HENRY FORD HEALTH SYSTEM

Henry Ford Health System: A Comprehensive and Integrated Healthcare System Vrushali Soni Northwest University

Author Note This paper is prepared for Operations Management, taught by Professor Lucas

HENRY FORD HEALTH SYSTEM Introduction Malcolm Baldrige National Quality Award winner of 2011, Henry Ford Health System (HFHS) is an integrated and comprehensive health care system that offers large variety of services. Headquartered in Detroit, Michigan, HFHS was established by Henry Ford, the auto pioneer, in 1915. Initially it was Henry Ford Hospital (HFH) that expanded gradually to include primary care units, wellness facility, retail shops, insurance agency and so on. There are

currently 140 sites and nine Business Units (BUs) of HFHS serving entire southeast Michigan. It is a non-profit organization and offers uncompensated care to many. Highly qualified physicians and specialists offer their services in HFHS. HFHS is highly influenced by Deming principles of quality management. Dr. Deming gave fourteen points for improving organizational and management system. He believed in continuous improvement and quality outcomes. Some of his points are highly practiced in many businesses including HFHS whereas some are not currently applied in HFHS. This paper focuses on operational and management principles of HFHS. It will further compare and contrast the HFHSs principles with Demings principles. This paper will explore Demings two principles with which HFHS is doing well; two of his principles that HFHS finds difficult to implement, and three of his principles whose application in HFHS can effectively improve it as an organization.

HENRY FORD HEALTH SYSTEM Henry Ford Health System A Comprehensive and Integrated Health System In 1915, Henry Ford established not-for-profit Henry Ford Hospital (HFH) in Detroit, Michigan. He encouraged research and education for continuous increase in employees knowledge and systems innovation. He innovatively divided HFH in two departments, inpatient

(IP) and outpatient (OP) but under single management. Gradually, HFH expanded to Henry Ford Health System (HFHS) by integrating with three different departments. First department, Health Alliance Plan (HAP) that offers low cost and high quality insurance plan; second is Behavioral Health Services (BHS) that offers psychological services and care to patients; and third, Community Care Services (CCS) that provides dialysis, hospice and retail services (Henry Ford Health System [HFHS], 2011). Apart from the flagship HFH in Detroit, HFHS includes four more hospitals, Henry Ford Macomb Hospital (HFMH) and HFMH- Warren Campus (HFMHWC) situated in Macomb; Henry Ford Wyandotte Hospital (HFWH) in Wyandotte; and Henry Ford West Bloomfield Hospital (HFWBH) in Bloomfield that served southeast Michigan (HFHS, 2011). This set of new hospitals was a mixture of organic and acquired properties. HFHS has a separate department, Henry Ford Medical Group (HFMG) constituting 30 ambulatory services and 41 specialists (HFHS, 2011). Therefore, HFHS is a total of nine different Business Units (BUs) that are distributed across 140 sites of southeast Michigan with the workforce of more than 31,000 (HFHS, 2011) and an earning of annual revenue, $4.22 billion in 2010; net income, $21.5 million; and uncompensated care, $210 million (Connelly, 2012, p. 38). HFHS went a long way to increase its revenue from $2.1 billion in 2000 to $4.2 billion in 2010. In Michigan, one of the most economically depressed states of the nation, HFHS competes with many other health systems and insurance companies. Its market share is

HENRY FORD HEALTH SYSTEM diversified because of its diversified service offerings. It holds 17.5% of IP (inpatient) market share in tri-county regions of south east Michigan whereas its OP (outpatient) market share is 19% in the tri-county region. Its IP market share in entire southeast Michigan is 15.4% (HFHS, 2011). HFHSs target markets are patients of hospitals and primary care, and purchasers of health insurance (HAP) products. HFHS was successful in crucial task of aligning mission, vision and values (MVV) together with one single motive of giving its customers, The Henry Ford Experience (THFE) (Connelly, 2012, p. 37). Its mission is to improve human life through excellence in science and

