Lean Manufacturing Lessons for Healthcare
March 13, 2014
It’s no secret that healthcare systems across the country are in need of better management and cost control. In Connecticut, HartfordBusiness.com reported recently that hospital costs have risen 16.2% over the last four years, now totaling $9.98 billion in expenses in fiscal year 2012. What’s pushing costs up in CT is reportedly spending on personnel, which represents over 50% of hospital expenses.
$1.32 billion in medical supplies –
how is inventory being managed?
It does make one wonder: if we could Lean out our healthcare processes, could we help stem the tide of rising costs? Would we need so much staff? Couldn’t we spend significantly less than $1.32 billion a year in medical supplies (13.3% of total annual expenses) with more optimal inventory management systems? What did the manufacturing industry learn when it began adopting Lean management methodologies over 25 years ago that is transferable to the healthcare industry?
To Lower Healthcare Costs, Become More Patient-Focused
While cost reduction is a natural outcome of Lean principles in manufacturing, it is not the target of Lean thinking. Lean thinking is centered on understanding and meeting customer demands. In striving to do the best job of meeting those demands, Lean processes drive out wastes and, therefore, lower costs. In healthcare, the “customer” is the patient, and focusing on more efficiently serving patients will likewise drive costs down as a by-product of Lean processes.
The pressure to cut costs in healthcare is severe, which does motivate many leading providers to turn to Lean management principles to simultaneously improve patient care and reduce associated costs. A number of hospital systems are doing a great job turning their organizations around, like Virginia Mason Medical Center and the ThedaCare medical system in Wisconsin.
In fact, ThedaCare’s efforts are so noteworthy that its former CEO, John Toussaint, wrote a book on their Lean transformation. “On the Mend” is available for purchase from the Lean Enterprise Institute and was reviewed by former Alcoa CEO and U.S. Treasury Secretary Paul H. O’Neill.
O’Neill states, “The ideas practiced at ThedaCare in Wisconsin should be adopted across the country. If they are, it will be easy to afford financial access for every citizen, because we will reduce national medical care spending by hundreds of billions of dollars per year, while improving outcomes.”
Lean Transformation is Revolutionary
The story of “On the Mend” is one of Lean transformation. What the CEO of ThedaCare found is that for the organization to really become Lean and customer-focused, you needed more than a series of gradual changes; you needed a revolution. As with Lean in manufacturing, Lean healthcare transformation must be driven from the top. The leaders of ThedaCare visited manufacturing companies to learn about Lean. One of my favorite anecdotes from the book described a visit to Ariens, a Wisconsin manufacturer of snowblowers, where Toussaint decided “they treated their snowblowers better than we treated patients.”
“they treated their
snowblowers better than
we treated patients”
While several cardiologists at first resisted the change, ThedaCare developed a standardized process in which ER doctors would diagnose a heart attack. Would the ER docs tend to overreact, and call the cardiologist in unnecessarily? In fact, over a 3-year period there were only 3 instances (out of 100 patient visits) where the cardiologist was called in for “false alarms”! Although it was hard for cardiologists to relinquish control, the change helped improve the relationship between them and ER doctors.
Communication Minimizes Errors
The healthcare system is rife with waste, making it rich with opportunity for process improvements. For instance, we check patients in, and then they sit and wait. We check their vital signs, then they sit and wait some more. Of course in some healthcare situations, there is no time to waste – like when a patient is having a heart attack. Yet when ThedaCare mapped their processes for those events, they found their patients were, indeed, waiting for the cardiologist to be consulted on confirming the Emergency Room’s diagnosis. If this took place in the middle of the night, the ER doctor would have to wait an average of 20 minutes for the on-call cardiologist to arrive at the hospital.
in medicine, errors
can be fatal
Just like with manufacturing, when information flows better and is complete and accurate the first time around, there is less chance for defects and errors – and in medicine, this is doubly important as the stakes are human lives. There’s simply no room for “scrap or rework.” Because Lean methodologies are so strong on communication, we’re seeing them adapted in the healthcare industry in the form of frequent huddles with nurses and other practitioners at the beginning of a shift to see what’s going on and catch up on patient status. Improved communication improves the quality of critical information that impacts patient care. It minimizes the back-and-forth communications that can lead to increased margins of error.
ThedaCare focused on patient care, eliminating as much waiting as possible and speeding patients from intake to treatment – and savings followed. Treating patients faster translates to shorter lengths of stay, further saving costs. At ThedaCare now within 90 minutes of admitting a patient they are assigned a nurse, a pharmacist, and a physician who all huddle with the patient and their family. This method of “collaborative care” helps to streamline communications and improve quality in the process.
