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Implementation of total quality management in the managed care industry

Seyed-Mahmoud Aghazadeh
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Case study
Implementation of total
quality management in
the managed care
industry
Seyed-Mahmoud Aghazadeh
The author
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Seyed-Mahmoud Aghazadeh is Full Professor in the
Department of Business Administration, State University
of New York at Fredonia, Fredonia, New York, USA.
Keywords
TQM, Implementation
Abstract
This paper presents an evaluation and discussion of total
quality management (TQM), focusing on its origin,
measure, and implementation into a specific industry
(managed care). It will further show the significance of
the nursing profession when looking how to successfully
join the two concepts together. The results of this paper
will effectively demonstrate that the implementation of
TQM into managed care reveals a higher level of quality
and customer satisfaction.
Electronic access
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The current issue and full text archive of this journal is
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http://www.emeraldinsight.com/0954-478X.htm
The TQM Magazine
Volume 14 . Number 2 . 2002 . pp. 79±91
# MCB UP Limited . ISSN 0954-478X
DOI 10.1108/09544780210416694
79
Introduction
Total quality management (TQM) addresses
the issues of customer satisfaction and
guidance on implementing the marketing
concept. The 1980s brought about a business
process of continuous improvement to satisfy
customers' needs (Churchill et al., 1994).
Through an external focus on customer
satisfaction and an internal focus on
operational excellence TQM has promised
superior performance. TQM also offers
managers a host of supporting tools and
organizational prescription (Churchill et al.,
1994).
The ``total quality'' concept is a general
philosophy of management which goes well
beyond the marketing customer-perceived
view of quality by including all key
requirements that contribute not only to
customer-perceived quality, but also customer
satisfaction (Buzzell and Gale Bradely, 1987;
Garvin, 1988; Zeithaml et al., 1990; Price and
Chen, 1993). This concept broadens our
previous notion of quality in that it provides
complete customer satisfaction on a full range
of product and service needs (Price and Chen,
1993).
The early 1990s brought about recognition
of this total quality concept from various
management scholars. Numerous studies have
been conducted and a range of books has been
devoted entirely to total quality, focusing
exclusively on product and service quality
management.
The purpose of this paper is to formulate a
working definition of TQM and possible ways
of implementation in an industry, specifically
managed care.
History of total quality management
TQM is a process that has been thoroughly
researched by many quality gurus. Each expert
has devised his or her own action plan for
success. The companies of today have begun
implementing the concepts established by the
quality gurus. They have found that this
concept has made them more able to provide
quality goods and services to capture loyal
customers.
W. Edwards Deming
Deming, the father of TQM, has been
recognized for his contributions to the
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
rebuilding of the Japanese economy after the
Second World War. By applying statistical
sampling techniques he looked to achieve
higher quality and productivity in
manufacturing and management. Deming
focused mainly on competition through
continuous improvement and elimination of
waste, therefore producing higher quality
products at a lower cost (Morehouse and
Capezio, 1993). When he changed his focus to
north America, Deming encountered an
industry faced with a number of different
problems (Flood, 1993):
. a general lack of constancy and purpose;
. too much emphasis on short-term profit;
. a lack of or unsuitable evaluation of
performance, merit-rating, or annual
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review;
. management is too mobile; and
. management decision-making too readily
relies on quantitative data without paying
due consideration to less tangible or
hidden factors.
Deming was able to draw up 14 points which he
felt would resolve the above stated problems he
saw plaguing north American industry:
(1) create consistency of purpose;
(2) lead to promote change;
(3) build quality into the product; stop
depending on inspections to catch
problems;
(4) build long-term relationships based on
performance instead of awarding
business on the basis of price;
(5) continuously improve product, quality,
and service;
(6) start training;
(7) emphasize leadership;
(8) drive out fear;
(9) break down barriers between
departments;
(10) stop haranguing workers;
(11) support, help, and improve;
(12) remove barriers to pride in work;
(13) institute a vigorous program of education
and self-improvement; and
(14) put everybody in the company to work on
the transformation.
These 14 principles are aimed at creating an
organizational environment in which statistical
methods will be effective. Deming was able to
modify his methods of success when moving
from the Japanese society to north American
society. He has noted that management must
come before technology, and that leadership
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Volume 14 . Number 2 . 2002 . 79±91
and motivation of a company's employees are
important. This systematic functional logic has
provided us an insightful way of reasoning
about organizations.
