Skip to main content

How One Woman Saved IU Health $54 Million

Analysis  |  By Philip Betbeze  
   January 19, 2017

With a little help from about 10,000 of her friends and colleagues, the head of Indiana University Health's office of transformation leaned in to cut waste and encourage value, one project at a time.

By 2012, Indiana University Health's board could see the writing on the wall: Its healthcare costs were too much.

In fact, the board sensed a day coming soon where the high cost of care would have a negative effect on the health system's competitiveness.

It felt an urgency to prepare the Indianapolis, IN-based health system for a future in which the buyers of healthcare, whether they be health plans, the government, or individuals, would be price-conscious.

IU Health had already tried some performance improvement projects, but they were scattershot and not based on a unified philosophy. In order to improve results and scale the improvement process, the board challenged then-CEO Dan Evans to deploy a system-wide value-improvement tool that could enlist all employees.

Lean, Not Six Sigma
Evans commissioned a study group that ultimately chose Lean because of its ability to engage large swaths of employees and because it "transforms culture," says Alicia Schulhof, the former HCA chief operating officer whom Evans hired to direct the effort, and whom he eventually put in charge of IU Health's Office of Transformation.

"Six Sigma can be intimidating," she says, referencing another popular process improvement technique. "[Lean] allows every one of our 35,000 team members to be a problem-solver."

That may be a slight exaggeration. Slightly fewer than 10,000 employees have participated in the project so far, but the transformation effort has reached wide—it's been installed at all 12 regions and 15 hospitals—and deep, as Lean performance improvement projects can be extremely specialized.

Schulhof does not prescribe efficiency projects. Her office and the consulting company IU Health hired to help with the process rollout train local offices in the statewide health system to find promising projects.

It's working. Over the past three years, efficiency efforts that Schulhof has overseen have yielded more than $50 million in savings.

Skepticism and Pushback
The consultancy hired to help implement Lean is called Simpler, and has experience implementing Lean at Fortune 500 companies.

But initially, even Schulhof was a skeptic of Lean, as were many at IU Health who were asked to lead the system's first Lean projects. Ultimately, she decided she had to trust the process, as she was asking others in the organization to do.

"It sells itself internally," she now says. "Leaders have to have deep personal experience with Lean to get it because once they go through it, they understand."

Office of Transformation
The Office of Transformation was created concurrently, but unrelated to, a reduction in force.

Schulhof had to convince the first of 12 local offices of transformation she would open during 2013 of the fact that Lean was not brought in to cut jobs. Indeed, she says, it was intended instead to remove redundancies in processes and reduce expenses to avoid the need to cut further jobs.

Employee surveys have shown that employees' perceptions of engagement with IU Health are higher if they have been involved in the Lean program, which now reaches all 15 hospitals and has been introduced through 1,150 "events" and 345 "projects" to 9,411 of its employees.

"Physicians are the best example of this," says Schulhof. "Their time is precious. They'll always say they can't commit two to three days for an event. I would always ask if they could just come in for first hour or two hours. Time after time they would come in and never leave."

Deployment Flexibility
As the first to lead the transformation office, Schulhof crafted the rollout the way she wanted to, deploying one site per month for the first 12 months.

"We chunked it by region," she says. "We went one-by-one and in a systematic fashion worked with local executive teams to determine what their biggest opportunities were. But [we] were not prescriptive."

The biggest opportunities to make headway on performance indicators were most often found in the perioperative or emergency departments.

One project began in 2013 in the digestive and liver disease clinic, involving extremely sick patients, some with end-stage renal failure. The problem: a patient cycle time of almost 210 minutes.

"I'm almost embarrassed to say that when we walked in, they were ordering additional office furniture because we were at capacity," says Schulhof. "These patients were spending some of the little precious time they had left on this earth just waiting. Talk about waste."

Since then, cycle time has been cut in half, while patient-doctor time stayed constant, and, in some cases, increased.

Each IU Health region tracks its Lean projects using about 15 metrics that are the same across the system, and are based on quality, people (employees), service (patients), finance, and growth. On Schulhof's dashboard and those of people who are managing the projects locally, those metrics for each project appear either red or green based on progress against goals.

While many companies use industrial engineers, such as those with IU Health's partner Simpler, as project managers at IU Health, those engineers are ordered not to solve problems themselves, but to instead act as coaches.

"That's how we can save $54 million," says Schulhof. "If you add in efficiency, we're over $130 million now."

View the HealthLeaders Media webcast, Maximizing Patient and Family Advisory Councils to Improve HCAHPS, live on February 14 and learn how one organization successfully created and upholds a highly effective advisory council.

Philip Betbeze is the senior leadership editor at HealthLeaders.

Get the latest on healthcare leadership in your inbox.