Lean Health Care: Lower Costs, Better Outcomes

Toyota’s legendary lean processes didn’t come out of nowhere. They were forged by the fire of urgency in post-World War II Japan when resources were scarce. Toyota innovated – and continued to innovate. Today, the Toyota Production System is the most respected manufacturing and inventory control system on earth — and very hard to duplicate. The company has been able to consistently reduce waste and cost through it’s commitment to lean and high quality products.

Could lean processes transform the U.S. health care system, with its spiraling costs and inconsistent quality?

Health care, of course, is different from manufacturing. There are no shop floors, products or assembly lines per se. But the industry’s growing problems — not to mention the challenges of health care reform — are creating a sense of urgency and a strong mandate for change. Can lean techniques help hospitals increase efficiency, streamline processes, and improve patient outcomes and patient satisfaction? In this article, part of a special report on how lean processes can transform businesses beyond the shop floor, experts from Wharton and The Boston Consulting Group (BCG) explain how it is possible to accomplish these goals.

Length of patient stay is a critical measure of effectiveness and efficiency. A shorter stay means that beds turn over more quickly and hospitals can treat more patients without investing additional capital. According to Jon Scholl, a partner and managing director at BCG, a hospital with 800 beds that cuts average length of stay by just 10% can free up nearly 80 beds per year, enabling the delivery of more than 4,000 additional procedures and boosting operating profit by almost $30 million. This approach effectively “builds” new beds for the hospital. With new construction costs averaging $1 million per bed today, “another $80 million in averted capital can be realized,” says Scholl. “If you can lower length of stay by 10%, just look at the incredible leverage a hospital has.”

So how can a health care system run with this?

The Longer the Wait, the Longer the Stay

“Executives can’t rescue the length of stay,” says Lawton Robert Burns, director of the Wharton Center for Health Management and Economics. “Clinicians do that. Doctors do that by being more efficient, getting discharge orders done quickly, allowing discharge planners to do their job.”

But physicians are generally a drag on length of stay. If the attending physician is a community-based doctor, his or her main practice is outside of the hospital. For discharge, that doctor has to get back to the hospital. “You can imagine all the communication gaps between the nurse manager and that doctor. Patients sit around waiting for treatments and for discharge. They may need diagnostic tests, an X-ray, and physical therapy — all those hand-offs.” If any one of those doesn’t happen on time, it can delay discharge. The longer patients wait, says Burns, the longer their hospital stay — and the greater the chance of infection.

With help from BCG, the University of North Carolina Health Care System (UNC Health Care) launched a lean pilot program that is increasing efficiency and enabling the hospital to serve more patients. UNC Health Care is an 800-bed hospital and medical school. Its problem, according to Scholl, was that its capacity was stretched to the limit in most areas of the hospital. As an important local public hospital and trauma center, UNC Health Care needed more space. But adding a new bed costs a million dollars and takes several years.

Glen Spivak, UNC Health Care’s vice president of operational efficiency, explains the reason for going lean: “At the end of the day, we’re not doing this to reduce length of stay for its own sake. We’re doing it to provide better care, to use our resources more efficiently. There are opportunities to be more efficient.”

Adam Farber, a partner and managing director at BCG, agrees. “You need to be clear on what you are trying to achieve with lean,” he says. “You can’t set a goal of wanting to do lean. Lean is not an outcome. Performance is an outcome. Competitive advantage is an outcome.”

UNC Health Care’s desired outcome was clear: Reduce length of stay without affecting quality of care.

A Whiteboard in Every Room

“None of this is rocket science,” says Douglas R. Dirschl, MD, professor and chairman of the department of orthopedics at UNC Health Care. “It’s pretty intuitive.” But a key problem is that physicians and hospitals typically are not on the same page. “It’s a gross generalization,” says Dirschl, “but the incentives for hospitals and physicians in U.S. health care have been historically different.” Lean processes can help close that gap.

Dirschl provided an example of what the initiative looks like in action: “Take someone who is having a total hip replacement. The patient is scheduled to come in to the hospital on a certain day, and they will need certain things accomplished in order to leave the hospital.” By planning better in advance, knowing what the patient will need, says Dirschl, “we can accelerate the process a little bit. Even prior to admission we begin to communicate with the patient about what their home health needs will be, what equipment they’ll need at home. We begin those conversations before admission.” Once admitted, Dirschl says the staff explains what is expected of them day by day while they are in the hospital. “The goal is to discharge these patients on the morning of the third post-op day,” says Dirschl. “That is one day sooner than it was typically in the last five years.”