Joseph Juran
Juran has helped build the conceptual basis for
quality management. He has stressed not only
the management of, but also the technical
aspects of, quality management. Juran believes
quality starts with knowing who the customers
are and what the customers need. With this
mindset he has developed three basic
processes:
(1) quality control;
(2) quality improvement; and
(3) managerial and technical breakthroughs.
While Deming places emphasis on statistical
aspects of quality management, Juran focuses
on quality planning, establishment of formal
quality policy, quality audits, and the systems
approach to managing quality throughout the
organization. He stressed the importance of
quality at each step in the product development
cycle (Juran, 1967; Juran and Gryna, 1970).
Philip Crosby
Crosby, like Deming and Juran, has been one
of the leaders in the quality movement. Again,
in contrast to Deming, he focuses on the
cultural and behavioral aspects of the quality
management process rather than statistical
tools. Crosby created the zero defect
movement focusing on prevention and the
theory that:
. . . it must be cheaper to do things right the first
time (Flood, 1993; Journal of the Decision Sciences
Institute, 1989).
Deming, Juran and Crosby are the three most
recognized pioneers in the quality movement.
Companies must accept the customer driven
concepts of TQM by utilizing resources to
deliver the highest quality product at the lowest
cost.
Measures of total quality management
In order to assess major business processes
such as financial indicators, product and
process quality and quality improvements,
several methods can be used. These are the
Malcolm Baldrige national quality
award, quality recognition scale, and
self-classification.
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
Malcolm Baldrige national quality award
(MBNQA)
The MBNQA is made annually to recognize US
companies that excel in quality management and
quality achievement (US Department of
Commerce, 1993).
Established by an act of Congress in 1987, this
award promotes quality awareness, recognizes
quality achievements of US companies and
publicizes successful quality strategies
(Morehouse and Capezio, 1993). Those
applying must provide information and data on
their quality processes and improvements that
could be duplicated and adapted by other
companies.
Quality recognition scale (QRS)
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In consumer behavior research used for
assigning opinion leaders and followers to
groups, there has been one well-known opinion
leadership scale from which QRS has evolved
from (King and Summers, 1970). A study on
the classic opinion leadership states that:
. . . common observations and many community
studies show that in every area for every public
issue there are certain people who are most
concerned about the issue as well as most
articulate about it. We call them ``opinion leaders''
(Lazarsfeld et al., 1944).
Those firms that are recognized in the press as
quality achievers are more ``quality oriented''
than those firms that are not recognized.
Test scores can range from one to 15.
Organizations which score high (14-15) are
classified as quality-advancers. Their high
score suggests high recognition for quality
improvement efforts and opinion leadership.
Organizations with low scores (less than or
equal to seven) are characterized as
quality-starters, suggesting low recognition for
quality improvement efforts (King and
Summers, 1970).
Self-classification
Those assigned to this third category have
admitted in interviews that they had either not
begun quality improvement efforts or had just
started. Those organizations that have been
evaluated through this means are also classified
as quality-starters.
Each strategy has its own advantages. The
MBNQA drives an organization to higher
quality, QRS classifies organizations, and
self-classification allows an organization to
characterize itself. The importance of these
measurements and/or reward systems has
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The TQM Magazine
Volume 14 . Number 2 . 2002 . 79±91
proven to be vital while aiming for total
quality.
Factors that facilitate the
implementation of total quality
management
The theories developed by Deming, Juran,
and Crosby show that there are somewhat
different ideas of how total quality
management should be implemented into an
organization. The processes which each guru
used while identifying factors of TQM were
different in each case. However, there are
some similarities and overlapping ideals which
move us towards one systematic approach
including:
. leadership;
. process management;
. human resources; and
. strategic planning.
Leadership
The leadership of each senior executive is
being looked at as one of the most critical
factors in the total quality management
orientation. According to Deming, managers
had to accept the pursuit of quality as a
corporate goal and be active participants in the
company's quality improvement efforts. He
saw quality as:
. . . the [company] president's responsibility
(Deming, 1982).
The commitment and involvement of top
executives is required in the expectations and
reinforcement of values.
``Lip service'' versus active involvement
The commitment of employees is essential to
the success of total quality management and
can only be achieved when consistency is
demonstrated in the action and words of top
managers. A director of quality services once
stated:
It can't be something where the chief executive
officer of the company sends a memorandum that
we subscribe to these policies and we expect
everyone else to. They need to be out there doing
what they are saying. They have to be very much
involved in the quality planning process. You
must have the buy in of employees and that goes to
front line supervision and hourly employees. If
they see mixed wave lengths so to speak during the
course of a month or quarter they are not going to
buy in to what we say, what we are trying to do
(Pfeffer, 1977).
