Adapting “Lean” to a Clinical Space: A Few Tips

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Conversations in healthcare often focus so much on bettering care and service that we often forget to consider how we can improve care centers as functional organizations. 

Non-health businesses discuss the matter all the time, asking — is there a way that we can be more efficient? Can we accomplish more at less expense, and if so, how? It is crucial for healthcare organizations of all sizes to hold these same discussions and act on their conclusions. Doing so not only helps providers improve their service offerings, but also empowers them to think critically about their operations, identify what is (and isn’t) working, and continually improve their business structures and day-to-day efforts. 

These conversations are invaluable in any industry but are particularly pressing in healthcare. 

It’s no secret that the American care system struggles with waste. In the fall of 2019, researchers affiliated with the University of Pittsburgh School of Medicine and Humana conducted a literature review of 54 peer-reviewed studies, government reports, and other sources only to find that waste accounts for almost one-fourth of all U.S. healthcare spending. The researchers noted that the cost of waste ranges between $760 billion and $935 billion per year. 

Obviously, this waste stems from a variety of sources, many of which individual care organizations have little to no control over. Pricing failure, for example, falls into this category and accounts for up to $240.5 billion annually; similarly, fraud and abuse costs top $83.9 billion each year. These factors aren’t within a healthcare leader’s ability to fix — but other factors definitively are. Of all the waste sources studied, administrative complexity posed the highest annual toll by far: $265.6 billion. 

This number is as striking is it is avoidable. As Lean TaaS President and Chief Marketing Officer Sanjeev Agrawal wrote of the matter for Health IT Outcomes, “To remain viable, asset-intensive and service-based industries must streamline operations and do more with less […] Healthcare providers can’t continue to try to spend their way out of trouble by investing in more infrastructure; instead, they must optimize the assets currently in place.”

Generally speaking, administrative costs fall into two major categories — billing and administrative (BIR) expense and facility administration. For this piece, we will be focusing on the steps that the leaders of care organizations can take to optimize their business processes and reduce operational waste. As defined by researchers for the RAND Corporation, the latter term refers to “the inefficient and unnecessary use of resources in the production and delivery of such services and can be divided into four types: duplication of services, inefficient processes, overly expensive inputs, and errors.”

At this point, it is almost a cliche to bring up “Lean” thinking in discussions about efficiency and waste reduction — but cliches are what they are for a reason. For context: a lean operating philosophy is one that focuses on creating value while simultaneously eliminating any nonessential processes and wasteful procedures. As writers for Investopedia explain, “This quality-control methodology uses a data-driven review to limit mistakes and defects in the production process. At its core, a company that adopts lean enterprise combines these two disciplines to maximize value for customers while slashing the money and resources spent on creating the products and services in question.”

The adoption of lean methodology has proven its cost-saving and efficiency benefits for healthcare organizations in no uncertain terms. 

In 2014, Ballad Health’s Johnson City Medical Center incorporated lean thinking into its approach to logistics and supply management. After doing so, its leaders realized that the organization of medical supplies was a source of inefficiency in the hospital’s emergency department. They promptly retooled their system to allow for more a trackable and accessible organizational method. According to a report published in Becker’s Hospital Review, the change allowed JCMC to save roughly $89,000 by increasing restocking efficiency and reducing unnecessary inventory and $150,000 per year in supply expenses. 

“From a team member standpoint, less time and fewer steps are being wasted when we perform our daily work,” JCMC’s emergency services manager, Travis Simmons, shared at the time. Even small changes to logistical processes can have enormous effects when implemented thoughtfully. 

All this said, it is critical that business leaders not think of lean principles as just a cost-cutting measure; instead, they should be viewed as a means to improve operations, quality, and efficiency. As lean thinking advocate Mark Graban once put the matter, “Cost reduction is an end result, not a primary goal.”  

Adopting a lean philosophy takes time. Before leaders leap to implement any efficiency measures, they must first establish and articulate their vision for a lean operation. The tenets of the philosophy — a passion for quality, an interest in continuous improvement, and acceptance for innovation — must be woven into the organization’s culture and reinforced at every level of leadership. 

Lean can’t be a vague buzzword to staffers; it needs to be explained and understood to have worth. As writers for Deloitte explain, “To succeed, health care providers must integrate Lean with the language of their existing patient-centered care philosophy. By adopting Lean principles and tools into their current practice environment, health care providers can more quickly realize the benefits of Lean throughout their care environments.”

Once the new philosophy has been introduced, business leaders can begin gauging the efficiency of their care delivery processes via predictive analytics. Over time, this approach will allow care organizations to not only identify areas of waste but resolve them. Lean thinking can’t patch all of the inefficiencies in the U.S. healthcare system — but it can certainly chip away at operational waste. 

Matthew Doyle is the Chief Operating Officer and Head of Investor Relations at Chicago Pacific Founders, an investment advisory firm that manages private funds within healthcare service sector. He has over 25 years of experience working in money management and financial services operations; prior to his time at CPF, Doyle served as the founder and managing member of Van Buren Securities, where he was responsible for all aspects of business development, risk management, regulatory compliance, operations, and profitability.

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