Operational Excellence Through Focused Lean Six Sigma

1. Process Improvement Process Design Process Management Operational Excellence Through Focused Lean Six Sigma

2. Rich Rozgay’s Rider 2009 • 1 Smoke machine • 3 Dozen white doves • 1 Gold sequined jumpsuit (“Rozgay” on the back) • 1 Disco ball • 6 Back-up dancers • 1 Bowl of M&Ms (all green M&Ms must be removed) • 1 Case of Red Bull • 2 Monkeys dressed as Harry Potter

3. Agenda? • BCBSNE Current State • Six Sigma DMAIC Vs Lean • Lean Methodology • Lean Exercise • Questions

4. Where Are We? • Our processes are sometimes inconsistent and / or inefficient = too much manual work! • Our organization is under stress • Competition (lonely at the top) • Resources Constraints • Assoc. Mandates and CoreLink Constraints • We all have the formal or informal responsibility to improve our processes “Better, Faster, Cheaper, NOW!”

5. Where Are We Going? • Only though efficiencies will we be able to remain on the top especially with Healthcare Reform • Streamlined processes will improve our flexibility for customers, lower resource requirements and improve morale • We work in a target-rich environment

6. How Are We Going to Get There? • Six Sigma • Six Sigma reduces variation in processes • Requires high level of expertise and reliable data • Very effective methodology in certain situations • Focused Lean Six Sigma • Hybrid approach designed to provide the best of both worlds • Great for cost take out and elimination of steps • Less focus on data / analysis • Does it work? The debates rage on! • Problem Solving Process • Quick way to solve a specific issue or problem

7. If you can't describe what you are doing as a process, you don't know what you're doing. --W. Edwards Deming

8. Core of Engineering Process Example Total Cycle Time = 152 - 383 days Total Touch Time = 105 - 132 Hrs

9. All Process Activities Can Be Classified into Three Categories: • Customer Value Add (VA) • Any activity in a process that is essential to deliver a service to the customer • Business Value Add (BVA) • Activities that are required by the business but add no real value from a customer standpoint • Non-Value Add (NVA) • Everything else!

10. VSA Category Definitions • Business Value Add • (BVA) • Activities that allow greater • effectiveness or efficiency in a process • Activities that are required by the business but add no real value from a customer • standpoint • Questions: • Does it reduce financial risk? • Does it support financial reporting requirements? • Would the process break down if this task were removed? • Is it required by law or regulation? • Business Value Add tasks should be questioned and, where possible, minimized or eliminated • Non-Value Add (NVA) • Activities that are not value add or Business Value Add • Activities which are not required to meet or exceed customer needs and are not required by the business • Non-Value Add activities add waste to the process • Non-Value Add (NVA) tasks typically include: • Transportation • Inventory • Motion • Waiting • Over processing • Overproduction • Defects • Non-Value Add activities should be eliminated • Customer Value Add (VA) • Any step in a process that is essential to deliver a service to the customer • Must be performed to meet customer needs • Adds form or feature to the service • Enhances service quality, enables on time or more competitive delivery, or has a positive impact on price competition • Those tasks which the customer would be willing to pay for if he/she knew you were doing it (i.e., has value to the customer) • Tasks should be optimized

11. Non-Value Add Business Value Add VA Process Cycle Time • Process Cycle Time (PCT) is the total time to complete an activity or process. - e.g., receive claim, enter, process and then & pay the claim Typically the largest contributor to process cycle time is non-value add activities, while the smallest contributor is Customer Value Add activities

12. Lean Eliminates Waste • 1. Waste of Overproduction • 2. Waste of Time (Idle) • 3. Waste in Transportation • 4. Waste of Processing • 5. Waste of Inventory • 6. Waste of Movement • 7. Waste of Making Defective Products 1. Preparing unneeded reports, reports not read/acted on, multiple copies in storage 2. Batch processing (e.g. monthly closings, weekly billing, monthly collection reports etc.) 3. Unneeded delivery steps, travel distance of materials 4. Too fast; excessive sign-offs or approvals 5. Materials waiting to be processed 6. Duplicated data entry, extra steps in the process 7. Incorrect data entry; making mistakes or errors, rework, loops in the process 8. People Waste – Ignoring their ideas or input !!!!

13. How Do We Get There? Fix What’s Broken Little’s (John) Law 20% of the steps = 80% of the problem Be Mindful of Counter intuitive fixes! • We train people and ignore process • We improve focus on VA steps when the real problem is NVA steps

14. Value Stream Analysis (VSA) / Lean Deliverables • Current Process Map - Where are we now - Analyze and identify issues and new ideas • Future Process Map - Where are we going and how will it look • Action Plan to Achieve the Future - How are we going to get there • Implementation Guidance - Procedures which are the future rules drafted by those who will have to use them

15. Lean Mapping Basics • Mapping is about the process, not the software • One should not have to learn a new language to read a process map • Keep everything serial for your process. If you think there is a parallel event occurring, think harder • Design for success - the points of failure will become obvious

16. Lean – Before and After Example Before – 27 Serial Steps After- 5 Serial Steps

17. Value Stream Analysis Results

18. Lean – Value Analysis Value Stream Analysis Template

19. What to look for during process design • Where do errors occur (errors cause defects) • Where do rework or redo loop steps often appear? • Wait time between steps or lost time in the process / dead zones • Unused outputs or pointless work • Redundant / duplicate activities • Inefficient movement of work between process steps • Inspections where a Poka-Yoke (automated mistake proofing) would work better • Bottlenecks in the process • Excessive hand-offs in the process • Excessive approvals built into the process • Steps marked as “rush”

20. What to look for - continued • Processes that are experiencing excessive OT • Lack of or too much required documentation • Is the fix or a solution planned in an upcoming system change? • Are there policies that need to be enforced? • Do we need new policies? • Is there a vendor who could perform these steps for us? • Do new features or functionalities need to be added?

21. Human Errors / Issues to Watch For • Errors due to a misunderstanding of the process • Errors due to inability to identify something correctly • Errors made by untrained personnel • Errors due to someone ignoring the process • Errors due to lack of standards or procedures

22. Lean Questions to Remove Waste • Can the step be eliminated? • Can the step be combined with another step? • Can the step be reduced in some way? • Can we eliminate inspections within the step? • Can we eliminate approvals within the step? • Should we slow down the step? • Can we use fewer resources to complete the step? • Can we reduce wait time within the step? • Can we ID an error in an automated way in the step? • Can we reduce the number of errors we make? • Can we reduce hand-offs within the step?

23. Value Stream Analysis (VSA) Requirements • Project • Defines the process to improve • Tied to Strategic Plan (High Performance Organization) • Lean Facilitator • Facilitation skills essential • Management Support • Process Owner is the person who can approve / sign-off on changes • This person MUST be on board • Charter • Defines requirements, scope, expectations BEFORE you start • Team • Every step of the process must be covered • Customers or stakeholders should participate or be consulted • This is where you achieve buy-in

24. Our Lean Process Tool Box

25. Contact Information Rich Rozgay, MBB BCBSNE 7261 Mercy Road, South 3 Omaha, NE 68180 Work = 402.390.1861 richard.rozgay@bcbsne.com

26. Lean Exercise • Have fun with it! • Get creative! • Understand the concept!