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
Authoritarian versus participative management
According to many top executives, one of the
most important ideas is that the move toward
total quality requires senior managers to
adopt a participative management approach.
Benefits such as trust, openness, receptivity to
ideas, and the adoption of flexible approaches
for satisfying customers, come from that
participative approach. A director of quality
services was quoted as saying:
. . . you have to move to the new style of
management to say ``hey, we're all in this
together, the mind of we is better than the mind
of one, I want you to be totally involved,
immersed in this company, in the decision we
make, in the direction that we go; and that's
the culture I am going to foster; I am not
going to manage you, I'm here to lead you''
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(Pfeffer, 1977).
Participative management is implying a loss of
formal power by executives, as they are
choosing to share it with other employees in
the way of asking for advice and their help in
making decisions. They are essentially
empowering their employees. It is the
responsibility of the managers to make sure
that the employees have the necessary
education and training to become enabled
and empowered so that the managers will
gradually lose some control (Pfeffer, 1977).
Process management
Many companies are using a new approach,
called process management, for pursuing
customer-perceived quality and customer
satisfaction. There are several approaches to
this method including consumer research,
concurrent engineering, experimental design
techniques, computer simulations,
cross-functional teams, and quality function
development.
Deficiency versus proficiency
Using these different approaches it has become
evident that those who have been characterized
as quality-advancers are almost always
proficient in the use of quality management.
Those quality-advancers have been known to
use quality assurance approaches, focus on
process and measurement, emphasize
prevention, stress cross-functional teamwork,
fuse customer requirements in design, use
objective quality assessments, and minimize
introduction time of products and services
(Zeithaml et al., 1990). On the other hand,
quality-starters are those companies that rely
on more traditional approaches such as
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focusing on results, emphasis on inspection,
and the use of subjective quality assessments.
These quality-starters have been noted as
being deficient in process management
(Zeithaml et al., 1990).
Human resources
Job satisfaction is an important factor for
senior managers to consider due to the fact
that the role of employees is essential in total
quality orientation:
We work under the principle that says if your
employees are not satisfied and effectively
motivated and empowered, they are not likely to
be effective in fully satisfying customer
requirements no matter how well you produce the
product because it is the delivery and the manner
in which the orders are taken and the support
services that are key drivers (Garvin, 1988).
In order to reach the highest level of customer
satisfaction you must have a satisfied work
force.
Number versus quality-driven policies
When looking at quality-advancer and
quality-starter organizations, policies for
human resources differ. Quality-advancers
rely on total quality as their key factor of
human resources, while the quality-starters'
policies are geared more toward production
and financial indicators (Zeithaml et al.,
1990). Human resource policies and total
quality become inseparable when a company
attempts to achieve total quality.
Control versus empowerment
Executives view empowerment as an essential
factor of total quality. The ownership,
independence, autonomy and job satisfaction
that comes with empowerment leads to an
increase in the contributions provided by
employees. They feel as if the doors of
communication are open and they are free to
share their ideas without fear of any
authoritative management obstacles
(Zeithaml et al., 1990).
Strategic planning
Strategic planning examines the key quality
requirements that have been integrated into
the firm's overall business planning, along
with its individual planning process (US
Department of Commerce, 1993). The first
step to strategic planning begins with defining
customer stipulations. For an organization to
meet the conditions of customers, they have a
range of short-term (one to two years) and
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
long-term (five years or more) plans that are
continuously reviewed and improved (US
Department of Commerce, 1993).
Strategic planning plays a large role in the
business functions of quality-advancers but a
minor role in quality-starters:
We have one-, two-, and five-year business plans
that are revised every year. We do something a
lot of firms don't do. We don't separate our
quality initiatives from out business incentives.
The quality plan is part of the strategic plan. The
reason is that the two issues go hand in hand
(US Department of Commerce, 1993).
In order to derive a strategic plan that works,
it must be based on meaningful data on those
factors that relate directly to quality. These
factors include customer, product services,
complaints, markets, employees, and so forth.
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Total quality orientation is a process that
contains the four previously discussed factors
of leadership, process management, human
resources, and strategic planning that are
carefully monitored for improvement (see
Table I). Total quality orientation provides
the necessary steps for maintaining a
competitive advantage and also aids in
minimizing the opportunity for a response by
competitors; this is what is necessary for long-
term success of any organization.
