When and how to “cash the check” from Lean Healthcare process improvements is not always obvious. Rightly so, CFOs will say: “If I can’t see the financial savings in the P&L, then they don’t count.”
Lean is not a social program. It’s a process improvement system that improves all aspects of the business case simultaneously when Waste is eliminated. In healthcare, business case (outcome) metrics can be categorized into: Satisfaction, Quality, Time, and Financial. Time includes patient access to services, the time to complete those services, and employee time to deliver them.
When Waste is eliminated, time is “freed up” for staff and leadership. For example, staff doesn’t have to search for supplies or perform rework due to a recurring defect. Leadership doesn’t have to deal with a recurring problem. But time is usually not freed up in 1 full-time equivalent (FTE) increments. And while continual productivity improvement is a business requirement, you cannot lay people off because of gains due to Lean. If you do, no one will sign up for the next improvement activity. So, what should leaders do to “cash the check” in a Lean Healthcare environment without it being perceived as another cost reduction program?
Make Productivity Visible
Productivity is a measure of cost, not production. It measures how much input is required to deliver a certain amount of output (output/input). When looking at labor productivity, possible productivity calculations are patients/labor-hour and service-units/FTE. Once the appropriate productivity metric for a given Value Stream process is determined, track it daily and post it in a visible location for all staff to see. Discuss it at least weekly. Let people know that productivity must be continually improved and that eliminating Waste is the only way to achieve it without overburdening staff. This creates an opportunity for dialogue allowing leadership to communicate the business reality while letting staff know that we are not going to continue adding work or reducing FTEs without improving processes to free up a proportionate amount of time.
Track all Time Saved and Dollarize its Potential
If we think of freed up time from Lean as being stored in a “time bank”, it may help us to see its value to the customer and organization. This time passes through three phases. First, it is identified (phase 1) during Lean improvement activities like kaizen events as time that will be freed up once tested solutions are fully implemented (phase 2). It is at this point that leadership must decide how to monetize (phase 3) the time savings. The freed up time can either be invested, cashed, or both. For example, freed up nursing time can be “invested” in more direct patient care (time with the patients) in order to improve other outcomes like satisfaction, infection rates or fall rates. Or it can be “cashed” by actions such as increasing volume with existing staff (revenue increase), reducing overtime (cost reduction), not filling a planned position (cost avoidance), or reducing budgeted FTEs. If you reduce budgeted FTEs, staff must feel confident that a proportionate amount of Waste has been eliminated and that no one will lose their jobs as a result. Attrition and internal transfer are examples of ways to achieve your commitment to no one losing their jobs due to Lean. In Lean thinking, it is important that leadership track and dollarize the time savings in all three phases in order to see its value. In many cases it will be difficult to quantify the exact impact to the P&L, but if we don’t quantify freed up people’s time, we cannot see its potential or actual financial value to the organization.
Reducing wait time and defects for patients frees them up to do the things they want to be doing, which increases their satisfaction with healthcare services. Eliminating Waste for staff frees up time to improve productivity without overburdening them. When it comes down to it, “It’s About Time.”
Dwayne Keller holds the position of Vice President of Healthcare Performance Partners (HPP). Dwayne has overseen the introduction and implementation of Lean Healthcare in various hospital and clinical systems throughout the USA. He coaches at all levels of Healthcare organizations, from CEO to front line staff to deliver improved outcomes via Lean. His deep understanding of Lean as a holistic process improvement “system,” and leadership guidance in connecting Lean implementation to each organization’s specific business case needs in a visual way, sets him apart in the industry. Dwayne has also been a speaker and lecturer at various Lean Enterprise conferences as well as a presenter at the Shingo Prize Conference. Dwayne began his career with DuPont as an Engineer and as an Industrial Engineer & Production Manager at Michelin Tire Corporation, he introduced Just-In-Time and Teamwork into two of their largest manufacturing operations. After earning his MBA, he spent three years in Michelin’s Marketing Department helping to transform it into a customer-focused research and data-driven organization. Dwayne joined Alcoa’s AFL Telecommunications Division as Plant Manager and later Director of Operations and drove implementation of the “Alcoa Business System” (ABS), which is its Lean Enterprise system, to meet business goals. Dwayne holds Master’s and Bachelor’s degrees in Mechanical Engineering from Bucknell University and a MBA from Clemson University.