sharp’s employees and also provided focus for the organization.

“I used multiple quality improvement methodologies because each system offers its own unique structure for evaluating your current processes, identifying performance gaps and creating solutions,” Murphy says. “So looking at our operation through each system’s criteria took us to a higher performance level. As a CEO, if you use different quality processes, you have to be careful that the different processes aren’t in conflict with each other. The way to avoid conflict or duplicity is to tie everything back to your company’s specific improvement plan.

“If a review of any area of your current operation using a different quality evaluation process suggests that improvements are still needed, that change will take you further toward your overall vision, so it brings value.”

Listen to the voices

Feedback plays an important role in any quality improvement process.

“There was a book that came out in the 1990s called, ‘If Disney Ran Your Hospital: 9 1/2 Things You Would Do Differently,’ and it was revolutionary in the health care industry because it brought a new way of thinking about service and customers,” Murphy says. “We studied Disney, and we ended up hiring consultants from the Disney Institute to help us begin our first quality improvement initiative. We started by reviewing feedback from focus groups comprised of our three stake-holder groups — patients, physicians and employees — and we used their feedback to identify our initial 12 major project areas. An example would be the goal of improving patient satisfaction, which, of course, ties back to one of our pillars of excellence.

“Next, we needed to develop an infrastructure to drive our process. We organized a senior leadership team made up of 26 midlevel managers and VPs, called the model developers, to establish a structure. The model development team devoted more than half their working hours to quality during the first four to six months of the program, and they were tasked with recommending a quality improvement structure and a communications system.”

The model developers recommended 100 different action teams, and more than 1,000 employees, including physicians, volunteered to serve on the teams.

“It’s important to provide your quality improvement teams with all the tools they need and the complete leeway to investigate the challenges and recommend solutions because no

one knows the answer about how to improve quality before you begin,” Murphy says.

Sharp conducted quarterly leadership development sessions where the model developers were trained on the fundamentals of the quality improvement process, and the model developers, in turn, passed the information along to their teams.

“With more than 1,000 employees involved, it was really never a problem getting employees to buy in,” Murphy says. “Also having so many members of your senior leadership team involved in the process pulls everyone together. The projects dealt with small components that support the main goal, such as increasing patient satisfaction by reducing wait times in the emergency room. The teams made recommendations about how to improve the process, and those were referred back to senior management for approval.

Surveys were used throughout the process to benchmark progress.

“We were constantly measuring the voice of the customer through patient satisfaction surveys and employee satisfaction surveys,” Murphy says. “If we didn’t think we were making enough progress, we changed the tools or our solutions based upon the feedback we received.”

Gauging progress by collecting employee feedback was vital to measuring quality improvement progress.

“We set annual goals for our organization’s progress tied to each pillar, a process that served as a spark plug to help drive us forward, and we reviewed our goals and our progress each year during our annual employee meeting. In addition, we included those major goals in the performance plans for everyone at the line-manager level and above. It gets everyone focused and engaged when you bring the performance criteria into individual plans, and the employees were excited at our annual meeting when they saw how we had progressed through the various cycles of improvement as documented by the feedback from the stakeholder surveys.”

Get lean

After two years, Murphy wanted to take Sharp’s quality improvement initiative to the next level, so he sought guidance from GE, a company that’s renowned for making financial improvements through the use of Six Sigma. Six Sigma was originally designed to enhance the performance and bottom lines of manufacturing companies through a defect elimination process called process mapping. It also uses the voice of the customer to determine if a step in the manufacturing process adds value or can be eliminated. The lean version of Six Sigma produces faster results and is better suited for service industries.

“What we learned from GE really gave us the ability to refine our improvement processes in a more efficient way through the Lean Six Sigma disciplines,” Murphy says. “We trained a number of our leaders and they became black belts in the Six Sigma process.

“We also started looking to other top-performing hospitals for best practices, and we learned from them. For example, we needed to streamline our coordination of out-of-network patients who come to one of our hospitals for treatment, usually through the emergency room. We visited another hospital and installed their system for coordinating those patients and their medical plan benefits, which, in turn, drove significant improvements in a number of other systems, including faster collection of insurance payments. We also changed our admitting process for emergency room patients and really shortened our wait times. Of course, shorter wait times not only improve patient satisfaction, but our staff feels better about the service they’re delivering and medical outcomes improve. So just making that one change positively impacts almost all the pillars under The Sharp Experience.”

By taking best practices from other organizations, Murphy was able to make changes quicker.

“Looking at the best practices of other health care organizations really added velocity to the quality improvement process, and the Lean Six Sigma methodology gave us a more defined structure for making evaluations and changes,” Murphy says.

He isn’t certain how many quality projects an organization can sustain at one time, but he cautions CEOs to be committed if undertaking a major quality improvement initiative because just one project can take as long as four months to complete.

Murphy’s theory encouraging CEOs to focus on quality and everything else will follow has paid off for Sharp. During the six-year quality improvement process, Sharp’s revenue increased $900 million reaching $1.9 billion for fiscal 2007. The company also won the Baldrige award in 2007.

“Quality really brings you efficiency and loyal customers,” Murphy says. “Our overall financial performance is now above the norm for a health care organization in this part of the country. Our employee satisfaction is almost at 100 percent, our patient satisfaction is averaging scores near the top quartile and employee turnover is down, averaging just 13 to 14 percent.”

Perhaps part of the Baldrige award criteria should include the phrase: Those without perseverance need not inquire because Sharp HealthCare applied two times for the Baldrige award before winning last year.

“CEOs really have to be committed before deciding to engage in a major quality initiative because it’s a lengthy process,” Murphy says. “But I think it really gives the organization direction because everyone knows where you’re going, and if you’re committed to process improvement, it will force you to look at data and make changes in your organization. The journey toward quality really never ends, and the awards are something you achieve as an organization because it takes a collective effort. Be sure and celebrate your successes along the way. It will keep all your employees engaged in the journey.”

HOW TO REACH: Sharp HealthCare,