Implementing total quality
management
The transition to total quality management
from other organizational methods can be a
complicated process (see Figure 1). With
executives and employees working together
the improvements of quality measure and
customer satisfaction can lead to a more
successful and smoothly run company
(Morehouse and Capezio, 1993). Employees
need to know that their positive contributions
are important to building onto the strengths of
the organization. In order to build trust and
confidence, the interaction between
supervisors and employees is essential and will
lead to employees taking the responsibility for
continuous improvement. Factors of this
positive communication include:
. An atmosphere that facilitates open
discussions that focus on the needs and
concerns of employees.
. A forum for employees to discuss ideas
and make suggestions to improve
work processes.
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The TQM Magazine
Volume 14 . Number 2 . 2002 . 79±91
. An opportunity to recognize individual
and team achievements.
The first step to implementing TQM is to set
up weekly meetings to discuss the best
method of implementation for that
organization. These meetings should be set
up to touch base on how the process is
moving, as well as to discuss issues such as:
. goals and objectives;
. progress reports;
. problem-solving about work issues;
. learning exercises; and
. training analysis (Morehouse and
Capezio, 1993).
Improvements with management and
employees in the areas of leadership, process
management, strategic planning, and human
resources, creates process measures and
monitoring systems which provide anticipated
improvements in customer satisfaction. This
process leads us toward increased total quality
orientation. With senior managers showing
consistency between their actions and words,
employees will show greater commitment to
quality efforts.
Today's changing organizations are using
more sophisticated methods in order to
implement total quality orientation. This
gives employees more responsibility in their
day to day business. An employee who is
motivated and encouraged to participate in
total quality implementation, and receives
tangible or intangible rewards, will be more
willing and driven toward quality
improvements. Research has shown that a
satisfied employee is directly related to a
satisfied customer (Pfeffer, 1977). In today's
organizations, senior managers focus more on
customer satisfaction than on financial
indicators, for a satisfied customer is a loyal
customer (Pfeffer, 1977).
Data from customer surveys are only
applicable when the managerial process and
responsibilities are linked to the design of the
organization as a whole. Further
enhancement of total quality orientation is
derived from a well-developed quality
planning process (Kordupleski et al., 1993).
A review of total quality management
Companies and mangers eager to improve
quality and productivity want the results that
TQM can deliver. To this point, a discussion
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
Table I Total quality orientation
Quality-starters
Leadership Lip-service
Inconsistency
Authoritarian
Control
Lack of trust
Rigidity
Narrow-minded
Non-receptitivity to ideas
Process management Deficiency
Traditional practices
Output oriented
Inspection
Isolated departments
Subjective quality assessments
Introduction time not an issue
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Lack of customer input in design
Human resources Number driven policies
HR policies with no relation to quality
Few people policies
QA training
Training is department driven
Control
Lack of involvement
Dependence
Employees under utilized
Strategic planning Step-child treatment to quality
Quality treated as QA function
Strategic plans are non-prevalent
Strategic plans are production driven
Meaningless data
Quality measures Discontinuous measurement
Progress measured sporadically
Reliance on narrow information
Output driven information
Customer satisfaction measures Weak customer commitments
Customer focus is not ingrained in culture
Unsophisticated methodology
Limited research
No customer indicators
Employees not empowered to handle customer
Inefficient complaint resolution system
Source: Pfeffer (1977)
of the views and critical factors of the three
leading quality gurus, Deming, Juran and
Crosby has been presented. Through their
overlapping positions, the critical factors have
been consolidated into four main objectives ±
TQM focuses on:
(1) leadership;
(2) process management;
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The TQM Magazine
Volume 14 . Number 2 . 2002 . 79±91
Quality-advancers
Active involvement
Consistency
Participative
Empowerment
Trust
Flexibility
Openness
Receptivity to ideas
Proficiency
Sophisticated practices
Process oriented
Prevention
Cross-functional teams
Objective quality assssements
Minimization of introduction time
Customer imput in design
Quality-driven policies
HR policies linked to quality
Many people policies
Varied training
Training is across the board
Empowerment
Total involvement
Automomy (indepencence)
Employees well utilized
Primary treatment to quality
Quality embedded throughout plan
Strategic plans are prevalent
Strategic plans are customer driven
Meaningful data
Continuous measurement
Progress measured regularly
Reliance on broad information
Process and output driven information
Legendary customer commitments
Customer focus is ingrained in culture
Sophisticated methodology
Extensive research
Broad range of customer indicators
Employees empowered to handle customer
Efficient complaint-resolution system
Process of prevention
Minimizing future recurrrence of problems
(3) human resources; and
(4) strategic planning
in order to implement them into today's
organizations. TQM is only now beginning
to take precedence in US companies,
especially in the managed care industry, in
order to achieve a higher quality of
services.