UNC Health Care’s lean initiative included a written care plan and a whiteboard in every room with daily goals to help keep the patient focused on his or her discharge date. The pilot program lasted about two months. It kicked off in the orthopedics, medical oncology, pulmonary and infectious disease areas. “We measured important changes,” says Dirschl. “In orthopedics we decreased length of stay by one day, which meant we were freeing up three to four hospital beds each day.” Plus, patient satisfaction scores went up by 10% over historic averages. “From day one, there was a focus on communication. Patients were told, ‘Here is your target discharge date. Here is what has to happen for you to get out of the hospital.’” Communication had been less consistent in the past. “We needed a better vehicle.”

If the pilot program results were applied to the entire hospital, it would effectively raise capacity by about 80 beds and add $35 million to the bottom line. “Expanding bed capacity directly improves net income,” says Dirschl. It’s like having more beds without adding to fixed costs.” The pilot approach is now standard procedure in the three test areas, and UNC Health Care plans to launch lean initiatives hospital-wide.

According to Scholl, creating a fast, easy-to-use plan of care was the essence of BCG’s work. Within the first 24 hours following admission, the doctor now checks off the care and education a patient will need. With that care plan in place, “the care manager and nurse know exactly what to do.”

Another part of the lean initiative was a top-down review of day-to-day administrative procedures, Scholl says. “We began to identify common problems, bottlenecks in other areas.” Then the hospital looked into it. For example, sometimes it would take a couple days for the central intravenous line to be inserted [into a patient]. “This is often because people don’t always communicate well,” Scholl says. Such problems could easily delay discharge, but once they were identified, planners could provide logistical solutions to systematically reduce the length of stay.

Spivak explains that before the initiative, UNC Health Care knew there were ways to speed up release, but rarely took action. For example, one patient was supposed to leave the hospital at a given time. But because no one gave the family proper notice, no family member was available at the time of discharge to drive the patient home, or to provide home care. In many other cases a patient may need, say, one final test before discharge, but staff members don’t expedite its scheduling because they are unaware that it’s the only thing holding up the patient’s release. Once they find out, it often causes a flurry of activity. Too often, however, the flurry comes too late and the patient must stay in the hospital an extra day.

The keys to success, according to Spivak: “Good expectation management, planning and communication. These are the basics of Project Management 101.”

Wrong Side of the Equation

If the solution is so simple, why did it take so long? According to Chris P. Lee, a professor of operations and information management at Wharton, “One reason for opposition is ethical concerns.” At first blush, he says, many physicians think that lean is all about production. But they’re wrong. “The Toyota Production System is not about a particular type of product, but basic principles.”

Another reason some medical professionals are cool to lean, according to Lee, is that people often focus on the wrong side of the equation. In production there’s a concept of thinking about things from the point of view of resources or products rather than consumers. “If I ran a hospital that believed that its mission was to care for patients, the number one thing I would do is start seeing things from the patient’s point of view.” He’d follow individual patients throughout their entire stay at the hospital. “Then I’d ask how much time they spent waiting and how much time they spent having care performed. You’ll see the majority of time is spent waiting. I think every care professional should begin to see it from the patient’s perspective.”

Lee says this should be traced back to the beginning, to appointment-taking. The average time to get an appointment is about three weeks. “It’s not just that patients wait once they are in the hospital. They begin waiting after they hang up the phone after making an appointment.” Why the delay? Lee believes it’s because hospitals book appointments weeks in advance. That leads to a lot of “no-shows.” The solution might come down to “open access” — that is, making appointments only for the next day. Lee explains, “The backlog is a function of having fallen behind matching the supply of care to the demand of care.” And the backlog grows if they continue to make appointments they can’t handle. Also, the longer the wait, the more chance the patient won’t show up for the appointment, so it becomes a vicious circle. “These clinics and hospitals with backlogs have a lot of no-shows and a lot of idle time every day,” notes Lee.

