1. This Presentation Will Address
Cost of Poor Quality • History of Quality Costs
in the Medical Laboratory • Definitions
• Quality Cost Scales in the Medical Laboratory
• Poor Quality Examples from the Medical
Michael A Noble MD FRCPC Laboratory
Professor – Department of Pathology and Laboratory Medine
• Summary and Conclusion.
Chair – UBC Program Office for Laboratory Quality Management
LifeLabs BC – Medical Microbiology and Medical Director for Quality
2
Six Decades of Useful References
History of Cost of Poor Quality
Many Authors Many Titles
• Joseph Juran • COQ
• Phillip Crosby Cost of Quality
• James Harrington
• Jack Campanella • PQC
Poor Quality Costs
• Douglas C. Wood
• CPQ
Cost of Poor Quality
3 4
Total Quality Costs Definitions of Quality Costs
The Juran Model
• The sum of all costs for all activities associated • Prevention Costs:
Costs for activities designed to prevent poor quality in
with ensuring an accurate and timely product products or services.
or service: • Appraisal Costs:
Costs for activities associated with measuring, evaluating, or
– Prevention Costs auditing to assure conformance to quality standards.
– Appraisal Costs • Failure Costs:
Internal – costs associated with detection of error before
– Costs associated with Internal Failure product or service reaches the customer.
– Costs associated with External Failure External – costs associated with detection of error after
the product or service reaches the customer.
5 6

2. Quality Costs Quality Costs
PREVENTION IND LAB APPRAISAL IND LAB INTERNAL FAIL IND LAB EXTERNAL FAIL IND LAB
Product Needs Team Quality Control-receipt Scrap Customer complaint
Product Review Quality Control – in use Rework Customer Returns
Supplier Review Calibration Re-inspection Warranty Claims
Product Evaluation Process audits Retesting Product Recalls
Quality Awareness In-process inspection Corrective Actions Corrective Actions
Supplies , materials Final inspection Downgrading Remedial Notification
Confirmation retest Proficiency Testing Near miss time loss Remedial Testing
LIABILITY COSTS
7 8
Juran: Crosby:
The Quality Economic Model the cost of nonconformance
Percent conformance and Costs
“Take everything that would not have to be
done if everything were done right the first
time and count that as the price of
nonconformance.”
Quality Without Tears:
The Art of Hassle-free Management
1984
9 10
Crosby and the four absolutes Cost Ratios
The Measurement of Quality is the price of
nonconformance.
– Cost of quality has two components – cost of conformance
and the cost of nonconformance, where the cost of
nonconformance is the sum of all expenses in doing things
wrong.
– Cost of nonconformance can be 10X cost of conformance.
– Identifying cost of conformance is easy.
3-4% of operating cost.
11 12

3. Costs of Quality Comparative Analysis Quality Costs
Prevention is ALWAYS cheaper and Organization size
N=63
S. Rodchua
Jack Campanella ASQ, Quality Management Jour
Principles of Quality Cost V16-1, 2009
3rd Edition -1999 - ASQ
13 14
Cost of Poor Quality Cost of Poor Quality
• More than what meets the eye!
Scrap Scrap
Rework Rework
Warranty Warranty
Investigation and report
Management time
Shop floor time
Re-engineering time
Increased inventory
Decreased capacity
Delivery delays
Lost orders
Litigation
From
Jack Campanella
Principles of Quality Cost
15 3rd Edition -1999 - ASQ
16
Different Folks cause Different Costs Different Folks cause Different Costs
White Collar Error Costs
• Meetings that start late.
• Prolonged meetings.
• Computer down-time.
• Recording errors.
• Communication errors.
• Delayed sign-offs.
• Supply chain errors.
• In-house training.
• Dismissals for poor performance.
• Non-business phone calls.
• Phillip Crosby • Phillip Crosby • Missed commitments.
• H. J. Harrington
17 18

