4.1. Framing the Problem

Alice Griffith has worked for a community hospital in the billing department for several years now. The hospital has recently initiated a Lean Six Sigma program to improve the efficiency and quality of its service, to increase patient satisfaction, and to enhance the hospital's already solid reputation within the community.

The hospital has hired a master black belt by the name of Alex Griffin to provide much needed support and momentum for the Lean Six Sigma initiative. Alex will be responsible for identifying and mentoring projects, providing training, and supporting and facilitating Lean Six Sigma efforts. Upper management has identified the billing department as particularly prone to problems and inefficiencies, and directs Alex to identify and prioritize realistic green belt projects within that area. Specifically, upper management mentions late charges as an area that ties up several million dollars per year.

It is in this context that Alex Griffin meets Alice Griffith. Alice is a devoted employee and a quick learner and has an enthusiastic personality. So, when management pairs her with Alex for the task of identifying projects, she is thrilled.

In accordance with their mandate, Alex and Alice proceed to address late charges, which have been a huge source of customer complaints, rework, and lost revenue. Alice describes late charges to Alex as follows:

Late charges can apply to both inpatients and outpatients. In both cases, tests or procedures are performed on a patient. The charge for each test or procedure is ideally captured at the time that the procedure is performed. However, a charge cannot be captured until the doctor's notes are completed, because the charge must be allocated to the relevant note. Sometimes notes aren't dictated and transcribed for as much as a week after the procedure date.

Once the charge is captured, it waits for the billing activity to come around. The billing activity occurs a few days after the procedure date, allowing a short time so that all the charges related to that patient are accumulated. However, it is never really obvious what might still be outstanding or when all of these charges have rolled in. At this point, the hospital drops the bill; this is when the insurance companies or, more generally, the responsible parties, are billed for the charges as they appear at that point.

Now, once the bill is dropped, no additional charges can be billed for that work. If charges happen to roll in after this point, then a credit has to be applied for the entire billed amount and the whole bill has to be recreated and submitted. Charges that roll in after the hospital drops the bill are called late charges. For example, an invoice of $200,000 might have to be redone for a $20 late charge, or the charge might simply be written off.

If a patient is an inpatient, namely a patient who stays at least one night in the hospital, charges are captured during the patient's stay. No bill can be issued until the patient is discharged. A few days after discharge, the bill is dropped.

By the way, the date is February 11, 2008, and Alice suggests to Alex that they begin their effort to identify green belt projects by examining some recent late charge data. She suggests looking at the January 2008 listing of late charges.