Lean Healthcare Exchange

I have seen a shift over the past year in the discussions  that I have with Healthcare leaders.  We are facing considerable financial pressures in the Healthcare Industry  today – increased demand on an already overburdened system with skyrocketing technology costs.  With well documented results from Lean Healthcare implementation around the world, leaders are taking into consideration the time tested philosophy and methods of Lean.  However, leaders are increasingly concerned with one question – What will my Return on Investment (ROI) be for Lean Healthcare implementation? 

First, let’s start with the basics.  Without spiraling into a discussion of Net Present Value (Google it if you don’t know about NPV), the textbook method for calculation of ROI would look like this: 

(Profit – Investment)/ Investment

It simply answers the question of will we make (or did we make) money on an investment.  It can be used when making business decisions such as whether to purchase a new piece of equipment.  Will it make us more profit than it costs us?  Or in other words, what is the Return on Investment?

However, ROI calculations for Lean Implementation can be incredibly complex because of the many variables on both the Profit and the Investment (expense) side of the equation.  In healthcare organizations, employee expenses (fulltime and supplemental labor) make up a significant percentage of the expense side of the equation.  In fact, full time and contract labor can make up between 50 – 60 percent of a hospital’s expenditures. 

Hospitals under considerable financial strain have traditionally looked at their largest expense category, labor, to identify savings.  With a short-term focus on cash, organizations may be cutting short the true benefits of Lean Healthcare implementation.  For example, under a Lean Healthcare program we look to identify and eliminate wasted time, effort, and resources.  The CFO rightfully questions,”Where are my savings? “  Unfortunately, it is not that easy.  I have reviewed many healthcare income statements and have yet to see where “wasted time” is captured on the current list of expenses.  Waste is hidden.  It is woven into the fabric of the organization.   So if waste is eliminated, where can we carve out savings from the P&L?  No savings = no ROI, right?

Not so fast.  A long-term view of Lean Healthcare implementation would see that additional service growth can only come from additional capacity.  By eliminating wasted time, effort, and resources through Lean Healthcare, we effectively increase an organization’s capacity.  In fact, it is the lowest cost capacity because we are already paying for it!  If we can do more procedures with the same staff without people feeling like they are working any harder, then we can show significant returns on the waste elimination efforts.  Service is better, patients are happier, and profits grow with increased volume flowing through the existing cost structure.

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to share lean principles through hands-on learning. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting. Tom has achieved the levels of Certified Lean Specialist from the Business Improvement Group and the National Institute of Standards and Technology (NIST), along with being an ASQ Certified Quality Engineer. These certifications build on an Engineering Degree from the University of Michigan. Training experience includes Lean, Quality, and Leadership Training, as well as serving as an Adjunct Faculty Member at Waubonsee Community College.

I am not sure about you, but around our house, we enjoyed watching the “Undercover Boss” television program.  Because my world is filtered through Lean eyes, I am sure that I enjoyed it for different reasons than some.  If you did not get a chance to see the show, I can summarize it for you quickly.  A top-level executive dresses down and “applies” for a job at his/her own organization.  I believe that the show uncovers a couple of simple truths that we can all stand to learn and apply in our Lean Healthcare journeys.

The first truth that I found amazing was how many times an executive could go into their own organization without being recognized.  I know that in a large organization, not everyone is going to spend time with the C-suite.  However, it was common for the undercover individuals to not be recognized by a whole store or division of their own companies.  It made me wonder if these leaders ever left their offices.  One of the few Japanese terms that has carried over into Lean Healthcare vernacular is used to describe the area where the work happens, or “Gemba.”  One of the significant challenges for healthcare leaders is getting out of meetings and into their healthcare organizations to meet with staff and patients. In a Lean organization, we work with leaders to go to Gemba.  The currency of leaders is T-I-M-E.

The second truth that was fun for a Lean Healthcare geek was to see the executives learning how things truly work in their own organizations.  The undercover bosses would work side-by-side with employees and learn the true challenges related to the work. Often times the leaders would see how their decisions were or were not communicated down through the organization.  However, this skill should not be limited to going undercover.  As a leader in an organization, problem solving is a significant part of the job.  As part of Lean Healthcare leadership coaching we teach leaders a simple three step process: Let’s-Go-See.  Go see how work happens, how problems look from the patient’s perspective, how staff understands mission and vision. 