4. Management’s View
Yesterday and Today
Cost of Poor Quality Make Money
is NOT an Money
Reduce Costs
Image/Media
Money Regulations
Accounting Tool Money
Money
Customer Base
Staff Management
Money Be Green
Douglas Wood
ASQ 1984 2009
19 20
Why Industry and Medical Laboratory Dimensions of Poor Quality
CPQ are different in the Medical Laboratory
more than just money!
• Money
Industry Medical Laboratory
• Time
1. Largely Private sector 1. Largely Public sector
2. Customer choice 2. Customers less choice
• Patient time and
3. Life choices
inconvenience
3. Life saving
4. Warranty • Productivity
4. Liability
5. Money common 5. Money and Time are
• Turn around Time
denominator • Reputation
separable issues.
• Liability
21 22
Dimensions of Poor Quality in the
Medical Laboratory
When is “time” not “time”
In the Medical Laboratory, time and money • Time
are not the same.
– When it can’t be used widely.
Lab Staff Clinical
– When it can’t be equated to Time Time
• Different professional groups within the laboratory do money
different things, and are paid on different scales, but all their
tasks are essential to laboratory operation.
• Clinicians are integral to the laboratory, but are not part of
the financial structure.
• Patients are integral to the laboratory, but are not part of the Patient Lab
financial structure. Time Med/Sci
Time
23 24

5. Time Sharing only within
Impacts of Time Wasting
its own Group
Techno- Techno-
logist Patient logist Patient
Assistants Family Assistants Family
Plebotomists Friends Plebotomists Friends
Delays
Turnaround Reputation
Costs Inconvenience
New hires Liability
Medical Clinician Medical Clinician
Locum Locum
Scientific Partner Scientific Reputation Partner
Staff New hires Reputation Staff
Business
Profit
25 26
In the blink of an eye CPQ and the Laboratory Cycle
A few
non-retrievable seconds slip
by and translate into minutes, Pre-Pre Patient
hours, days of consumed Examination Post-Post
Test Ordering Examination
consequence. Result Interpretation
Pre-Exam
Collection
Pre-Exam Sample Examination Post-Examination
Transport Report
27 28
Proposed revisit to CPQ
for the medical laboratory
CPQ and the laboratory (1)
• Money A physician called to have patient information changed. Report
Prevention + Appraisal + Failure supplies
indicates mother was tested, but he was sure it was the child.
Investigation indicates (a) requisition made out for mother, (b)
• Staff time person tested was mother, (c ) report made out for mother.
Investigation, Remediation, Correction
• Clinician time – Direct Cost impact – trivial
Notification, rework, re-interpretation –Staff time - Review and remediation ( 9 hours)
• Patient time –Clinician time – brief
Revisit, remediation, risk, liability –Patient time – 2 hours
–Patient risk – incalculable
–Reputation Damage and Liability Risk - incalculable
29 30