art of health care and healing. Vision is to transform lives and communities through health and wellness-one person at a time. Values are we serve our patients and communities through our actions that always demonstrate. Each patient first, respect for people, high performance, learning and continuous improvement, and social conscience (HFHS, 2011). The MVV (Mission, Vision and values) are supported by core competencies of HFHS. These core competencies include innovation, care coordination and collaboration/partnering (HFHS, 2011). MVV are well coordinated with core competencies of HFHS through the support of seven strategic pillars that include people, service, quality and safety, growth, research and education, community, and finance. The information flow across all the pillars, progress measurement in each pillar and strategic planning according to the progress are very well coordinated. Changes in MVV and strategic initiatives in seven-pillar framework are under the authority of Senior Leadership (SL). It is continuously involved with patient survey processes, market research, focus groups, local and national benchmarking and research to understand the customer needs and to influence potential customers (HFHS, 2011, p. 14). It studies specific trends in complaints or suggestions and accordingly drafts Models For Improvement (MFI). It is

HENRY FORD HEALTH SYSTEM also considering Baldrige Principle assessment since 2007 for designing strategic initiatives. HFHS satisfies Baldrige criteria and also many of the requirements of Deming principles. Is HFHS is doing well with improving every process and adopting new philosophies? Dr. Deming, the TQMs mentor, illustrated his fifth principle of management as

Improve every process. His perception was to improve every process of production and service forever, and to continuously search for problems in every process. He believed that productivity and efficiency of a process are inversely proportional to its cost; hence, with increased productivity one can achieve decreased cost. Management should monitor this proportionality and assign realistic goals instead of relying on arbitrary numbers and anecdotal data (Neave, 1990, p. 177). HFHS constantly improves upon its processes of strategic planning, organizational structure, performance improvement system, and models of improvement. It has designed a robust culture inculcating can-do spirit among its employees and giving its customers a unique The Henry Ford Experience (Henry Ford Financial Management [HFM], 2012, p. 37). One of the seven-pillar framework of HFHS institution is Quality and Safety. HFHS has won many awards for safety and quality, among them the recent ones are Thomson Top 10 U.S., Quality and Efficiency award in 2009 and Malcolm Baldrige Award for Quality in 2011 (HFHS, 2011, p. 45). HFHS is one of the only four Baldrige award recipients in U.S. It is awarded a total of $26.2 million from federal government along with other four healthcare institutes of Michigan to complete the projects that will reduce health care cost and increase quality (Greene, June 15, 2012). HFHS robustly follows Demings illustrated quality chain reaction model (Fig. 1) for reducing cost and improving quality. The CFO and Executive VP of HFHS, James Connelly believes, "Small changes make a big difference. In this environment, you have to watch your unit

HENRY FORD HEALTH SYSTEM cost carefully, which we have done"(HFM, 2012). HFHS is continuously chasing cost-effective treatments and techniques with increased quality service for remaining competitive in the most

economically challenged state of U.S. Innovative techniques and treatment are invented but only put into action after clinically testing it and doing proper market research (HFHS, 2011). In HFHS, improvement decisions are solely based on comparative and competitive data such as surveys; recommendations and complaints of patients; research and innovation (incorporated in HFHS only after achieving success in its simulation centers), and focus groups. Surveys are collected in person, via emails, phones, mails, and social media from patients and customers. In order to make sure that patients are experiencing The Henry Ford Experience (THFE), nurses invigilate the wards of hospitals on hourly basis to assure that none of the patients has any complaints or difficulties (HFHS, 2011). Major issues or complaints are discussed bimonthly with Senior Leadership (SL) in Employee Advisory Groups meetings. Then they are presented in board meetings, which are held every month. The Henry Ford Leadership System analyze all the data collection, feedbacks and current trends and threats in the market and accordingly come to some changes in goals leading to improve and enhance quality of service. The SL team has designed employee engagement strategies; Lasting Impressions Framework; THFE reference pocket cards; standardized service recovery (HEART- Hear, Empathize, Apologize, Respond and Thanks) approach for its improvement in customer loyalty (HFHS, 2011). Apart from improving every process, HFHS is doing well in adopting new philosophies and creating innovations. Dr. Deming proves his second principle of management, Adopt the new philosophy, by explaining how this world is changing and adopting with better performance and services. For sustainable success, change in system is very necessary, constant