Lee also believes there is room for improvement in patient handoffs. “Look at how many times patients are handed off during their hospital stay. There are numerous handoffs to doctors, nurses and various departments.” When hospitals adopt lean methods, he says, they tend to stop passing patients between care professionals. Instead, they develop care teams of dedicated professionals who handle patients. “This reduces handoffs, it reduces medical errors, it reduces length of stay, and it improves patient satisfaction greatly.” More handoffs lead to more medical errors. And more medical errors lead to longer lengths of stay.

Overcoming Resistance

Maria Rieders, an adjunct professor of operations and information management at Wharton, has observed various lean health-care initiatives. Over the last few years, she says, hospitals have systematically decreased the number of infections by standardizing their procedures. But standardization can go a lot further in the health-care environment.

“The underlying goal is to get the best product to the customer in the best possible way,” she says. “In this case, the customer is the patient.” While noting that lean health care is not brain surgery, she understands the resistance. The problem is that health-care professionals are so dedicated and professional. “They are well-educated and by nature focused on doing the best at all times. If they encounter a problem they quickly try to come up with a solution.” But they are not systems thinkers.

In industrial engineering, “you try to look at the processes working in that system as part of your system set.” The physician, on the other hand, is trained as a problem solver. “He does not follow the patient from the very beginning when they are admitted to discharge.” If you start thinking in terms of systems you would arrive at a different viewpoint. “You begin to see that in collaboration with others it does make sense to come up with standardized rules.”

Another obstacle to successful lean health care, Rieders says, is that medical professionals are incredibly busy. “If you visit a hospital floor, you see that nurses don’t sit around and gossip,” she says. They don’t have time to discuss how to improve things. If you want to improve things you have to invest a little, and who has the time? Imagine you are trying to look at an infectious disease ward and review its practices with an eye toward standardization. “Everyone is willing to get together but there is no extra time. There has to be a commitment on a fairly high level so that these efforts are not idle management efforts, but are being put into place to improve patient care. With that commitment comes the ability to free up some nurses to attend workshops.”

What strikes Rieders about hospital settings is that “you really work with great people.” Toyota has cultivated a culture of continuous improvement where every worker is part of the solution. Workers are encouraged to stop the assembly line if they see a problem. They are not encouraged to cover up, but to get to the root cause of the problem. In a hospital you have an educated, dedicated workforce. “When you explain to them how much they can contribute to the solution, you don’t have to work hard to convince them to come on board. A lot of these dedicated people are already problem-solvers. They just need to take a look at and think about the entire system.”

But, Rieders adds, if you don’t have a top-level manager who is a strong advocate of the program, “you might wind up with a temporary, short-term improvement, and the system is likely to slide back to status quo.”

According to BCG’s Merchant, the reason no one can copy the Toyota Production System is “the mindset of senior leaders and people on the production floor” create success or failure. There are technical aspects of lean — reducing waste, gaining efficiency. “But lean is really about change.” For lean to succeed “you have to think about what your customers need, what your employees are connected with and what your senior leaders support. You won’t be successful unless you do all three.”

Looking back on initial discussions prior to UNC Health Care’s lean initiative, Dirschl says they encountered some resistance. “Nurses and care managers were a bit skeptical. So we had to take three groups of people — doctors, nurses and care managers — and get them all working on this problem.”

There was pushback from all three. “So first we chose some areas in which we could pilot it, where we had champions and knew we’d be successful. We never allowed frustration to build. We made sure that the communications were managed at every step.” Another pushback came from doctors who had to complete a form for every admission. Even though this task took no more than 60 seconds, “it was new work for them,” says Dirschl. “But it was key because it triggered everyone else’s work.” Of particular importance was picking a target discharge date and defining the criteria the patient needed to meet in order to be discharged. “It was a total no-brainer, but this information was never before in a place where people could see it.”

Dirschl acknowledges that lean health care isn’t yet a tsunami, but it is picking up speed. “Doctors are recognizing this is the way of the future, but I’d be exaggerating to say that the midpoint has shifted a whole lot. But it will change a whole lot more in the next five years.”

BCG’s Jon Scholl agrees. “The UNC Health Care lean initiative required new processes and new behaviors – the same things faced by manufacturing plants. Doctors are protective of their time, but they are also scientists, so when they see that something works, they will change.”

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