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to share lean principles through hands-on learning. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting. Tom has achieved the levels of Certified Lean Specialist from the Business Improvement Group and the National Institute of Standards and Technology (NIST), along with being an ASQ Certified Quality Engineer. These certifications build on an Engineering Degree from the University of Michigan. Training experience includes Lean, Quality, and Leadership Training, as well as serving as an Adjunct Faculty Member at Waubonsee Community College.

You have probably heard the phrase – a picture is worth a thousand words.  It is certainly quite true.  Trying to describe a situation or improvement during a Lean Healthcare kaizen event is much easier through pictures.  The Lean tool of visual controls leverages this principle by clarifying through use of pictures.  However, just as Yogi Berra states, “You can observe a lot just by watching”.  While a picture is better than words, nothing beats seeing it for yourself. 

I was reminded of this last week during my first visit to London, England.  I had seen pictures of the famous sites, but was blown away in my short visiting time squeezed in between Lean Healthcare work.  Nothing will replace the memories of seeing Trafalger Square, Big Ben , and London Tower with my own eyes.  I tried to bring back pictures to describe the experience to my family (who did not accompany me on this trip).  However, I could not muster the emotion of the experience through my iPhone photo gallery. 

This principle applies equally to the Leadership teams that we coach during a Lean Transformation engagement.  It was telling this week to hear a team member from a Kaizen Event Team say how refreshing it was to see a hospital “O” on the floor during improvements.  It is easiest to truly understand the care being delivered to patients by watching it happen.  Getting leaders out of offices and into “gemba” (Japanese for actual place) is a key component of Leading in a Lean environment.  You might find you can observe a lot just by watching.

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to share lean principles through hands-on learning. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting. Tom has achieved the levels of Certified Lean Specialist from the Business Improvement Group and the National Institute of Standards and Technology (NIST), along with being an ASQ Certified Quality Engineer. These certifications build on an Engineering Degree from the University of Michigan. Training experience includes Lean, Quality, and Leadership Training, as well as serving as an Adjunct Faculty Member at Waubonsee Community College.

While many organizations have begun to look at Lean Healthcare as a strategy to improve the overall business case, the long term benefits of Lean remain elusive to many organizations. Many groups simply look at Lean Healthcare as the application of tools to identify and eliminate waste. However, the true benefits of Lean come through the shift in thinking which comes from leading an organization into a new way of thinking.
 
As organizations begin to bring Lean Healthcare into the organization, many look at the simple application of Lean Tools (Kaizen, 5S, Standard Work, etc). Some institutions are looking for the “recipe”. Those leadership teams that suggest “Go make my teams Lean out their processes.” Somehow, in this version, Lean becomes a verb and there is a switch that we are supposed to flip which will make the organization’s processes more effective.
 
While the application of Lean Tools is a key component of a Lean Healthcare Transformation, there is much more to becoming “Lean”. There is a shift in thinking required for organizations to truly realize the long term benefits of Lean Healthcare Transformation. The shift in thinking is very dramatic for some organizations. We must begin to regularly expose and solve problems. While we may be able to harvest some early wins by finding low hanging fruit within the value streams of the organization, true benefits come from the systematic identification and elimination of waste from the entire facility. Waste needs to be exposed through visual controls and metrics. Improvements need to be made through leveraging the Rules in Use. Leader Standard work needs to develop accountability and disciplined adherence to the process.  If the steps described here are already in place in your organization, great. If what I mentioned in the previous couple of sentences sounds like a foreign language, find a coach. Lean Healthcare Transformations require a new way of thinking.
 
This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to share lean principles through hands-on learning. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting.

Understanding the complexity of healthcare payment systems is not something that most people understand.  In most businesses, a product or service is delivered to a customer in return for a pre-established price.  My research for answers turned to the internet.  I found promise in a white paper titled, “Principles of Healthcare Reimbursement”.  However, I quickly realized that I was looking for the Healthcare Reimbursement for Dummies version. 

While conducting a Lean Healthcare Kaizen Event recently, the team was excited to have identified significant improvements which resulted in a gross revenue increase of just over $1.0 million.  However, the complicated, mulit-variable equation which determines how much the hospital would actually see reduced the net gains to less than $100,000.  The “missing” $900K is not profit; it is the reduction in top line revenue healthcare organizations face every day from reduced reimbursements, payor mixes, fee schedules, DRGs, etc.