HENRY FORD HEALTH SYSTEM improvement in process leading to increase in productivity and efficiency whereas decrease in throughput time, lead time, setup time, or cost will always prove beneficial to the company. He emphasizes on breaking the traditional barriers of unwillingness to change, fear of failure and unknown, people measuring productivity than improving it, etc. and creating innovations for betterment of society (Neave, 1990, p. 173). HFHSs one of the three core competencies is innovation therefore, breaking all the barriers; it has placed many exemplary innovations in the field of health care. HFHS does inventions and innovations for increasing productivity and efficiency. In 1998, HFH was the first in state to offer genetic detection of breast cancer. In 2007, it has established 12,000 square foot medical simulation center that allows physicians and students to enhance and test their

clinical skills in risk free environment. (HFM, 2012, p. 38). HFHS was the early adopter of EMR (Electronic Medical Record), which is successfully leveraged presently by entire health care industry. It was the first mentor hospital in nation-wide harm reduction campaign. Henry Ford Medical Group (HFMG) performed the first robotic removal of cancerous prostate gland, which revolutionized the prostate cancer treatment globally (HFHS, 2011). In 2011, HFHS collaborated with Wayne State University Engineering studies and Detroit College of Creative studies in order to establish the Henry Ford Health System Innovative Institute (HFHS-II) for research and innovation in the field of health care (Henry Ford, n.d.). HFHS-II is working with Detroit College and Wayne State University on projects of cancer detecting bra and miniature heart pump (Miller, 2011). In the same year, HFHS won John M. Eisenberg patient safety and quality award in innovation. It is one of the two hospitals that received Eisenberg award this year (Angell, March 19, 2012).

HENRY FORD HEALTH SYSTEM Several years ago, Henry Ford Hospital (HFH) implemented an innovative strategy of inviting patients from other hospitals for transplantations and other critical surgeries. This strategy proved very successful to HFH. It is one of its kinds to give its patients retreat like experience in hospitals for agile healing and recovering process. Considering patients convenience, it follows few new techniques of survey collection, like emails, social media, and phone calls. Maximum of the HFHS hospitals take surveys in person by an innovative mechanism that offers its patients to convey their complaints/compliments electronically via televisions in their rooms, hospital leadership immediately respond to this feedback (HFHS, 2011). Henry Ford Health System is excelling in following some of the key principles of Deming, such as improving every process and adopting new philosophies but it is difficult for HFHS to incorporate Permit pride of workmanship and Institute leadership. Why HFHS is finding it difficult to implement Permit pride of workmanship and Institute leadership? HFHS is not implementing Demings twelfth point, Permit pride of workmanship, in its organizational structure. According to Deming, pride of workmanship should be given to every worker by removing incentives and annual reviews because money will not encourage them to do more work or rather do more quality work but instead it will make their growth stagnant. Deming believes that performance appraisal is a bar to innovation because workers

pursue it as, if they are paid to do their instructed job then why will they contribute or create any change or improvement in their work or the results of their work (Neave, 1990). On the contrary, HFHS has mid-year performance reviews in July and annual performance reviews in January. Compensation and rewards are aligned with the employee and organizational performance. There are specific budgets allocated to different Business Units

HENRY FORD HEALTH SYSTEM (BUs) depending on their performance on the goals of annual operating income targets. No performance appraisals if the operating income targets are not met. The annual reviews have a significant impact on base salaries and the employees are also compensated with bonus. Depending on the employees designation various awards and compensations are given. Few awards include Annual Incentive Plan (AIP) payment, Group Performance Award (GPA), Employee of the Month awards, Celebration of Performance Milestone, Quality Expo Awards, etc. Connelly, the CFO of the HFHS affirms that they have participated in pay-for-performance initiatives that had significantly increased the employees performances (HFM, 2012). Todays competitive world and economic downturn are the key reasons for implicating incentive programs because such programs establishes healthy competition in the company itself and also tremendously encourages the employees to work hard and put their best efforts. Culminating such programs might lead to increase in employee attrition. Another key principle that HFHS has difficulty in adopting is Demings seventh

principle, Institute Leadership. Demings perception is that managers or supervisors job is not merely supervision but they should help their team member to work efficiently. They should provide special assistance to employees who require it; and take key decisions of improving quality and enhancing employees work efforts. Their priority task is not to meet the goals or prepare agendas but to find and solve key issues hindering quality of service or productivity of employees. Managers and supervisor should take the ownership and accountability of the defects, poor performance, and poor implication of techniques. Managers should appoint employees on various projects depending their skill set, ability and interest in pursuing the defined task (Neave, 1990).