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
Figure 1 TQM implementation model
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History of managed care
A new reality in the USA is managed care.
Numerous complex and important issues that
began in the early 1980s have influenced the
US health care industry. The following issues
have caused the necessary restructuring of all
levels of the health care system (Green, 1976):
. changes in reimbursement patterns;
. the increasing number of uninsured
individuals;
. escalating delivery costs;
. difficulty in the recruitment and retention
of health care professionals; and
. efficiency and productivity issues.
In the past, there has been a strong emphasis
on the need to control cost and restructure
access to health care, but more recently
quality and how quality of care must be
incorporated directly into the service of health
care delivery, has become equally important.
Methods such as vertical integration,
diversification, managed care arrangements,
marketing strategies, political and community
activities, and strategic alliances between
organizations have been used in the past.
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Today, health care executives are focusing on
the implementation of TQM (Green, 1976).
In a nation wide survey of 781 hospitals, 59
per cent responded that they were using a
TQM process, and of the remaining 41 per
cent, 85 per cent plan to begin TQM (Green,
1976). In order to evaluate the effectiveness of
actual patient care the appropriate use of
resources, efficiency of hospital operations, and
the degree to which the expectations of
patients, physicians, payers, and other hospital
customers are satisfied, there are large amounts
of information which must be made available.
Defining managed care/quality
In order for TQM to be implemented
properly into managed care, an
understanding of the following concepts is
necessary.
Managed care
Managed care has been defined by Federa
and Camp (1994) as:
. . . an organized system of care that seeks to
influence the selection and utilization of health
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
services of an enrolled population and ensures
that care is provided in a high-quality,
cost-effective manner.
Others also in the field of managed care, state
that there is more of a focus on a need to
control cost and extend access to health care,
along with ensuring that maximum value has
been received from all resources used.
Managed care must be implemented in a way
that demands and ensures quality.
Quality
As stated above, obtaining and maintaining
quality in health care has become the main
focus. Quality is defined by Donabedian
(1989) as:
. . . that kind of care which is expected to
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maximize an inclusive measure of patient
welfare, after one has taken into account the
balance of expected gains and losses that attend
the process of care in all its parts.
Implementation of TQM is not a guarantee
for the highest quality but is a step in the right
direction. TQM implements a philosophy of
strong leadership participation, increased
communication among departments, and the
education of all employees. The process of
achieving and maintaining quality throughout
the continuum of care is the basis for this
philosophy. The success of health care reform
depends upon the integration and coexistence
of both managed care and TQM.
Integration of concepts into managed
care
In striving to reduce heath care cost and to
maximize appropriate utilization of resources,
managed care organizations must focus on
how best to provide the least expensive care
while maintaining their current level of care.
With today's increasing competitive health
care industry, emphasis on TQM and high
standards must be enforced.
Strategies for improving quality and
reducing cost
In order to maintain the highest level of
competitiveness, managed care has shifted its
strategies of the 1980s to improving quality
and reducing costs by (Ummel, 1991):
. identifying and meeting customer needs;
. reducing the cost of non-compliance with
standards;
. striving for zero defects;
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Volume 14 . Number 2 . 2002 . 79±91
. reducing outcome variability;
. eliminating the cost of poor quality;
. using statistical methods to identify and
monitor processes; and
. continually working for improved quality.
These strategies are used by managed care
organizations in order to provide greater value
and services for the customer.
Implementing TQM in managed care
Numerous studies have been conducted
(Sahney, 1992; Zabada et al., 1997) showing
that there are various methods of
implementing TQM into an organization. For
this to be successful substantial amounts of
research and information must be utilized.
Top management leadership
Taking a strong leadership role and showing a
strong commitment during the
implementation of TQM, by top
management, is of vital importance to the
company. Executives must prove to
employees that TQM is an ongoing process
that the company will continue over the long
term. For it is through the actions of the
employees that TQM can be a successful
method of care for the organization.