So what is a Lean Healthcare practitioner to do?  While we let Washington D.C. sort out the payment and coverage issues, some of us continue to focus our improvements on the Healthcare System.  A Lean friend, Christy G., helped me understand the healthcare reimbursement model with the following description. 

Healthcare provides a basket of care for a bucket of money.

We control what goes into the basket.  Our job as we study processes and drive out waste from the basket of care.  We use Lean Healthcare as our primary tool to review what’s in the current basket (Value Stream Mapping) and design a better basket (Ideal Care).  Nonetheless, what about the bucket?  Well, just as I learned from Sesame Street all those years ago…”there’s a hole in the bucket, Dear Liza, Dear Liza”.   There is a big hole!  The healthcare payers (including Medicare) are shopping for bigger drill bits and more powerful drills in order to make bigger and bigger holes.  As reimbursements continue to shrink, we have to get more and more creative.  We have to look for the best way to take care of the patient while making sure we don’t gift wrap the basket full of unnecessary tests and care for which the hospital will not get reimbursed. So I guess, like Dear Henry from Sesame Street, we will fix it Dear Liza, Dear Liza, Dear Liza…

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to share lean principles through hands-on learning. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting.

Ever been on a flight next to someone? Normal conversation covers topics of family, weather, work, etc. Upon mentioning that I work implementing Lean Healthcare principles, I regularly field questions like, “What is going to happen under the new President’s administration?” To not discuss the pending Healthcare Reform plans would be like ignoring the elephant in the room. So while I don’t want to open a long debate about politics, I wanted to share some thoughts about the details coming out this week.

In order to keep the focus off of politics, I wanted to open the discussion to the following topics: access and cost. You’ll notice that I left coverage off the list. I think we can all agree that there are too many people in 2009 without adequate healthcare insurance coverage in the United States. Coverage (or lack of) is a complex issue to which I don’t propose to know the answer. However, there are two key areas in which Lean Healthcare principles will continue to have a profound impact on the state of healthcare in the United States.

Access
The first key area in which we are making significant progress with Lean Healthcare is access. One of the biggest concerns I have with the current proposal is turning on the floodgates by providing coverage for everyone. Many of the hospitals in which we work simply do not have enough capacity to handle the current patient population, with the problem possibly getting worse with the aging baby boomers. If we were to increase access to healthcare without addressing the capacity issue, patient wait times, overtime for hospital staff, and, therefore, costs would increase significantly. Lean is designed to create capacity within the existing resources by eliminating waste. The access issue is really a capacity issue. If we do not eliminate waste to create room for all these additional tests, procedures, etc. then the system will fail. Automation, Electronic Medical/Health Records, and many other things being proposed will not help if the process is not redesigned. Sure these things are needed but only after careful consideration of the processes and removing waste (i.e. Lean Healthcare).

Cost
The second area where Lean Healthcare is making an impact is cost. Through a rigorous and structured approach to reviewing healthcare processes and value streams, we have identified and eliminated wasteful practices which add cost to the system. Lean Healthcare Kaizen Events regularly yield savings in the six figure range, while A3 Problem solving activities can add up to millions in savings, $10,000 at a time. However, reducing costs must come from an equivalent elimination of waste. To mandate cost reductions or reduce payments will only hinder the progress being made in healthcare. This view is shared by many. In response to the infomercial regarding the new program last week, Karen Ignani, president/CEO of American Health Insurance Plans, told ABC, “If you look at the proposals that have been laid on the table thus far, it will bankrupt all of the major hospitals in the United States because it pays at public program rates, which are already significantly underfunding providers.”

So what do you think? How would you answer the person who asks, “what does healthcare look like in a few years?”

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to make lasting improvements. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting. Tom has achieved the levels of Certified Lean Specialist from the Business Improvement Group and the National Institute of Standards and Technology (NIST), along with being an ASQ Certified Quality Engineer. These certifications build on an Engineering Degree from the University of Michigan. Training experience includes Lean, Quality, and Leadership Training, as well as serving as an Adjunct Faculty Member at Waubonsee Community College.