HENRY FORD HEALTH SYSTEM On the other hand, HFHS follows the preaching of John Kotter, a voice of Western management style. He stated that leadership is about developing mission, vision and strategies and appointing individuals that makes this vision and mission come true. According to him,

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decision making of any change is an eight step long process that should be taken care by higherranking leaders and not by managers. This eight step process include creating a sense of urgency, putting together a team, creating a clear vision for the change, communicating this vision clearly to the employees, encourage the team to make act on this vision, produce short-term results to give them credibility, build momentum to act on new challenging problems, and adopt new organizational culture (World of Quality, 2010). In HFHS, managers play a role of middle management and higher authority takes decisions. Managers task is to supervise the ongoing projects, conduct reviews of weekly performance in staff meetings, emphasize on the decided goals of achievement and report their higher authority about any change required or any issue to be resolved. There is a separate division of decision making which includes 24-member system Board of Trustees (BOT) and Senior Leadership (SL) team/ Performance Council (PC), which includes C-suites executives. This division is accountable for mergers, acquisitions, mission, vision and values. They are also responsible for strategic planning, new projects, and any change in goals and performance of the employees. Management presents any major defect, change or issue during monthly meeting with PC. If under ownership of PC, the issue is resolved or else BOT further considers it. In case of emergency assistance, employees, volunteers, physicians and trainees can directly contact the CEO of HFHS, Nancy Schlichting, via email (eNancy). She is available 24/7 for emergency assistance. The patients can also communicate directly with her via television if they have any issues or complaints. In case of change in policies, health care acts, mission, vision or goals of

HENRY FORD HEALTH SYSTEM any team; the CEO posts a blog every week on the website (HFHS, 2011). New projects are thoroughly studied by PC and BOT, they appoint a team for working on this process, creates a

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clear vision and goals and the rest of the process is followed according to the Kotters eight-step process (World of Quality, 2010). HFHSs incentive program and leadership organization proved to be successful according to the CFO and CEO of HFHS but there are few key areas where HFHS should robustly implement some of the Deming principles. Which three areas require implementing Deming principles for beneficial outcomes? The first principle of Deming, Constancy of purpose illustrates constant improvement of quality and service to help men live better mentally and materially. He encourages creating long-term profitability plans, investing in right areas, improving constantly in goals to remain competitive, sustaining in business and enhancing profitability (Neave, 1990). In HFHS, the sustainability and profitability qualities of Demings principle are lacking. Its net income dropped 64% in 2011, from $60.1 million in 2010 to $21.5 million in 2011 (Herman, April 6, 2012). It has millions of dollars invested in ongoing innovation projects and in expansions of healthcare fields but with $21.5 million dollar net income, the CFO of HFHS is finding difficult to carry out these projects. It has recently received grant from federal government under the health reform act. This grant will be utilized in the ongoing projects but it will not be sufficient for the completion of all the projects. In addition, the uncompensated care (Fig. 2) is constantly increasing every year hence, it becomes a responsibility of HFHS to successfully overcome this challenge for its sustainability in the healthcare market. Its IP market share is 17.5% in the tri-county area and 15.4% in al southeast Michigan. Its four major competitors also range from 10.5%-17.5% of IP market share in tri-county regions. Competition is very crucial in healthcare and HFHS has to find the reasons for its less performance on the

