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CFOs: Collaborate with the Competition to Save Millions

Karen Minich-Pourshadi, for HealthLeaders Media, December 5, 2011

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.

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