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Why Lean Isn't Successful in Healthcare

by Janice Brathwaite
November 14, 2013

Why Lean Isn't Successful in Healthcare

by Janice Brathwaite
November 14, 2013 | Comments (5)

Working in lean process improvement in healthcare, I wanted to find out why 40% of the Lean/Six Sigma projects in for-profit companies succeeded while only 20% succeeded in healthcare. Although for-profit or non-profit, all organizations seem to struggle.

Satya S. Chakrovorty says much of the responsibility lies with senior management who lose focus on Lean and move on to other things. This may be a part of the problem, but it is not the whole of the problem. Even when there is buy-in of senior management in the for-profit world–buy-in being espoused as the cornerstone of all successful lean initiatives–there is still that nagging 60% failure rate. In healthcare, the percentage of failed improvement efforts is even worse. 

Having come from industry, this made me think back to what drives organizations to implement process improvement initiatives in the first place. And then not just implement, but continue to support process improvement throughout the organization.

What drives these organizations is what should drive all of us: how is a particular process improvement effort going to improve the bottom line for this service or product and in turn contribute to the organization’s stability and viability? We are talking about Return on Investment (ROI).

ROI feels like a foreign concept to most nonprofits, one which too many cannot or will not tie back to process improvement. Of the 10 different healthcare organizations I’ve worked with, most of which have focused on improving patient “flow,” I’ve seen little to no effort to quantify savings gained by the implementation of process improvement efforts. I’ve seen project charters and process maps with no mention of how the improvement effort they are working on is going to impact the bottom-line. Rarely is there any attempt to: 1) quantify the actual cost of the service provided or 2) quantify how much was saved by implementing an improvement. If you don’t know your cost, how can you know if what you have done has really had a positive financial impact on the organization's bottom line? How often do you choose to improve processes that may not provide any financial benefit whatsoever?

This may be because healthcare organizations don’t think about “cost to produce” the same way for-profit corporations and manufacturing companies do. They hardly know the “true” cost of the individual services or products they provide to their patients. Very little effort is made to quantify the dollar impact all the processes listed in a value stream or process map. Healthcare leaders may be failing to acknowledge the impact of process improvement on ROI. Healthcare organizations continue to see their services as necessities that will always be available at some level despite the cost of production (a notion they might want to quickly disabuse themselves of).

Does improving patient flow mean a physician can see more patients? If s/he can, we need to look at what the financial consequences have been to the organization for seeing fewer patients and extrapolate the financial benefits. As we improve flow, we must quantify the costs of the steps along the way (I call this a Financial Process Map), look to see which steps are considered non-value added (in process flow and financial flow), and eliminate or reduce time spent on those. Once we quantify the steps we can easily see how their elimination or improvement can reduce costs.

If with Lean we spend too much time worrying about the composition of process improvement teams or creating process maps and value stream maps and not enough time finding out if the processes we seek to improve are really going to provide financial benefit to the organization, we are hamstringing our lean efforts across the board.

We cannot continue to sell the concept of lean process improvement as only that – process improvement. CEOs and CFOs of healthcare organizations want to know if Lean is going to give them a strong return on investment. Once they see the financial benefit (in addition to improved work processes), they will be more open not only to implementing Lean, but sustaining Lean.

The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
Keywords:  healthcare
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5 Comments | Post a Comment
Jackie November 14, 2013
4 People AGREE with this comment
I think that if you want to really have an 'improvement' succeed- LEAN or not - You need to consider the real Return on Investment.  If your only focus is on cutting costs then you will never succeed in a Health Care environment.  The real return on investment is Better Quality Care for more people, as a result of the change you want to make.  For example - you can reduce the Physician visit time to 2 minutes - but the quality of care is Zero.  You are giving zero service to even more people, but the cost /person is lower.  What I have seen in a number of projects in health care - is resources stripped out of departments as a result of the project.  Actual value goes down, while those resources just plain disapear.  Is it any wonder that the staff being asked to make the change, feel little enthusiasm for the so called 'Improvement'.  For your project to succeed - the staff/department being asked to change - need to see some kind of real "return on Investment".  Where LEAN succeeds in Health Care - they do.  For example again - rather than shortening Physician visit time - why not pre-screen and do required tests prior to the appointment  so that the physician and patient get maximum value out of the time and not have to have 2 apointments.  Better care + more time available for more patients.  (theory only)

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Ken November 18, 2013
1 Person AGREES with this reply
I agree with both Janice Brathwaite and Jackie. Ms. Brathwaite says: "CEOs and CFOs of healthcare organizations want to know if Lean is going to give them a strong return on investment." Yes, CEOs and CFOs in many industryies (non-profit and for-profit alike) often think only in terms of hard dollar ROI.  This is regrettable since the danger, as Jackie points out, is that customers (or patients) care about a lot more than just price.  Cost reductions will only allow you to reduce your price (or increase your profits) in the short run. Customers, on the other hand, care about quality and innovation and good service-- things that are hard to quantify.  I've always believed that if a company does a lot of things right in terms of quality and service, the revenue will come in the long-term. But this is a huge leap of faith for CEOs and CFOs to make. They will even acknowledge the truth of it, but they have to "meet their numbers" because they have boards, shareholders and analysts to answer to. So how do you effectively bridge the gap? How do you speak the language of ROI to senior executives to get their buy-in, while also doing what's right for the customer and the long-term health of the enterprise? I'm open to any suggestions because I've always struggled with this one.

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Greg November 19, 2013
2 People AGREE with this reply
I agree with Jackie. Any "improvement" should benefit the patient.

From my reading of Lean, it is a customer/patient centric process with the operating goal of elminating waste. Value to the patient is not a waste. It is the reason we are in business.

I think one of the pitfalls of Lean is getting too fancy and nutted-up with charts and metrics. As result it is too easy to get distracted from the primary goal: Improving value to the customer/patient. 

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rumples December 01, 2013

I am actually totally shocked that any task never mind project goes beyond the A3 phase if you do not cover basics like bottom line.

wow wow and another wow! Shocking!

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Shahriar Khan September 13, 2014

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