Creating a corporate framework for quality
Once a company has established its definition
of quality, it must then incorporate it into its
mission statement, which clearly defines what
it stands for. It is through this process that
TQM is tied into the companys' strategic
plan, hence creating the corporate framework
for quality.
Transformation of corporate culture
The once authoritative style of management
has been changed to a more flexible and
participative method in which employees are
involved in the resolution of quality problems.
Senior managers throughout the organization
must enforce this new style of management.
This type of radical change may take as long
as five to ten years to take full effect.
Customer focus
In order to have successful implementation of
TQM, a customer focus is imperative. The
customer in a managed care situation is the
patient who is seeking a solution as a result of
a problem. Each customer's needs are
different and should be identified. Individual
mechanisms of care must be developed along
with the strategies needed to meet them.
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
Process focus
An organization must place the most
emphasis on the process rather than on those
people involved in the process, therefore
taking blame off the individual employees. In
order to do this a detailed statistical study
must be performed at each stage. In this way,
processes may be improved, reducing the
variation that exists within them.
Collaborative approach to process improvement
Senior management must not only serve on
teams, but also act as a facilitator of them.
Involvement of senior management and
employees in the process improvement will
allow them to formulate an understanding of
their customers' needs.
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Employee education and training
TQM techniques must be taught to
employees, beginning with a comprehensive
overview of TQM and the various techniques
and tools used to recognize and eliminate
problems. Managers should hold a conference
in which guest speakers from other
companies, where TQM has been fully
implemented, come to speak of their own
successes and failures.
Quality measurement and statistical report
Data is abundant at managed care
organizations but the majority is meaningless
information. Organizations of the past have
been unable to transform this data into useful
information due to a lack of integration
between departments. It is the integration of
data, which allows one to establish quality
indicators that are necessary in assessing if
quality improvement is occurring. It is
impossible for the data to be useful if
employees have not received the proper
training in these types of statistical
measurement techniques.
Recognition and reward
Incentives and rewards should be offered to
employees as part of the TQM process. These
can come in the form of monetary rewards,
articles in newsletters and company picnics. It
is these incentives which motivate employees
to perform at a higher level of efficiency.
Integration with process
Each employee should feel that his or her own
activities are important to the outcome of the
TQM process. Not only must a manager keep
the organization progressing in regards to this
process, but they must also develop their own
87
The TQM Magazine
Volume 14 . Number 2 . 2002 . 79±91
plan for quality in their individual
department. Creating training methods and
educational plans are additional key
responsibilities of management. In order to
track all the above, each department must
develop a report which summarizes their
individual quality performance over a period
of time.
Information systems in managed care
The integration of information systems into
managed care organizations focuses on:
. cost control and productivity;
. medical quality assurance;
. clinical research;
. utilization analysis; and
. demand estimation and education.
In order for TQM to be successful, these
systems must be combined with the TQM
environment. Through this, companies are
able to establish quality as part of the
organizational structure thus generating
accountability for long-term quality
achievement (Melum and Sinioris, 1992).
Beginning in the 1950s, information
systems were established as part of the
managed care process. As the level of patient
care has increased throughout the years, so
has the continued dependency upon the
information systems. This has generated the
need for information systems to be
continually updated (see Table II).
Nursing as a liaison between managed
care and TQM
The demand on the practitioner is to judiciously
determine how best to use resources and then do
so at the appropriate level of intensity at the time
service is provided (Porter-O'Grady, 1995).
A pivotal role in linking the goals of managed
care with the goals of quality patient care is
accomplished through nurses as case
managers, nurse practitioners, and nurse
managers/administrators. Nurses hold a key
position in evaluating standards of care and
patient outcomes.
Nurses
Case management focuses on an entire episode
of illness, including all settings in which the
client receives care. It emphasizes achievement
 Implementation of TQM in the managed care industry The TQM Magazine
Seyed-Mahmoud Aghazadeh Volume 14 . Number 2 . 2002 . 79±91

Table II Updating of information systems

1950-1959 1960-1969 1970-1979 1980-1989 1990s
Data processing equipment Manual systems, Initial use of Increase in computer Rapid develoment of Rapid development
some mechanical computers, mainly for use, on-line microprocessor of advanced
aids batch processing processing information
processing
System design approaches Individual Mostly batch Shift to on-line Shift back to More shift to
departmental system processing focus on applications distributed processing distributed
administrative in hopsital processing in
application applications hospital applications
Focus of administration Ensuring that Interest in computer More attention to Concern with The need for
individual systems to support system planning and proliferation of integration of
departmental operating use of information for micro-computers and databases and
information needs departments management control problems of system improved decision
are met and medical quality integration caused by support for clinicians
assurance decentralization of
computing to hospital
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departments
Source: Melum and Sinioris (1992)

of outcomes in designated time frames with Nursing management/administration

limited resources (Mariner-Tomey, 1992).