6. CPQ and the Laboratory (2) CPQ and the laboratory (3)
Blood samples are drawn for multiple tests on the same analyzer, but Improperly collected Blood Culture volumes (either too low or too great)
an insufficient volume of blood is collected. result in false negative cultures – 10%. Time to collect properly 2
Usually these are “near-misses” because a laboratory worker runs minutes. Time to collect improperly 2 minutes.
around and finds more blood from the patient drawn into a different
tube. Retrieves sample and increases tube volume. Time to draw
sample correctly: 30 seconds, Time to draw sample with reduced •Direct Costs – Nil
volume: 30 seconds. •Staff time – Trivial
•Clinician Time – Nil
–Direct Costs – Trivial
•Patient Time – Nil
–Staff time – 3-4 hours per day.
•Potential impact on reputation, liability, risk - substantial
–Clinician time – nil
–Patient time - nil
31 32
CPQ and the Laboratory (4) CPQ and the laboratory (5)
The patient goes to an laboratory for an ECG, but the ECG is performed A laboratory is made aware by physician complaint of
incorrectly. possible cross contamination of 100 tuberculosis samples
Time to record ECG correctly – 10-15 minutes. Time to record ECG within the laboratory testing process.
incorrectly – 10 -15 minutes. One laboratory reports 3-5 per week.
Direct costs: $20 per test
Staff time: Review and Analysis 70 hours
•Direct Costs – Trivial Contact 40 hours
•Staff Time – review, contact, recall, retest – 1 hour Rework 20 hours
Corrective Actions 40 hours
•Clinical time – 1-2 hours Additional Monitoring 7 hours each week
•Patient time – 3 hours Clinician time Patient recall and retests 100 hours
•Reputation, Liability, Risk - substantial Patient time Retest 100 hours
Reputation, Liability, and Risk: incalculable
33 34
CPQ and the laboratory (6) CPQ and the laboratory (7)
A large community laboratory changed its method for measuring vitamin Improperly tested and interpreted breast tumor markers result in
D in order to save both time and money, but did not adjust its reference false positive and negative information. Time to test and interpret
range to accommodate the new methodology. As a consequence, a properly 2 minutes, Time to test and interpret incorrectly 2 minutes.
massive recall (one million tests) of patients and retests was required.
– Direct Costs $100 per test
– Direct costs: $3,000,000 – Staff time Review – 6 months
– Staff time : New reference range – 5 days
Remediation – 16 weeks
Time to recall patients - 60 days
– Clinician time hours per patient
Time to retest patients - 120 days
– Patient time 2-4 hours each
– Clinician time 1-2 days for each clinician
– Patient time 1-3 hours for each patient
– Reputation, Liability, Risk $7,000,0000 plus
– Reputation, Liability, Risk: incalculable.
35 36

7. Medical Laboratory Losses Cost of Poor Quality
Observations multi-scale
1. Laboratory Errors result in time loss and costs throughout the
laboratory testing cycle.
2. Laboratory Losses and costs involve all profession groups and
all reasons.
3. Poor Quality Impacts are often felt downstream from the error
and,
4. Poor Quality Impacts are usually borne by people who did not
directly cause the problem.
5. Creating loss take trivial time compared to investigation,
remediation, and correction.
6. Inconvenience, Reputational damage, Liability, and Risk are
common consequences
37 38
Costs of Poor Quality
Impact of Error on CPQ Scales Spidergrams
Ideal Near Miss
Patient Recall Complex
39 40
How to monitor About monitoring for
medical laboratory CPQ medical laboratory CPQ
• Index
– Near-miss time
– Sample repeat times
– Patient complaints • It is probably unreasonable and inappropriate
– Physician complaints to try to capture all costs at all times.
– Opportunity For Improvement reports
– Critical events reports • A sequence of point-in-time calculations can
• Process equally monitor trends.
– Investigate, capture time and finances losses
– Compile
– Internal targets until benchmarks become available.
– Management Review leading to Action Plan.
41 42

8. Why Medical Laboratory Why Medical Laboratory
Errors Happen Errors Happen
Process
Process Failure Distraction-Inattention
Distraction-Inattention Training – Compliance – Competency
Training – Compliance – Competency Equipment Failure
Equipment Failure Knowledge - Interpretation All errors cost
Knowledge - Interpretation
But, some errors cost
more than others,
and some a lot more!
43 44
Why Medical Laboratory
Errors Happen
Recovering Poor Quality Costs
Process
Distraction-Inattention
• Be aware
Training – Compliance – Competency • Have an active OFI or continuous
Equipment Failure improvement program
Knowledge - Interpretation All errors cost • Develop and Measure a CPQ process
But, some errors cost
• Record
more than others, • Monitor
Money • Remediate and Correct
Time and some a lot more!
Inconvenience
Reputation
Risk 45 46
Costs of Poor Quality Conclusion…
Regardless of one-scale or multi-scale
It is still easier, faster, and cheaper
to prevent errors
than to have to
find them and fix them.
47 48

9. Poor Quality Costs
Techno-
logist
Patient More Than Money
Assistants Family
Plebotomists Friends
Medical
Scientific
Clinician
Locum
Partner
Staff
49 50