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scale of market share. It has to increase annual revenues in order to expand HFHSs profitability and to assist un- and under insured people with uncompensated treatment. There are nine Business Units (BU) of HFHS (Table. 1) and among them two BUs are significantly underperforming in revenue generation. The HFMH- Warren campus, offering 203 beds provision, is generating 2 % of revenues. Another unit is BHS, which includes 7 clinics and 150 beds; and offers behavioral health services, generate 1 % of the revenues. On the other hand, the flagship HFH accounts for 18 % of revenue and offers 803 beds. HFH lacks private rooms and demonstrates a crowded environment, which significantly reduces customer satisfaction (Fig. 3). HFHS should analyze the rationale behind such notable disparity among revenue generations. If required it can reduce some clinics from BHS and invest its finance and the working employees in HFH for gaining momentum in increasing customer satisfaction. Current updates of HFHS illustrates that it is increasing efficiently in the direction of overall improvement of HFHS as well as the society. It has closed its Warren Campus hospital on March 31 after $70 million dollar loss in last five years. It has decided to establish a rehabilitation center in the place of Warren hospital because market research indicates the requirement of rehab in that area (Henry Ford Macomb, January 17, 2012). HFHS will open its 32nd outpatient medical center in Bloomfield hills for the convenience of its customers residing in Bloomfield. A substantial growth of this medical center in next five years is forecasted by HFHS (Greene, February 06, 2012). HFHS has signed a merger agreement with Detroit Institute of Ophthalmology (DIO) for enhancing research education in the field of Ophthalmology by expanding DIO support services for visually impaired and blind (PRNewswire, June 18, 2012). Therefore, considerable growth in market share is expected from

HENRY FORD HEALTH SYSTEM HFHS by following Demings principle of constancy of purpose for profitability and sustainability. Demings sixth principle, Institute training on job, emphasizes on increasing skills of employees required for the occupation and not their knowledge or education. Training is an

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ongoing process that is required for the employees to learn skills for operating modern tools and techniques. While training employees, leader must take into consideration various aspects of teaching so that employees can easily learn and remember without extra efforts. Finance is a major barrier for companies to institute training (Neave, 1990) but for HFHS, lack of proper training resulted in violation of disability act, fine of $70,000, and requirement of mandatory training for employees. Gamble (February 06, 2012) reported that HFHS has settled a complaint with department of Justice for the allegation that it failed to provide sign language interpreters to a deaf patient and his deaf family. It has violated Disability Act and therefore, it will have to compensate this violation by paying $70,000 to the family who issued this complaint; and by training the hospital staff on the requirement of ADA, adopt specific policies and procedure to ensure assistance to deaf and hard-of-hearing patients, appoint a corporate ADA administrator and ADA facilitators at each hospital of HFHS. Research shows that there is significant increase in employee turnover rates. Hospitals, retail services and homecare services experience highest turnover in 2010. The Henry Ford Medical Group (HFMG) physician engagement is 30-40% for overall satisfaction and that for quality and care is 50%. It has increased constantly since 2004 but yet it is not satisfactory (HFHS, 2011). High employee turnover and less employee engagement are two big challenges for HFHS to incorporate training session. HFHS has to take some critical measures to reduce

HENRY FORD HEALTH SYSTEM employee turnover, increase employee engagement especially of physicians, and to institute proper training for communication skills and auxiliary services. Demings eighth point, Drive out fear, describes about encouraging two-way

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communication to enhance open communication between leaders and employees. It is important to create an open and fearless environment in order to receive comments and compliments from employees and their ideas for improvement (Neave, 1990). In HFHS, two-way communication is encouraged but employees seem to be still not open in their meetings with leaders. Open culture is required to receive innovative ideas from the employees because they understand their customers better than leaders. Employees ideas should be encouraged and appreciated. For improvement in this area, HFHS has started communication training for leaders (HFHS, 2011). This will boost up their communication skills with their employees and in return will boost the morale of employees to give their comments. Anonymous surveys also can be a good option for encouraging employees to give their honest feedback and improvement on ideas. Conclusion Henry Ford Health System is performing excellent in the field of healthcare and it will continue to do so for upcoming many years. Its competitive advantages cover, not compromising on quality and introducing innovative technologies for treatment and other purposes. It will have to focus more on the marketing aspects in order to spread awareness about its core competencies and to influence potential customers. Strategic and skillful planning for increasing revenue generation and market share is required to strengthen the empire of HFHS.

