Where Precision Is Life or Death

A year ago, it took Wellmark Inc. 65 days or more to add a new doctor to its Blue Cross & Blue Shield Assn. medical plans. Today, despite working with a reduced staff, the Des Moines managed-care company gets the job done in 30 days at most. The staff cuts, meanwhile, have helped the company shave administrative expenses by $3 million per year, enabling it to keep a lid on premiums.

Wellmark's secret? Six Sigma, the factory-floor methodology spreading quickly through the service sector. The analytical tool helped Wellmark's employees discover that doctors' applications often got stuck as processors double-checked one another's work, instead of sending the forms along for a final O.K. All told, they concluded, half the process was redundant. Now those unnecessary steps are gone. "We wouldn't have been successful if it had been business as usual," observes John D. Forsyth, Wellmark's chairman and CEO.

Together with the likes of GE Capital and American Express Co., Wellmark is one of a new breed of service companies turning to Six Sigma to debug backroom operations. And nowhere does the process show more promise than in the bloated health-care sector. After years of double-digit price hikes, the industry is under enormous pressure to curtail costs. At the same time, doctors and hospitals are on a quality kick after a series of studies highlighted how medical personnel may be injuring or killing hundreds of thousands of patients annually by giving them the wrong medications.

Froedtert Hospital in Milwaukee is in the vanguard. Two years ago, it put its first two employees through training. Along with two other so-called black belts, they've so far completed a dozen projects. Today, their boss, COO Cathy Buck, effectively doubles as a Six Sigma consultant. She rattles off success stories, like how the 655-bed hospital has had only one incident of a patient being wrongly medicated since standardizing its intravenous-drug practices. Or how it slashed turnaround on intensive-care-unit lab results to 23 minutes, from 52. Based on such results, Buck eagerly advises other health-care managers to start Six Sigma programs. It's turning out to be a smart prescription for the services sector as a whole.

By Michael Arndt

    Before it's here, it's on the Bloomberg Terminal.