Keen to Be Lean

Desperate to cut costs, hospital CFOs are turning to an unlikely source: the "lean management" principles championed by manufacturers.

Lean, Not Mean

The notion of applying a manufacturing mind-set to a medical facility will strike many as not only improbable but potentially dangerous (it may not help that Toyota just announced its largest recall in history). Are doctors and nurses to be thought of as assembly-line workers focused on efficiency and speed at the expense of care and compassion?

“A lot of the anxiety about lean comes from the fear that all of the methods from Toyota will be copied,” says Mark Graban, a former industrial engineer who has worked in manufacturing as well as health care and who is now a senior fellow at the nonprofit Lean Enterprise Institute. “But hospitals are implementing lean methods to help them support what they are trying to do, not to make them into any less of a caring environment.”

Lean has also made inroads into financial services, higher education, state governments, and retail. Starbucks has put together “lean teams” to improve its repeatable activities — rearranging store layouts to improve barista productivity, for example.

“Lean management focuses on improving processes, so its principles and practices are applicable to any business,” says Bob Emiliani, a lean educator who works with senior managers. “There’s a potential role for it any time there’s a need to reduce costs, although to think of it solely as a cost-cutting method is a misinterpretation.” (For lean’s principles, see “Healthy Regimen” at the end of this article.)

Health-care facilities have any number of activities that consist of repeatable steps, such as registering, diagnosing, and testing patients. If there are inefficiencies that can be corrected, not only should costs go down but quality should go up. If nurses are spending just 30% of their time with patients, for example, a hospital may study what they are doing the rest of the time. They can then make it possible for those nurses to spend more time bedside, rather than hunting for equipment or tracking down doctors.

Physicians, of course, may be less amenable to being told how to do their jobs. “Lean hasn’t been widely accepted, because in health care you’ve got thousands of professionals who think, ‘I know how to do that,’” says Tim Olson, CFO of ThedaCare. “That creates process defects, errors, waste, and quality issues.” At least 44,000 people die each year because of medical errors, according to the Institute of Medicine.

Lean provides a lens through which companies can study different processes across various departments with the goal of reducing costs and improving quality. (That applies to accounting as well; see “Accounting for Lean,” below.) Guided by spreadsheets and benchmarks, a conventional cost-cutting exercise will simply look for expenses that can be eliminated, such as employees. But that approach can still leave waste in the system — hampering the productivity of a smaller workforce that must, if anything, become more productive.

A lean hospital would take a more holistic view, hoping to boost revenue and improve service by, for example, developing standardized methods that allow operating rooms to be changed over more quickly. A hospital that can disinfect and restock in half the time can increase the number of procedures it performs and reduce wait times.

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