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Figure 1 Demings chain reaction model. Note: From An empirical test of Demings chain reaction model, by Wayhan et al., 2010, The Journal of Total Quality Management, 21(7), p. 763.

Figure 2 Uncompensated care provided by HFHS and its competitors. Note: From Henry Ford Health System, by HFHS, 2011, p. 48.

HENRY FORD HEALTH SYSTEM Table 1 HFHS BUs, Revenue and Employees distribution.

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Note: From Henry Ford Health System, by HFHS, 2011, p. i.

Figure 3 Private rooms vs. Non private rooms customer satisfaction. Note: From Henry Ford Health System, by HFHS, 2011, p. 39.

HENRY FORD HEALTH SYSTEM References

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Gamble, M. (2012, February). Henry Ford Health Settles Alleged Violation of Americans With Disabilities Act. Retrieved from http://www.beckershospitalreview.com/legal-regulatoryissues/henry-ford-health-settles-alleged-violation-of-americans-with-disabilities-act.html

Greene, J. (2011). Henry Ford Health System wins Eisenberg patient safety, quality award. Retrieved from http://www.henryford.com/body.cfm?id=46335&action=detail&ref=1564 Greene, J. (2012, February). Bloomfield Hills will be home of Henry Ford Health's 32nd outpatient medical center. Retrieved from http://www.crainsdetroit.com/article/20120203/ FREE/120209965/bloomfield-hills-willbe-home-of-henry-ford-healths-32nd-outpatient Greene, J. (n.d.). 5 Michigan companies awarded $26.2 million under health care reform act Henry Ford Health System and Detroit Institute of Ophthalmology sign merger agreement. (2012, June). Retrieved from http://www.prnewswire.com/news-releases/henry-fordhealth-system-and-detroit-institute-of-ophthalmology-sign-merger-agreement159405315.html Henry Ford Health System. (2011). Henry Ford Health System Award Application Summary. Retrieved from http://www.baldrige.nist.gov/PDF_files/2011_Henry_Ford_Health_System_ Award _Application_Summary.pdf Henry Ford Health System. (n.d.). Retrieved from http://www.nist.gov/baldrige/award_ recipients/ford_profile.cfm

HENRY FORD HEALTH SYSTEM Henry Ford Innovations. (2012, March). Retrieved from http://www.henryford.com/body_nologin.cfm?id=39485

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Henry Ford Macomb Hospital In Warren To Close. (2012, January). Retrieved from http://detroit.cbslocal.com/2012/01/17/henry-ford-macomb-hospital-in-warren-to-close/

Herman, B. (2012, April). Henry Ford Health System Net Income Drops 64%. Retrieved from http://www.beckershospitalreview.com/racs-/-icd-9-/-icd-10/henry-ford-health-systemnet-income-drops-64.html

James M. Connelly each challenge is an opportunity. (2012). hfm (Healthcare Financial Management), 66(5), 36-39. Retrieved from Business Source Complete database (75120720). Miller, R. (2011). Creative problem solving: Henry Ford Health System looks to students for innovation. Retrieved from http://www.michiganradio.org/post/creative-problem-solvinghenry-ford-health-system-looks-students-innovation Neave, H., (1990). Deming88 Part 1: win-win, joy in work and innovation. Total Quality Management, 1(1), 33-48. Neave, H., (1990). Deming88 Part 2: The 14 points revisited. Total Quality Management, 1(2), 169-182. Neave, H., (1990). Deming88 Part 3: The 14 points revisited. Total Quality Management, 1(3), 293-308. Retrieved from http://www.crainsdetroit.com/article/20120615/FREE/120619936/5-michigancompanies-awarded-26-2-million-under-health-care-reform

HENRY FORD HEALTH SYSTEM Wayhan, V., Khumawala, B., & Balderson, E. (2010). An empirical test of Demings chain reaction model. Total Quality Management, 21(7), 761-777. doi: 10.1080/14783363.2010.483107

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Words of Quality Archive. (2010). Retrieved from www.henryford.com/body.cfm?id=54222