As I was dressing my eight month old the other day, I could not help but laugh.  Why are there front pants pockets (albeit on a very small scale) in my daughter’s size 12-month blue jeans?  Anything that could even fit in the pocket would easily qualify as a choking hazard.  My initial reaction was, “that is the way jeans are supposed to look.”  However, I suddenly stopped.  I had just repeated one of the phrases which, as a change agent, we are conditioned to detest. 

For anyone who has tried to implement Lean in a Healthcare setting, the mindset of “that is the way it has always been” is all too prevalent.  Ironically, we wouldn’t typically be digging deep to understand a process if it wasn’t broken.  Therefore, the argument “that it has always been that way” just indicates that the broken process has existed for a long period of time.  Just because it has been around for a long time, doesn’t make it right. 

Recently, while helping lead a Kaizen Event, the oft-uttered phrase surfaced once again.  I realized that the group was not just feverishly defending the status quo, but rather they didn’t know a better way.  This group was so focused on taking care of the patient that they would do anything to try and help.  Many systems and processes are a complex matrix of workarounds and local knowledge designed to try and help serve the patients’ needs in a broken system. 

Once the group was able to see how unnecessary some of the steps were, they were very willing to make the necessary changes.  Our job is often to just help point out those things that otherwise go unnoticed – like pants pockets on my daughter’s jeans.

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to make lasting improvements. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting. Tom has achieved the levels of Certified Lean Specialist from the Business Improvement Group and the National Institute of Standards and Technology (NIST), along with being an ASQ Certified Quality Engineer. These certifications build on an Engineering Degree from the University of Michigan. Training experience includes Lean, Quality, and Leadership Training, as well as serving as an Adjunct Faculty Member at Waubonsee Community College.

As the calendar flips to 2009, the thought of a new year’s worth of New Year’s Resolutions comes to mind.  The month of January brings with it a sense of new beginnings – a clean start. So maybe it is a good time to take inventory of current goals. First, I needed a working definition of “New Year’s Resolution”.  Wikipedia says that a New Year’s resolution is “a commitment that an individual makes to a project or the reforming of a habit, often a lifestyle change that is generally interpreted as advantageous.”  

We could debate what is “interpreted as advantageous” for hours, but that is not the intent of this article.  No one in my family would probably argue that me losing a few pounds would be advantageous. However, as I think about losing weight (which is a New Year’s Resolution for so many) there are a few keys which seem to stand out.

Just for example, let’s say that I wanted to lose about 15 pounds.  A typical resolution would sound like, “I want to lose 15 pounds by April.” That sounds a lot like an outcome measure that we would typically set at the end of a Lean Healthcare Kaizen Event (i.e., reduced wait times for patients by April or improved patient flow by end of April). Many organizations think that they can improve by simply setting outcome measures. Some even track progress toward those measures, but then wonder why they are not making progress toward their goals. 

Just like my New Year’s Resolution – merely checking the scale won’t get me closer to my goal. However, I do know that I need to limit my calorie intake and exercise more. If I were to track my calories per day and number of minutes exercised, I would have a great chance of meeting my goals. I could make adjustments to my daily routine at the end of the month if I were not making adequate progress. This is a good example of process metrics. By measuring these, I know that I will achieve my desired outcome metric – losing the weight.

So maybe some good advice for achieving your New Year’s Resolution is to identify and track process measures on your improvements. It will go a long way toward helping you reach your Lean Healthcare goals in 2009.

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to make lasting improvements. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting. Tom has achieved the levels of Certified Lean Specialist from the Business Improvement Group and the National Institute of Standards and Technology (NIST), along with being an ASQ Certified Quality Engineer. These certifications build on an Engineering Degree from the University of Michigan. Training experience includes Lean, Quality, and Leadership Training, as well as serving as an Adjunct Faculty Member at Waubonsee Community College.

I returned to my beloved alma mater, The University of Michigan, for homecoming this last weekend.  While the outcome of the football game was less than desirable, the weekend overall was a lot of fun.  It was great reconnecting with old friends and introducing my family to some of my past.  It always amazes me when I return to campus how much has changed; new buildings are constantly being added and friends and familiar places on campus continue to look older. Sorry guys, but it’s true.  However, with so much changing, the beauty of going back to campus is how much things feel the same.  It made me begin to think that as we attempt to transform processes in healthcare, are we really changing things or are they staying the same?

