Go Lean (Part 2): Don't be Scared, It's Only Change

In Part 1 of our look at "Lean" healthcare we looked at how Seattle Children's hospital applied the tenets of this methodology toward creating a more efficient outpatient facility. In our second part, we look at how to approach "going Lean" with your team.

If you've ever watched a child get ready for school in the morning, you've witnessed the ultimate in inefficiency. First they can't find their homework—it's never in their backpack. Then they can't locate their shoes or their coats or just about anything else that they bring with them every day. To get them out of the house on time means that Mom and Dad must move with lightening speed and optimum efficiency from one room to the next acting as a super-human GPS for socks, shoes and the like. Then they must pull together a lunch and get them out to the bus. All this activity barely leaves time for breakfast, much less a relaxed start to the day.

Let's add Lean to this picture. Mom and Dad impose a new way of approaching the morning routine; prepare things the night before. The kids don't like this; they don't want to do it (why would they, you do all the work for them in the morning). There's grumbling and resistance but after a lot of prodding the plan goes into action. Step one: The night before, all clothes and shoes are laid out in one location in the bedroom where the child wakes up. Step two: The book bag is pulled together (including homework and books) and placed next to the front door. Step three: Lunches are packed the night before and are ready to take from the refrigerator. Step four: Breakfast bowls, spoons and a box of cereal are left on the counter waiting to be used.

All that advance prep work will likely take you and your child 10 minutes the evening before. But now there is no fuss. Everything is where it should be; you spend no time searching for items and believe it or not, you and your child can even enjoy breakfast (or a few extra minutes of rest). Everyone starts the day happier and the program is a success.

We know everyone likes things to run smoothly but not unlike the average child, the average adult dislikes change in their routine. Change brings fear, but it often brings progress. You see, there is a misconception by some in healthcare—in particular with clinical staff—that Lean is about efficiency without regard to caring. Getting Lean to work at your facility requires you as CFO to help breakdown these preconceived notions and show the staff why this is beneficial to them and their patients.

1. Hit 'em with the financials.
"There are lots of efforts that can be done for short-term fixes to shore up financials and ROI, Lean isn't the best method for the quick hit," explains Charles Hagood, president and founder of Healthcare Performance Partners, a division of Broadlane. "You don't embark on a Lean transition unless you are more focused on long-term, quality patient care because it takes three to five years to really take effect."

Gallatin, TN-based HPP has spent more than a decade implementing and partnering with companies in the application and utilization of the Lean and Lean Six Sigma concepts and tools.

In July, as part of an agreement with the Obama administration to pay for reform, hospitals agreed to forgo $155 billion in government reimbursement over the next 10 years—that's an average of $2.7 million per year per hospital. Moreover, the revised Medicare rates are likely to be determined by efficiency on a regional or city-wide basis—not a hospital-to-hospital basis. In other words, some low-performing hospitals could be lumped in with efficient hospitals (and vice versa), so every hospital would be best served to become more efficient in order to obtain the best reimbursements as a group.

These will be long-term cuts to your budgets, and you need a long-term approach to correcting them. It's just common sense that every hospital has to make up that money—ideally in growth—but improving outgoing expenses is another approach. Lay it on the line with folks: Help us be more efficient, so we don't have to look for other ways to compensate for the losses (e.g., layoffs or compensation freezes).

That's not to say there aren't quick fixes to be found by applying Lean principles. For instance, I spoke to a CFO on the east coast last week who was discussing cost reductions, but what she really was discussing was efficiency. During a meeting with some hospital directors it came out that they had a time clock issue with the staff. Through no fault of the staff, there was only one time clock to check in and out. So, once the staff punched in—on the main floor—they still had to make their way to their department. Sometimes along the way they'd stop for a coffee or to say "hello" to someone. Those personal minutes on the hospital's dime added up. What was the simple, efficient solution? Put a time clock on each floor. Now when the staff clocks in, they are ready to work and the hospital isn't paying for down time. Was this a million dollar efficiency measure? No, but it saved the hospital an estimated $10,000 for the year—and every dollar counts.

2. Discuss what efficiency means in terms of quality.
A doctor can tell a diabetic to cut out sugar, but the patient needs to do the work. The same holds true for you and the rest of the hospital staff and administration. To help get everyone on board ask them to help define what efficiency means at your hospital. Also look for input through brainstorming sessions on areas where processes could be improved. As with the time clock scenario, CFOs aren't in the trenches everyday, so you need the staff to participate if you want success.

What you may find, however, is that there is a great deal of fear surrounding Lean and staff layoffs. Certainly it has happened that once Lean was implemented, less staff was needed, but that is only the case when productivity could be maintained or improved while decreasing the staff. It's important that everyone is clear about the goal for your Lean efforts. Better quality and improved patient satisfaction are the ultimate goals. However, the by-product of efficiency is often financial savings—and that's nothing to be ashamed of.

"A lot of non-profits are very cautious about making the focus of the transformation solely financial, so many of them concentrate on improving quality and patient satisfaction—choosing to become the 'provider of choice' and hoping the financials will wash out," says Hagood.

However, CFOs shouldn't shy away from stressing the importance of the financials with the team, because it goes hand-in-glove with better quality and patient satisfaction. "It's the folks on the front line who need to believe in this [Lean]. They can't see it solely as a new cost cutting approach or it won't work," Hagood adds.

Financials, quality and patient satisfaction are intertwined and nowhere is that perhaps more evident than in length of stay. LOS has long been a pain-point for physicians and administrators. The faster you turn over beds, the more quickly patients can be treated without expanding (investing capital) for more space. Doctors want more beds to be able to treat more patients, but these days many facilities cannot invest the nearly $1 million per bed to build. Since more money isn't readily available to change the bed situation, a new approach—a Lean approach—helps everyone achieve the goal.

According to data gathered by Knowledge@Wharton and Boston Consulting Group, if a hospital with 800-beds reduces the average length of stay by just 10%, 80 beds will be freed up annually. That means the staff can help more patients, ultimately increasing procedures (by an estimated 4,000) thereby boosting operating profit by almost $30 million annually.

Applying Lean correctly and allowing your team to understand the practical ways in which it can not only help the bottom line but also the patient is the key to the successful implementation of this program. The fact is Lean efficiency and similar programs work. Hospitals can ill afford to allow their staff to kick and scream so loudly that they fail to take action. Doing so could cause incredible financial woes in the coming years—no hospital can afford those consequences. You're all on the same team, only now the team is "Go Lean."