Learning From Chrysler’s Efforts

By Jeremy Smerd

Feb. 27, 2009

A decade ago, Chrysler decided it would send process- and quality-improvement specialists into hospitals and doctor’s offices in hopes that helping hospitals reduce costs would benefit the automaker as well. The project came from the company’s former senior vice president for HR, who had had a personal run-in with bad medicine.

    The company brought in four process-improve­ment specialists to go into various hospitals that Chrysler contracted with nationwide. Roger Valen­tine was among the specialists assigned to the project. (He is not related to GM engineer Michelle Valentine, who is featured in related stories in this report.)

    “The first thing we noticed is, there is no standardized practice,” Valentine says. “It just blew us away. Doctors talk a lot about it but they don’t do it.”

    Dave Lalain, a former engineer at PPG Industries who is director of life sciences at the Automotive Industry Action Group, a nonprofit formed by the Detroit Three to improve business practices within the automotive industry and its supply chain, says it brings to mind a popular saying in health care: “If you’ve seen one medical practice, you’ve seen one medical practice.”

    Chrysler also noticed that its costs varied wildly among locations. Though workers in Detroit were older, and New York is known for its pricey health care, the company’s costs were higher at sites in Indianapolis and Kenosha, Wisconsin. The automaker concluded that variation in care led to higher costs that were passed on to the company.

    “Every time a hospital had a cost overrun, they’d jack up their rates,” Valentine says. “You can’t do that in other businesses.”

    Developing a set of best practices, the group was able to save its hospitals millions of dollars. But the savings, for various reasons, never made it back to Chrysler. Some hospitals cooperated only to appease Chrysler, not because they believed in the process, Valentine says. After several management changes, Chrysler pulled the plug on the effort.

    Last year, Valentine was approached by the Automotive Industry Action Group to work in a local doctor’s practice. Chrysler, running low on cash and facing a rapidly deteriorating economy, denied his request. When the company took him off his last in-house health care project, it gave him the option of being reassigned to HR. Valentine took a buyout instead.

    He wanted to parlay his 24 years in the auto industry into what he believes could be the job of the future for professionals like him. In November, Kaiser Permanente health system hired Valentine and nine other people, including another automotive industry veteran, skilled in cost- and quality-improvement techniques to work with doctors and hospitals.

    “The health care industry needs some outside eyes,” he says. “We in health care are where the auto industry was 20 years ago.”

Workforce Management, February 16, 2009, p. 26Subscribe Now!

Jeremy Smerd writes for Crain’s New York Business, a sister publication of Workforce Management.

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