Those that have had the pleasure of participating in a Kaizen Event know that one of the invariable results from an event is change.  The process is designed to create change.  One of our focuses at HPP is sustainability.  In other words, how do we make sure that the changes that we work so hard to achieve during the event week and beyond continue to grow and develop into lasting improvements?

There are several components to lasting improvements, such as leadership, training, measurement, and ongoing communication.  HPP’s transformation efforts are designed to develop these components in order to help organizations sustain.  How do we make sure that we are not just “adding new buildings to campus”? 

I look back at my weekend on campus and realize that the familiarity results from the connections and relationships.  Those things are lasting.  While many of the changes and improvements that we are making through our improvement efforts impact processes, we have to remember that the people are going to make it last.  We have to make sure that we are hitting the heart of the Toyota Production System methodology – the people that work in the system.  When we connect people within the process, our chances of sustaining are much greater.

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to make lasting improvements. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting. Tom has achieved the levels of Certified Lean Specialist from the Business Improvement Group and the National Institute of Standards and Technology (NIST), along with being an ASQ Certified Quality Engineer. These certifications build on an Engineering Degree from the University of Michigan. Training experience includes Lean, Quality, and Leadership Training, as well as serving as an Adjunct Faculty Member at Waubonsee Community College.

With the rapid improvements that often result from Kaizen Events, organizations can easily fall into a trap of looking at Lean Healthcare as a “quick fix”. Those quick results are a necessary component of the Kaizen process; however, Kaizen Events are only part of a true “transformation”. For true sustainability and transformation to occur, improvements must be made at three key levels of the organization: strategic, Value Stream, and daily work.

From a strategic perspective, there is a process to adopting Lean as the primary operating methodology within an organization. We work closely with leadership teams within an organization from the onset of a transformation activity to coach on Lean Thinking. Developing Lean Leadership skills requires time and experience. 

Understanding Value Streams are an important element for deployment of Lean Tools. As Lean practitioners, we map value streams and leverage Lean tools to identify and eliminate waste. As mentioned earlier, rapid results are one outcome from improvement at this level. However, there are additional aspects of the transformation process that take place during a Kaizen Event as front line workers, staff, and physicians begin to look at their work differently. They begin to change their long-held beliefs about their work through this experience, which leads to new actions. These new actions are necessary to deliver and sustain improved outcomes.

For true continuous improvement, workers must begin to leverage Lean Healthcare tools and waste reduction efforts into the problems that occur every day. We typically see this transformation occur more quickly in staff and leaders who are exposed to Lean Thinking during Kaizen Events. However, we are often limited in the number of people who can be directly involved in events during the early phases of a transformation effort. By training everyone in an organization in Lean Thinking, we will help those not yet involved in a Kaizen Event begin to identify and eliminate waste, as well as support the Kaizen Event process changes.

Many groups would be content to leverage Lean by simply using the recipe approach - a dash of Kaizen Events, a sprinkle of metrics, a pinch of employee involvement. However, working only at the Value Stream Level will short circuit the improvement effort. At HPP we feel strongly that two key elements to the sustainability efforts at any organization implementing Lean are:

1. Strategic leadership sessions where an organization can create alignment around a Lean vision.
2. Ongoing Lean training for ALL staff, providers, and leadership.  We have found the use of our simulation-based Lean Healthcare training methods (ex. HPP’s Healing Healthcare™ Pharmacy Simulation or Job Instruction Simulation) help to better explain Lean Healthcare methodolgies and Lean Tools as they apply specifically to healthcare. Whether you use these methods or others, what is important is that you continuously train staff in how to lead in a Lean system and/or how apply the principles to their daily work.

This week’s article was written by Tom Stoffel, a director & consultant for HPP. Before joining HPP, Tom served as President of Transformation Group, Inc,. Tom developed TGI Healing Healthcare – a brand of Lean Healthcare training tools designed to make lasting improvements. Tom has led healthcare organizations in both the development of high-level Lean Strategies down to hands-on implementation of Lean in a clinical setting. Tom has achieved the levels of Certified Lean Specialist from the Business Improvement Group and the National Institute of Standards and Technology (NIST), along with being an ASQ Certified Quality Engineer. These certifications build on an Engineering Degree from the University of Michigan. Training experience includes Lean, Quality, and Leadership Training, as well as serving as an Adjunct Faculty Member at Waubonsee Community College.