The Data Tells the Story
One thing to remember is that Lean requires strict measurements as a data-driven process. Every process has inputs and outputs, even in healthcare. For instance, why do some Emergency Rooms have better throughput than others? We have to measure and examine the data to find the answers. Just because we’re in healthcare, we can’t say we’re immune to measuring the process.
ThedaCare has saved
over $20 million
By developing focused patient processes and waste elimination, ThedaCare has generated cost savings of more than $20 million and passing the savings on to their customers, becoming one of the most affordable healthcare providers in Wisconsin.
Point Solutions can Jumpstart Lean Transformation
Here in Connecticut, the clients I’ve worked with in healthcare are starting out with point solutions to start Lean improvements, creating pockets of improvement in different units within the hospital. Although these improvements have not fully transformed these organizations, they are a good start in streamlining processes towards improved patient care. In addition, such initiatives have begun to reduce costs.
Recently, CONNSTEP ran a two-part training seminar on Lean healthcare practices in collaboration with the Connecticut Hospital Association. The first session focused on the application of Lean principles, followed by a session on the benefits of Value Stream Mapping for healthcare operations. Grace Napolitan, Vice President, Administration at CHA reports, “Feedback from the Lean program has been very positive. It’s been relevant and practical in helping our members understand how to identify waste and make process and information flow improvements back at their institutions.” While Lean manufacturing has a big head start on Lean healthcare, both sectors have a proven potential to benefit greatly from Lean tools. Toyota built a Lean structure that launched a worldwide revolution, and its inherent customer focus—whether the customer is an end-user or a patient—applies easily.
For example, the same Kanban tools used in Lean manufacturing can be used to optimize material replenishment, whether it’s sterile gloves, gauze, syringes or other disposable medical supplies. Lean tools like this can help healthcare providers reduce costs. Lean visual management tools like 5S, a workplace standardization tool, can help medical treatment facilities ensure that the right supplies and equipment required for doctors and nurses to do their jobs are set up closest to where they’re needed, reducing time and motion spent tracking them down.
$30k in savings.
One such initiative at a hospital unit where we worked recently in Connecticut resulted in $30,000 in savings by setting up a well-controlled, localized department storeroom. By carrying optimized inventory levels on hand in the stock room, the staff realized they were storing inventory that was outdated or overstocked- like too many Size XL gloves on hand while Size M gloves were in short supply. Now they only carry what they need, and stopped ordering supplies that weren’t really necessary. While it wasn’t a huge cost savings, here’s an example of an opportunity that could be replicated throughout the hospital’s many other units.
Management Must Be On Board
Regardless of which industry is using Lean principles, ultimately the Lean philosophy doesn’t change. Its benefits are universal. From the textile mill to the operating theater, the principles apply to virtually any situation. For Lean to work, however, it needs to be driven from the top down. Lean, including customer-focused care, often requires a cultural revolution within an organization, and that revolution needs to start with top management. When top executives drive Lean in health care or on the plant floor, improvements abound.
What can your
I learned this lesson in 1988 as I had the privilege of witnessing the transformation of Danaher’s Jacobs Vehicle Manufacturing Company in Connecticut. Jacobs’ dramatic shift towards profitability and improved customer satisfaction, through the implementation of the Toyota Production System, was led by George Koenigsaecker. John Toussaint credits Koenigsaecker with being ThedaCare’s most important mentor.
Is Connecticut Ready for Lean Healthcare?
“Competition and lower reimbursement at federal and state levels – like the over $500 million in Connecticut alone that was cut last year – means if you want to survive, there’s no choice any longer. Around 10% are uninsured in CT, yet we’re treating everyone regardless of ability to pay,” says Grace Napolitan of CHA. “Healthcare is absolutely at its prime for implementing lean principles right now. All of our hospitals are focused on safety and quality, on redesigning care to improve patient outcomes. Health reform is here, and it is accelerating changes that are just unprecedented. New models of care have arisen, like urgent care facilities, dial-ins, telemedicine – there is a transformation going on. We need leadership for hospitals in the transformation to value-based healthcare. We define ‘value’ as the best possible outcomes for patients, at the lowest possible cost. To get there, we have to focus on patient centered care and eliminate variability, and get our processes to be reliable. Hospitals can’t stay in the Current State and survive. Lean principles are essential in getting them to the Future State.”
If we could Lean out our healthcare processes, could we help stem the tide of rising medical costs in this country? Would we need so much staff? Couldn’t we spend significantly less than $1.32 billion a year in medical supplies in Connecticut (13.3% of total annual expenses) with more optimal inventory management systems? What did the manufacturing industry learn when it began adopting Lean management methodologies over 25 years ago that is transferable to the healthcare industry?
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