This makes it essential for nurses to be
defined in the role of case managers and
delegate responsibilities within a managed
care setting. It is this role in which nurses are
able to provide the necessary link between
total quality management processes and the
goals of managed care. Nurses who have
access to TQM information systems have a
stronger ability to evaluate outcomes and
manage ongoing care effectively
(Mariner-Tomey, 1992).
As managed care organizations move forward
with the concepts of TQM, the role of nursing
management/administration has also become
important. Opportunities for growth and
education have become a priority as nursing
management/administration facilitates the
integration of managed care. A key factor for
conveying the numerous underlying
philosophies of TQM can be implemented in
a ``TQM workshop''. Committees may also
be created for guidance and support through
the actual TQM process (Wood et al., 1992).

Nurse practitioners A universal language

In many managed care facilities the nurse
practitioners hold the position of primary
caregiver. Among their responsibilities are to
follow patient trends and evaluate outcomes.
This provides the ability to identify existing
and potential problems making it easier to
implement treatments or solutions:
The nurse practitioner must take an active role
in all efforts that measure the quality of patient
outcomes that have resulted from their practice
or intervention. These actions not only support
the concepts related to TQM, such as
maintaining a customer focus, strong leadership,
and service, but also facilitate the appropriate
utilization of resources throughout the
continuum of care, thus overseeing economic as
well as patient care benefits (Mariner-Tomey,
1992).
Quality care is a priority outcome for the
success of health care reform, which relies
heavily upon nurse practitioners.
88
Improvement in the way that nurses
document patient care will lead to a more
efficient means for nurses to identify,
measure, implement and improve quality
outcomes. In order to measure these
outcomes in a reliable and consistent way a
standard terminology must be in place.
Today's nursing administrators have been
given a position in which they are able to
assist in the task of standardization. Without
the establishment of this common language,
evaluating and ensuring quality will never
reach its highest potential.
There are many potential obstacles and
pitfalls that an organization can face such as
unlicensed assistive personnel and
multidisciplinary teams of patient care
providers. It is the job of the nursing
managers to ensure quality across the many
levels of care. To encompass the broader
 Implementation of TQM in the managed care industry The TQM Magazine
Seyed-Mahmoud Aghazadeh Volume 14 . Number 2 . 2002 . 79±91

organizational viewpoint to quality Figure 2 PDSA cycle

throughout all the levels of health care,
managers must also be able to focus their
attention on system level TQM issues.

Supporting case work

In order to survive in today's changing health

care environment, organizations must have
the ability to implement and adapt to
changes. These organizations must reduce
costs while maintaining quality and patient
satisfaction. The following case studies show
examples of quality measures, employee
turnover rates, comparisons of patient
satisfaction surveys, and reduction of
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accident/incident reports.

Case 1 ± ORYX
The following case study was performed at
the Buffalo Veteran Administration Medical
Center (Department of Veterans Affairs,
1999-2000). ORYX is the name of a large
African antelope with long straight horns
projecting backwards, this name represents a
performance measurement system, which is
required by the joint commission for health
care facilities seeking accreditation.
Through the process of TQM, the facilities
are able to look back at the measures over
time to identify those that need to be
improved in the future, thus the
representation of the horns pointing
backwards. Since 1997 VA medical centers
across the country have been developing a
standard language through the joint
commission in order to compare quality
measures between these facilities.
There are three main forms of
measurements, each used to evaluate different
services provided by the medical center. The
following are the measuring techniques used
(see Figure 2):
. hospital accreditation program;
. long-term care accreditation program
(LTC); and
. home care program.
As shown in Figure 2 through the hospital
accreditation program, goals are set for each
service provided. The data is made visual
through charts which are printed monthly.
Members of the staff use these in order to
monitor each month's progress in relation to
their goal.
