Lean in Healthcare Michael Waterman Division Director, Performance Excellence March 17, 2016 Welcome Why we are hear Goal of today

Fundamentals of Improvement “Seeing and Eliminating Waste”

Improvement Using Scientific Method Improving processes is not new…..it has been around for centuries Scientific Method Ford Production System Frederick Taylor Toyota Production System Deming – TQM And a host of spin-offs - lean, six sigma, lean-sigma, business process re-engineering….. There are many different names for process improvement over the years Each on has a set method and package of tools that are used to improve a process. All are based on the scientific method Ask question-Can we make this better Do research on current state-study the system, measure performance Construct Hypothesis-why do problems exist, how to elminate Test your solution-do a pilot study Analyze the results….what did we learn from experiment If it worked, change it…if not start again. http://www.sciencebuddies.org/science-fair-projects/project_scientific_method.shtml

So what has changed? Toyota determined that improvement need not just be set of disparate tools, but could be used as entire business system to create operational excellence House of Toyota The method of lean we are using is based on the Toyota Production System The idea is that you don’t just give people tools but you have to create an entire business system around the tools. This is a cultural change that is needed. The change will impact how our managers and leaders do their job everyday. The base of this system is understanding the various value systems and establishing methods of standard work. This will help to create operational stability. Work standards lead to reduced variability and therefore more predictability in outcomes. The next level involves creating a culture of continuous improvement. We infuse the Lean design concepts in our processes. That is the idea of pull systems, flow, visual management, etc. We will explain more about that later today By example we show our employees that continuous improvement is everyone’s job. We utilize daily management methodologies to teach and reinforce this. The result of all this is an organization based on providing the highest quality, shortest lead time by eliminating wasteful activities in our work. Prior to the merger we used these methods to address process improvement http://tbmconsulting.com/about/ourroots/house_toyota.php

What is “Lean” Short for “Lean Thinking” Management System for Continuous Improvement based on the Toyota Production System Set of principles that guide organizational thinking based on two themes: Elimination of waste or non-value added activity (continuous Improvement) Respect for all people So Toyota doesn’t really call this Lean If you go to Toyota they might not know what you are talking about The term Lean came about as a result of two MIT professors who were studying automotive companies and how each one worked. Lean Manufacturing as it was first called was their conceptualization of what they saw at Toyota. Two primary themes in lean Eliminate waste, or non-value added activity We are going to talk more about this in a minute Respect for all people in the organization This ties in perfectly with our cultural unfreezing and concepts such as Assume Positive Intent, Be Here Now, Mood Elevator, and so on. Taichi Ohno

Value Added versus Non-Value Added Any activity that takes time, space, or resources, but does not contribute directly to satisfying the needs of a Customer Any activity that contributes directly to satisfying the needs of a Customer So what is the difference between value added and non-value added work. This is the key thing we need to understand to successfully create the culture we want. We need to rethink how we measure and define value We are going to define a value added activity as any thing we do that contributed DIRECTLY to satisfying a customer need What does that mean? Example, ED patient with ear ache What is their need? What steps to do we take that add value if filling that need Triage? Registration? ID band? Prescription We are going to call anything we do that takes resources but does not contribute to satisfying a customer need non-value added. Does not mean it is not necessary or not valuable…but by doing this we are going to change how we approach process design and improvement So based on this, what % of the time do you think a typical process adds value? Activity Over Time Customer Need Presented Customer Need Met Time

How is “Lean” Different? “Lean” is the only improvement methodology that focuses on reducing the non-value added activity Value Added Non-Value Added A Typical Process is 95% Non-Value Added to 5% Value Added Activity Over Time Customer Need Presented Customer Need Met A typical process is 95% non-value added activity Give examples of the Value streams we have done already Give filter example. What we want to do is to isolate the NVA activity and focus on that. We don’t want to focus on changing the 5%...that is not where the big opportunity is. By eliminating things we do that don’t provide value, we improve throughput and quality without significant cost. We are eliminating work Give example of 1700 nurses and 50% of nurses time is wasted walking around Give example that 2000 steps is a mile and that take 20 minutes Give example of cleaning IV pumps We create resource capacity by taking away thing that waste time. Focusing on NVA creates two simultaneous phenomenon: The improvement potential is much LARGER The cost of the improvement is much LESS

Waste = Non-Value Added Activity Three Forms of Waste Operational Waste Waste of Unevenness Waste of Overburden Waste = Non-Value Added Activity

Are your Eyes Open? Can you see Waste ?

Eliminate the Waste Basic Concepts of Improvement Current State Design the system/ process with these attributes: Flow Pull Defect Free Visual Management Continuous Improvement Apply Improvement Concepts and Eliminate Wastes Better State

Anytime work stops, waste is present Flow Principle – Allow value to flow continuously to customer demand, in a standardized way Anytime work stops, waste is present

Utilize Pull Systems when work cannot flow continuously Principle – Perform work only when you have a true need from the customer Pull don’t Push Utilize Pull Systems when work cannot flow continuously

We always have time to do work the second time Defect Free Principle – Build quality into the process to exactly meet customer specified value the first time We always have time to do work the second time

Manage Visually Principle – See normal conditions from abnormal conditions at a glance so corrective action can be taken in real-time Issues tracked to support continuous improvement not as a punitive tool Process and Results Visual Management gives employees the knowledge and motivation to succeed!

Kaizen - Continuously Improve What is happening? Gaps? Trends? Why? Root causes? What needs to be done? Correct the problem Prevent the problem Who is going to do it? Who does what? Any support needed? When is it going to be done? Prioritization? Deadline? Milestones? Be fact based – Data and facts to drive the dialog Set right tone – Proactive language and send consistent messages

Applications in Finance Applying Lean in Non-Operational Areas

Lean Design in Financial Areas Example: Closing the Books Defining the Customer Need SIPOC Reducing Batch Size Concurrent Processing Based on an article by Jean Cunningham from Plant Lean Examples on the internet shows one company reducing the time to close books by 38%. Another reduced the time from 9 days to 5 days. http://www.lean.org/fusetalk/forum/messageview.cfm?catid=49&threadid=6394 http://planet-lean.com/lean-accounting-jean-cunningham-explains-how-to-apply-lean-principles-and-techniques-to-close-the-books-at-the-end-of-the-month

One Soft Hard Ti m e Financial Impact Productivity Level Loading LWBS Overall Impact Soft Productivity Level Loading Cost Avoidance Hard LWBS LOS/Growth One Ti m e Invent ory Safety Issues Measuring operational vs financial metrics Picking leading vs lagging measures Getting financial signoff on measures Standard calculations and measures (TAT in OR, Arrival Time in ED, etc) Availability of data

Measure Both Increases and Decreases Example Calculations Impact from changes in LWBS ((Baseline LWBS % - Current LWBS%) x (Actual Monthly ED Volume x Baseline LWBS Admit Rate % X IP Contribution Margin + Actual Monthly ED Volume x (1-Baseline LWBS Admit Rate %) x Outpatient Contribution Margin )x 12/1000)) Measure Both Increases and Decreases

Questions?