It may be hard for healthcare CFOs to envision sitting around a table with nearby competitors, having a detailed discussion about what doesn't work at your organization. Yet collaboration can result in shared ideas and even shared costs for programs that save money and improve services.
It's happening in North Carolina, where a Lean initiative shared among several community hospitals is boosting their quality of care, slashing millions in costs, and laying the foundation to unify that state's healthcare community. The result for one hospital was an ROI of nearly 5-to-1 in the first year alone.
Three years ago, Jeff Spade, FACHE, senior vice president of the North Carolina Hospital Association and executive director for the North Carolina Center for Rural Health Innovation and Performance, set out to get as many healthcare providers as possible to adopt Lean management methods, as part of his goal to create high-performing hospitals and health systems in the state.
Lean techniques for cutting costs and boosting productivity by eliminating waste and improving processes are widespread in hospitals. In a recently released HealthLeaders Media survey on cost containment, 50% of healthcare organizations say they use lean as an efficiency technique.
Yet many Lean programs are limited to departments within hospitals and health systems rather than being implemented on an organization-wide level. Major cultural and leadership shifts are required to implement Lean, along with a significant upfront cost for training staff.
Lean methods make great sense for rural hospitals, Spade says. "Rural hospitals are disadvantaged financially. They tend to serve a large number of uninsured, Medicare and Medicaid, and that can make it more difficult for these organizations to survive over time. So I was looking for an idea that could bring the group improvement in their finances as well as improve their capacity for the population they serve," he says. "Plus, we wanted a model that could be shared collaboratively, so it didn't have to be customized by each hospital. Lean gave us that."
But getting the first five pilot hospitals in place would require equal parts inspiration, perspiration, and non-hospital funding. To build interest, Spade invited experienced Lean representatives from other hospitals to share their lessons and success stories. Then he held informal workshops and learning sessions with hospital executives from his association.
Next he tackled the main objection most financial leaders have against Lean programs: the upfront cost for training. Usually, the six month training involves a Lean consultant who educates key managers and executives. It's a step that is crucial to driving the cultural change needed to establish a Lean environment. Instead of hiring individual Lean consultants,however, Spade and the first group of five hospitals—called the Western North Carolina Lean Collaborative—agreed to pool resources and train together. The five pilot hospitals were Caldwell Memorial in Lenoir, Ashe Memorial in Jefferson, Cannon Memorial in Linville, Blue Ridge Regional Hospital in Spruce Pine, and McDowell Hospital in Marion.
"Our state and many others have figured out that strong collaboration is necessary in order to transform healthcare. So rather than look at each other as competitors, we need to work together and we have to share what works well," he says.
Along with the pooled resources from the hospitals, a third of the training cost was funded by state and federal money and the Duke Endowment. Each hospital was required to hire a designated Lean coordinator to manage the project, and each CEO had to commit to driving an organization-wide cultural change toward Lean process improvement.
As it turned out, by combining on training the hospitals not only saved money, but they were also able to short-cut the Lean implementation process, Spade says.
"Dealing with a culture shift is intimidating. You're messing with the basic DNA. … But all of these hospitals were dealing with the same problems. So if one hospital was having a problem in a specific department, then more than likely one of the other hospital had already addressed it. They could help each other get past the implementation problems more quickly," he says.
Proving ROI was an important part of the pilot programs. "One of the goals of our model was to prove that making the investment in Lean would bring the return," Spade says. "We wanted to give other hospitals' good evidence that investing in Lean now means in a year's time you will get at least a 2-to-1 return on your investment."
But getting past the startup period meant the hospitals could reach the results sooner. Initially Spade estimated two years before the collaborative would earn the return from Lean. Instead, the combined efforts of the five hospitals brought about significant financial and process improvement returns in one year. For instance, at 72-bed Caldwell Memorial, the initial investment was nearly $500,000, but the hospital's cost savings from Lean was nearly $2.3 million in year one.
Beyond the savings, Caldwell measured several performance improvements:
- 70% increase in the proportion of pre-registered imaging patients
- 50% improvement for inpatient bed preparation time
- 40% reduction in time for operating room preparation
- 35% reduction in laboratory turnaround time in the emergency department
- 40% improvement in radiology process time in the ED
- 50% improvement in time to initial treatment in the ED
One year after the Western North Carolina Lean Collaborative program launched, six more hospitals came together to launch the Eastern North Carolina Lean Collaborative program, comprising Samson Regional Hospital in Clinton, Columbus Regional Healthcare System in Whiteville, Bladen County Hospital in Elizabethtown, Duplin General Hospital in Kenansville, Dosher Memorial Hospital in Southport, and Johnston County Health in Smithfield.
As Lean gains ground at these hospitals, the next wave is to push Lean deeper into the healthcare community. "My next vision is to take this out into the whole supply chain for healthcare. So, if you're a patient, your primary care or home health is operating Lean," he says.
To that end, Spade who also serves on the board of the North Carolina Department of Public Health, has guided the implementation of the Lean methodology at all 85 of the state's departments of public health. Others in the program have also begun spreading Lean concepts, too. For instance, Caldwell Memorial has started working with area safety net organizations, such as free clinics and primary care practices, to teach them how to apply Lean principles.
"We want this to spread into the whole healthcare value stream," Spade says. "The ultimate goal is to use Lean throughout the community to improve care. You have to get the Lean principles out to the physicians, to the organization managers, to the community health centers to really make the change complete. You have to get all the stakeholders to come together so we can design a better overall health system, not just a leaner hospital."
Spade's Lean gospel is expanding beyond North Carolina, too; hospitals from Nebraska and Oregon are now using his model to help their hospitals become more efficient. For healthcare financial leaders looking to take their organization Lean but uncertain how to fund the effort, learn from Spade's collaboration: Work with other healthcare organization—even your competitors—to create a Lean learning collaborative. You have nothing to lose but process inefficiency and waste.
Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