89
Case 2 ± TQM in the medical optics field
The following case deals with a vision service
provider that produces a surgical instrument
for delicate eye surgery (Customer Focused
Quality, 1992). The provider was having
difficulty keeping clerical workers and lab
technicians for more than 18 months. The
firm was also receiving complaints dealing
with malfunctions in their surgical
instruments. Prior to 1992, two out of ten of
their instruments worked correctly the first
time, this caused many negative effects on the
organization. With implementation of TQM
in 1992 they saw significantly positive results.
Their instruments are currently made nearly
defect free and their turnover rate in 1991 of
28.2 per cent was cut to 7 per cent.
The changes, which came about from the
implementation of TQM, shifted the entire
corporate culture and provided a standard of
measure and quality. This enabled them to
better compete with other producers in their
industry.
Case 3 ± customer satisfaction
An additional case study that was produced
through the VA Medical Center uses waiting
time and patient surveys as a way of
measuring customer satisfaction (Department
of Veterans Affairs, 1999-2000). The
standard language that has been implemented
through the joint commission has allowed the
medical centers to compare the level of
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
customer satisfaction at different locations.
Through the use of customer surveys, the
VA is able to measure the effects of the
implementation of TQM on patient
satisfaction.
Case 4 ± reduction of accident/incident
reports
A recent case produced by the VA Medical
Center deals with a program for the control of
infection (Department of Veterans Affairs,
1999-2000). This is an on going case that
assesses the high rate of accident/incident
reports dealing with needlestick injuries. The
VA hospital is implementing the TQM model
of plan, do, study, and act (see Figure 2).
Plan
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In order to begin this phase of the model, the
hospital must decide why there is a need to
measure needlestick injuries:
. Sharp injuries are a high-risk occurrence,
based on a high volume of activities
conducted by employees.
. OSHA revised its bloodborne pathogens
law in 11/99, requiring all facilities to
evaluate/purchase safer sharp devices.
Facility needed to have improved analysis
of sharp injuries in order to prioritize
types of safety devices to be looked at.
Do
In this next phase of the model, the hospital
asked how the measurement was to be
completed:
. Employee injury data from ASISTS
program, obtained through occupational/
employee health program.
. Formation of sharps safety
sub-committee, as sub-committee of
infection control committee.
Interdisciplinary team that meets
bi-monthly, consisting of safety officer,
infection control nurses, employee health
nurse, ER head nurse, OR nurse, nurse
instructor, and supply specialist.
. Analysis of injuries occurs, including
whether the injury could have been
prevented if a safer sharps device was
used or if there was a deviation from
recommended procedure/policy for tasks
performed.
. Individual recommendations made/
corrective actions taken, based on
trending of data.
. Quarterly, report generated to careline
managers, various departments and
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The TQM Magazine
Volume 14 . Number 2 . 2002 . 79±91
committees (environment of care
committee, infection control committee
and commodities standards committee).
Study
The third phase of this model focuses on the
results of the study.
. Improved analysis of data and
documentation of corrective actions
taken.
. Three needlesticks occurred due to
overfilled sharps disposal container.
. Able to trend where and how majority of
sharps injuries occurring and made
recommendations based on data.
Act
Due to the fact that the total implementation of
TQM has not been completed, they are not
able to answer the final question whether or not
any changes or improvements were made
based on the results.
Concluding remarks
Through the case studies above and other
recently completed research (Gupta, 1995;
Holliday, 1994; Holloway and Mobbs, 1994;
Kivimaki, 1997; Roberts, 1993; Zairi and
Matthew, 1995), it is evident to us that the
implementation of TQM, though difficult to
measure, is extremely beneficial for the
long-term aspects of health care.
While the focus on cost containment and
resource utilization has become necessary
during the managed care restructuring and in
light of the economic instability of health care
systems, quality must be addressed at each step
of the process and in each discussion. Some
have raised the question whether managed care
systems will be able to provide quality care with
fewer resources without quality suffering as a
result. What has been stated above has shown
that the integration of the concepts of TQM
directly into the system of managed care will
allow for quality to be maintained at high levels
even if resources are to become more restricted
and costs contained (Mariner-Tomey, 1992).
This is clearly shown through nursing's role
within managed care organizations and their
desire for the highest level of quality.
This paper has provided background and
current information on the implementation of
TQM principles into managed care
organizations. In effect, both these principles
have been shown to have similar goals of
 Implementation of TQM in the managed care industry
Seyed-Mahmoud Aghazadeh
achieving the highest positive patient care
outcomes, while improving the quality of
care. The utilization of these two concepts
jointly appears to be the future of managed
care delivery.
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