1. Surgeon and Surgical Team Knowledge Generation and Learning in a Hospital Nile W. Hatch Marriott School – BYU Nile W. Hatch Marriott School – BYU David W. Moore KLICNET.org David W. Moore KLICNET.org POMS – Dallas May 4, 2007 POMS – Dallas May 4, 2007

2. Surgeon and Surgery Team Learning Economics of Hospitals New and growing pressures against strategic pricing in hospitals –Insurance, government, customer choice Rising costs in all dimensions High fixed costs in facilities Going “up market” Operating room utilization is key to economic performance New and growing pressures against strategic pricing in hospitals –Insurance, government, customer choice Rising costs in all dimensions High fixed costs in facilities Going “up market” Operating room utilization is key to economic performance

3. Surgeon and Surgery Team Learning Revenue Performance As processes improve, delight surgeons and staff, so able to attract top people (publish in trade journals, word of mouth, etc.) Improved process efficiency can improve the learning rates of surgeons Higher volume = faster learning by staff and surgeons Concentration of better surgeons and staff = higher rates of learning and potential improvement First-mover advantage, especially locally All above is synergistic and magnifies the advantage; once progress accelerates very hard for competitors to react and catch up; knowledge maybe the only long- run source of sustainable competitive advantage in high-tech industries that experience rapid and sometimes sudden innovation As processes improve, delight surgeons and staff, so able to attract top people (publish in trade journals, word of mouth, etc.) Improved process efficiency can improve the learning rates of surgeons Higher volume = faster learning by staff and surgeons Concentration of better surgeons and staff = higher rates of learning and potential improvement First-mover advantage, especially locally All above is synergistic and magnifies the advantage; once progress accelerates very hard for competitors to react and catch up; knowledge maybe the only long- run source of sustainable competitive advantage in high-tech industries that experience rapid and sometimes sudden innovation

4. Surgeon and Surgery Team Learning Cost Performance Lower accounting cost per case may be leveraged in a number of strategic ways: –Lower price to patients to increase market share –Greater margin per case due to increased operational effectiveness may be reinvested in additional improvements in infrastructure, information technology, process improvements, policy refinements and incentives that reinforce the cost advantage – reduce internal gamesmanship –Depending on level of gamesmanship in the marketplace, may maneuver strategically to force competitors into undesirable positions Lower accounting cost per case may be leveraged in a number of strategic ways: –Lower price to patients to increase market share –Greater margin per case due to increased operational effectiveness may be reinvested in additional improvements in infrastructure, information technology, process improvements, policy refinements and incentives that reinforce the cost advantage – reduce internal gamesmanship –Depending on level of gamesmanship in the marketplace, may maneuver strategically to force competitors into undesirable positions

5. Surgeon and Surgery Team Learning Surgery as Craft Mastery requires continued practice and development Keeping doctors happy requires keeping doctors busy –Operating room management –Procedure time Repetition of craft maintains and/or improves speed Idleness risks loss of knowledge and skill Speed (controlling for level of care) is the measure of performance for hospitals and surgeons Keeping doctors happy requires keeping doctors busy –Operating room management –Procedure time Repetition of craft maintains and/or improves speed Idleness risks loss of knowledge and skill Speed (controlling for level of care) is the measure of performance for hospitals and surgeons

6. Surgeon and Surgery Team Learning Knowledge and Learning in Surgery Experience - Overall - By type Experience - Overall - By type Behavior change Behavior change Organizational performance Surgeon/Team Organizational performance Surgeon/Team Tenure in organization Tenure in organization Knowledge Time between procedures Time between procedures Process change Process change

7. Surgeon and Surgery Team Learning Data and Methods 5 years of surgery performance data for one hospital specializing in orthopedic surgeries –295 surgeons –861 procedures –Time in OR / Time in procedure Estimation of learning curves for surgeon and surgical team controlling for –Tenure, procedure heterogeneity, environmental changes 5 years of surgery performance data for one hospital specializing in orthopedic surgeries –295 surgeons –861 procedures –Time in OR / Time in procedure Estimation of learning curves for surgeon and surgical team controlling for –Tenure, procedure heterogeneity, environmental changes

8. Surgeon and Surgery Team Learning Results (by surgeon) ModelSurgery TeamSurgeon Constant 4.557*** 3.95*** Cum. Surg 0.027*** 0.036*** Cum. Proc 0.019*** 0.041*** Tenure-0.0001***-0.0014*** Infreqency-0.0000 0.0012 R 2 0.09 0.25 ModelSurgery TeamSurgeon Constant 4.557*** 3.95*** Cum. Surg 0.027*** 0.036*** Cum. Proc 0.019*** 0.041*** Tenure-0.0001***-0.0014*** Infreqency-0.0000 0.0012 R 2 0.09 0.25

9. Surgeon and Surgery Team Learning Results (by surgeon and procedure) ModelSurgery TeamSurgeon Constant 4.557*** 3.98*** Cum. Surg 0.016*** 0.032*** Cum. Proc 0.023*** 0.039*** Tenure-0.0001***-0.0014*** Infreqency 0.0001 0.0000 R 2 0.65 0.62 ModelSurgery TeamSurgeon Constant 4.557*** 3.98*** Cum. Surg 0.016*** 0.032*** Cum. Proc 0.023*** 0.039*** Tenure-0.0001***-0.0014*** Infreqency 0.0001 0.0000 R 2 0.65 0.62

10. Surgeon and Surgery Team Learning LCS 290E-01 0.4688E-02 3.475 0.001 0.018 0.0430 0.0188 STS0 -0.79335E-04 0.1045E-04 -7.593 0.000-0.040 -0.0760 -0.0152 STST1 0.89258E-04 0.6702E-04 1.332 0.183 0.007 0.0052 0.0002 LCPS 0.23342E-01 0.3828E-02 6.097 0.000 0.032 0.0722 0.0146 CONSTANT 4.4954 LCS 290E-01 0.4688E-02 3.475 0.001 0.018 0.0430 0.0188 STS0 -0.79335E-04 0.1045E-04 -7.593 0.000-0.040 -0.0760 -0.0152 STST1 0.89258E-04 0.6702E-04 1.332 0.183 0.007 0.0052 0.0002 LCPS 0.23342E-01 0.3828E-02 6.097 0.000 0.032 0.0722 0.0146 CONSTANT 4.4954

11. Surgeon and Surgery Team Learning Conclusions Prior learning is a stock of knowledge capital that influences the rate of active learning and the efficacy of learning activities Work is needed on how firms should invest to optimize investments in learning activities given degrees of prior learning Study of prior learning reveals the importance of observed history and the need for functional forms robust to prior learning Prior learning is a stock of knowledge capital that influences the rate of active learning and the efficacy of learning activities Work is needed on how firms should invest to optimize investments in learning activities given degrees of prior learning Study of prior learning reveals the importance of observed history and the need for functional forms robust to prior learning