Lean in a Land of ACOs and Health Reform

With all of the political uncertainty facing American health care in the coming years, health systems are already moving quickly to get ahead of the curve on the quality improvements and cost reductions that are being demanded by health reform and the marketplace.

Hearken to the recently departed Dr. Stephen Covey, who taught millions about the "circle of concern" and the "circle of influence." The circle of concern includes the broader issues of the November election, the future of the Affordable Care Act (ACA), and the health of the global economy. Dr. Covey recommended we focus on the things we can do something about – and there’s plenty of that in health care – our circle of influence.

In this climate, some hospitals have accelerated their adoption of Lean improvement principles and the broader Lean management system. Some, like ThedaCare in Appleton, Wis., are leveraging their experience with using Lean to redesign care processes and build new facilities to design completely new ways of working – as a part of the Accountable Care Organizations that are part of the ACA.

The ACO’s fixed "per episode" payment model places a premium on process improvement and effective collaboration to prevent errors and shorten length of stay, while working to avoid admissions and readmissions. In keeping with the Lean model of starting with small-scale scientific improvements, ThedaCare CEO Dr. Dean Gruner told me earlier this year, they consider the early ACO work to be an experiment. In this light, they are starting with care that represents just 20% of their revenue to see if they can make the ACO model work.

ACOs fit well with the Lean model and its definition of customer value – where people want to pay for results, not activity. In the current fee-for-service model, Dr. Gruner says, "if we’re healthy and don’t get sick, nobody gets paid. We’re paying for illness, when what [patients] want is wellness – that sounds sort of wacky, doesn’t it?" With ACOs, hospitals that can best work together with primary care physicians to keep patients out of the hospital will have the most to gain financially. "The ACO model is better connected to keeping people healthy," says Dr. Gruner.

When patients do need to get admitted, hospitals (with or without an ACO structure) can use Lean methods to provide the safest, highest-quality care that gets the patient home as soon as medically ready. The Lean improvement model engages frontline staff to find ways, for example, of improving the inpatient discharge process, something that involves many disciplines and, often, many organizations. Hospitalists can play a key role in preventing communication problems that would cause a patient to stay in the hospital a day or two longer than necessary.

The shorter length of stay in a fixed reimbursement model means cost savings for the hospital for that case. Additionally, beds are freed up, which means higher volume (and, often, more revenue) for the hospital; and freed-up beds often mean that a hospital increases its capacity without the need for multimillion-dollar expansions. ThedaCare, for one, has published results that show 25%-30% reductions in the cost of inpatient care, 25%-30% reductions in length of stay, and dramatic reductions in errors and mortality – through their Lean-based "collaborative care" model.

Hospitalists are playing a major role in using Lean to drive improvements in organizations. If your organization is not yet "getting Lean" (meaning formally adopting this methodology), then you can play a role in getting things started – your patients, staff, and organizations will all benefit, even in these challenging and uncertain times. As Dr. Covey would remind us, these process improvements are right in our circle of influence.

Mr. Graban is the coauthor of the book "Healthcare Kaizen: Engaging Front-Line Staff in Sustainable Continuous Improvements," released in June 2012, and the author of "Lean Hospitals: Improving Quality, Patient Safety, and Employee Engagement."

He has employment with and ownership stakes in Constancy Inc., Lean Pathways Inc., and KaiNexus; and he is a former employee of the Lean Enterprise Institute, a formal partner with ThedaCare in the Healthcare Value Network initiative.

With all of the political uncertainty facing American health care in the coming years, health systems are already moving quickly to get ahead of the curve on the quality improvements and cost reductions that are being demanded by health reform and the marketplace.

Hearken to the recently departed Dr. Stephen Covey, who taught millions about the "circle of concern" and the "circle of influence." The circle of concern includes the broader issues of the November election, the future of the Affordable Care Act (ACA), and the health of the global economy. Dr. Covey recommended we focus on the things we can do something about – and there’s plenty of that in health care – our circle of influence.

In this climate, some hospitals have accelerated their adoption of Lean improvement principles and the broader Lean management system. Some, like ThedaCare in Appleton, Wis., are leveraging their experience with using Lean to redesign care processes and build new facilities to design completely new ways of working – as a part of the Accountable Care Organizations that are part of the ACA.

The ACO’s fixed "per episode" payment model places a premium on process improvement and effective collaboration to prevent errors and shorten length of stay, while working to avoid admissions and readmissions. In keeping with the Lean model of starting with small-scale scientific improvements, ThedaCare CEO Dr. Dean Gruner told me earlier this year, they consider the early ACO work to be an experiment. In this light, they are starting with care that represents just 20% of their revenue to see if they can make the ACO model work.

ACOs fit well with the Lean model and its definition of customer value – where people want to pay for results, not activity. In the current fee-for-service model, Dr. Gruner says, "if we’re healthy and don’t get sick, nobody gets paid. We’re paying for illness, when what [patients] want is wellness – that sounds sort of wacky, doesn’t it?" With ACOs, hospitals that can best work together with primary care physicians to keep patients out of the hospital will have the most to gain financially. "The ACO model is better connected to keeping people healthy," says Dr. Gruner.

