3
Introduction to Lean
THE NEED FOR CHANGE
Perform an Internet search on Lean healthcare and within 0.29 sec there are 9,403,000 hits.
1
A recent ASQ study shows
53 percent of hospitals report some level (minor, moderate, or full) of Lean deployment, and 42 percent
of hospitals report some level of Six Sigma deployment. Few hospitals participating in the study report
full deployment” of either Lean (four percent of hospitals) or Six Sigma (eight percent). The reasons
that neither method has been deployed in hospitals include: the need for resources (59 percent of hos-
pitals), lack of information (41 percent), and leadership buy-in (30 percent). Eleven percent of hospitals
surveyed were not familiar with either method.
2
Healthcare organizations have seen their customers shop for services, with access to information
at their ngertips. Customers today seek out treatment and provider options and soon will be able to
seek out services that offer the most value. Quality information is also starting to be available and
understandable. Pay for performance (perceived customer value) and healthcare reform will reinforce
the need for healthcare organizations to offer customer value, yielding high quality and a high ser-
vice at low cost. Every Healthcare entity is working to achieve the Triple Aim goals adopted by the
Centers for Medicare and Medicaid (CMS), to improve the patient experience of care (including qual-
ity and satisfaction), improve the health of populations and reduce the per capita cost of healthcare.
Today, we live in a competitive global economy. The global market drives the selling price as
customers seek to nd the best value at the lowest cost. The value of our healthcare in service, qual-
ity, and cost is being compared to healthcare around the world; therefore, the global market, in turn,
will impact the customer’s (patient’s) value proposition. The worldwide system impacts our ability to
increase or maintain our prots; we can no longer just raise our prices! Global competition today is
as close as your Internet screen. Today, if companies want to raise their prot, their only option is to
reduce costs. This means that companies have to be able to manufacture or provide the best and most
services they can, in as little space as possible, with the least amount of inventory, with the fewest
number of people, and the least number of errors. This is a challenge. Companies that can delight
their customers with the lowest cost will survive in the upcoming decade of increased competition.
Nowhere is this truer than in healthcare. Hospitals have experienced this with the current Medicare
reimbursement model and have been shifting the cost of providing services for Medicare patients
and the uninsured to the insured. (Cost shifting) Hospital reimbursements have always had a “xed”
component with contracted payments. They often manage prots by cutting costs and employees
(FTEs). This is not a sustainable strategy. Eventually they will have to move to a more efcient care
delivery model to be successful. With healthcare reform and increasing healthcare costs always on
the horizon, it appears that the only way to survive will be for organizations to become Lean.
Healthcare organizations must reduce costs and set predictable delivery systems (outcomes) in
place that can meet or exceed customer expectations, to grow their businesses. As they better under-
stand the customer value stream, they will identify opportunities to streamline or expand services
and grow both horizontally and vertically through partnering or the acquisition of other companies.
1
Internet Google search on February 2014.
2
“Hospitals See Benets of Lean and Six Sigma,ASQ Releases Benchmark Study Results, March 17, 2009.
1

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