When patients do need to get admitted, hospitals (with or without an ACO structure) can use Lean methods to provide the safest, highest-quality care that gets the patient home as soon as medically ready. The Lean improvement model engages frontline staff to find ways, for example, of improving the inpatient discharge process, something that involves many disciplines and, often, many organizations. Hospitalists can play a key role in preventing communication problems that would cause a patient to stay in the hospital a day or two longer than necessary.

The shorter length of stay in a fixed reimbursement model means cost savings for the hospital for that case. Additionally, beds are freed up, which means higher volume (and, often, more revenue) for the hospital; and freed-up beds often mean that a hospital increases its capacity without the need for multimillion-dollar expansions. ThedaCare, for one, has published results that show 25%-30% reductions in the cost of inpatient care, 25%-30% reductions in length of stay, and dramatic reductions in errors and mortality – through their Lean-based "collaborative care" model.

Hospitalists are playing a major role in using Lean to drive improvements in organizations. If your organization is not yet "getting Lean" (meaning formally adopting this methodology), then you can play a role in getting things started – your patients, staff, and organizations will all benefit, even in these challenging and uncertain times. As Dr. Covey would remind us, these process improvements are right in our circle of influence.

Mr. Graban is the coauthor of the book "Healthcare Kaizen: Engaging Front-Line Staff in Sustainable Continuous Improvements," released in June 2012, and the author of "Lean Hospitals: Improving Quality, Patient Safety, and Employee Engagement."

He has employment with and ownership stakes in Constancy Inc., Lean Pathways Inc., and KaiNexus; and he is a former employee of the Lean Enterprise Institute, a formal partner with ThedaCare in the Healthcare Value Network initiative.

With all of the political uncertainty facing American health care in the coming years, health systems are already moving quickly to get ahead of the curve on the quality improvements and cost reductions that are being demanded by health reform and the marketplace.

Hearken to the recently departed Dr. Stephen Covey, who taught millions about the "circle of concern" and the "circle of influence." The circle of concern includes the broader issues of the November election, the future of the Affordable Care Act (ACA), and the health of the global economy. Dr. Covey recommended we focus on the things we can do something about – and there’s plenty of that in health care – our circle of influence.

In this climate, some hospitals have accelerated their adoption of Lean improvement principles and the broader Lean management system. Some, like ThedaCare in Appleton, Wis., are leveraging their experience with using Lean to redesign care processes and build new facilities to design completely new ways of working – as a part of the Accountable Care Organizations that are part of the ACA.

The ACO’s fixed "per episode" payment model places a premium on process improvement and effective collaboration to prevent errors and shorten length of stay, while working to avoid admissions and readmissions. In keeping with the Lean model of starting with small-scale scientific improvements, ThedaCare CEO Dr. Dean Gruner told me earlier this year, they consider the early ACO work to be an experiment. In this light, they are starting with care that represents just 20% of their revenue to see if they can make the ACO model work.

ACOs fit well with the Lean model and its definition of customer value – where people want to pay for results, not activity. In the current fee-for-service model, Dr. Gruner says, "if we’re healthy and don’t get sick, nobody gets paid. We’re paying for illness, when what [patients] want is wellness – that sounds sort of wacky, doesn’t it?" With ACOs, hospitals that can best work together with primary care physicians to keep patients out of the hospital will have the most to gain financially. "The ACO model is better connected to keeping people healthy," says Dr. Gruner.

When patients do need to get admitted, hospitals (with or without an ACO structure) can use Lean methods to provide the safest, highest-quality care that gets the patient home as soon as medically ready. The Lean improvement model engages frontline staff to find ways, for example, of improving the inpatient discharge process, something that involves many disciplines and, often, many organizations. Hospitalists can play a key role in preventing communication problems that would cause a patient to stay in the hospital a day or two longer than necessary.

The shorter length of stay in a fixed reimbursement model means cost savings for the hospital for that case. Additionally, beds are freed up, which means higher volume (and, often, more revenue) for the hospital; and freed-up beds often mean that a hospital increases its capacity without the need for multimillion-dollar expansions. ThedaCare, for one, has published results that show 25%-30% reductions in the cost of inpatient care, 25%-30% reductions in length of stay, and dramatic reductions in errors and mortality – through their Lean-based "collaborative care" model.

Hospitalists are playing a major role in using Lean to drive improvements in organizations. If your organization is not yet "getting Lean" (meaning formally adopting this methodology), then you can play a role in getting things started – your patients, staff, and organizations will all benefit, even in these challenging and uncertain times. As Dr. Covey would remind us, these process improvements are right in our circle of influence.

Mr. Graban is the coauthor of the book "Healthcare Kaizen: Engaging Front-Line Staff in Sustainable Continuous Improvements," released in June 2012, and the author of "Lean Hospitals: Improving Quality, Patient Safety, and Employee Engagement."

He has employment with and ownership stakes in Constancy Inc., Lean Pathways Inc., and KaiNexus; and he is a former employee of the Lean Enterprise Institute, a formal partner with ThedaCare in the Healthcare Value Network initiative.