1. World-Class Performance Lean in Healthcare Operations “A Lean Guy Goes to the Hospital” Presented Aug 4, 2006 Mark Graban, LFM ‘99 Senior Consultant, ValuMetrix ® Services Ortho-Clinical Diagnostics, Inc.

2. Business Confidential, © Ortho-Clinical Diagnostics 2006 Agenda The Crisis of Waste in Healthcare Lean Thinking Principles in Healthcare Benefits for: –Patients –Employees –Hospitals

3. Business Confidential, © Ortho-Clinical Diagnostics 2006 Mark’s Spaghetti Chart

4. Business Confidential, © Ortho-Clinical Diagnostics 2006 Who Do I Work For? ValuMetrix Services (Ortho-Clinical Diagnostics) –Started in 2001 running Lean and Six Sigma pilots in labs –Launched as a fee-for-service consulting business in 2003 Not “internal consultants” –100% dedicated to healthcare projects Hospitals, Laboratory Companies U.S., Canada, Europe, China –Application of the J&J “Process Excellence” Model –Project-based approach, lean coaching, “train the trainer” Goal is to help build a lean enterprise, not to do “kaizen events”

5. Business Confidential, © Ortho-Clinical Diagnostics 2006 In the News Almost Daily…

6. Business Confidential, © Ortho-Clinical Diagnostics 2006 Hospitals Are Dangerous… CDC 1998: 90,000 killed and 2,000,000 injured from hospital-caused drug errors & infections

7. Business Confidential, © Ortho-Clinical Diagnostics 2006 Preventable Errors Abound… “… 3 to 5% of specimens taken each year are defective… blood that isn’t drawn correctly… mix-up with another patient’s sample”

8. Business Confidential, © Ortho-Clinical Diagnostics 2006 Preventable Errors Abound…

9. Business Confidential, © Ortho-Clinical Diagnostics 2006 Preventable Errors Abound…

10. Business Confidential, © Ortho-Clinical Diagnostics 2006 Mass Production or Healthcare? Large batches Sub-optimizing one resource Lack of employee input One-person / One- machine Quality through inspection Automation is the answer Lack of standard processes Not communicating metrics Lack of leadership Constant fire fighting

11. Business Confidential, © Ortho-Clinical Diagnostics 2006 Non-Lean, Current Thinking 1.Specify value in the eyes of the provider (or the payer) 2.Identify your department and sub-optimize it 3.Make patients wait for the convenience of the system 4.Ignore some employees and devalue others 5.Continuously fight the same fires in the pursuit of surviving the day

12. Business Confidential, © Ortho-Clinical Diagnostics 2006 Applications of Lean in Healthcare Laboratories –Reducing Turn Around Times and Errors Emergency Departments –Reducing diversions, improving flow Outpatient Cancer Treatment –Reducing patient delays, increasing capacity Operating Rooms –Reducing changeover times, increasing utilization Pharmacies –Reducing errors, improving response Food Service –Reducing wasted food, improving quality

13. Business Confidential, © Ortho-Clinical Diagnostics 2006 Why LEAN Works in Healthcare LEAN is not a list of tools that applies only to factories LEAN is a philosophy of management that applies to any system LEAN rallies people around goals we can all agree on: –Patients and Employees

14. Business Confidential, © Ortho-Clinical Diagnostics 2006 Not About Cutting Heads Shortages of skilled employees –51% of hospital med techs greater than 45 years of age, vacancy rate at 11% –Shortfall of 265,000 nurses expected by 2010 Do more… –With the same –Eventually, with less

15. Business Confidential, © Ortho-Clinical Diagnostics 2006 Not Only About Cutting Costs Hospitals are using lean as a Business Strategy –Improving quality –Improving service –Improving employee satisfaction –Growth strategies –“Un-outsourcing” testing work

16. Business Confidential, © Ortho-Clinical Diagnostics 2006 Source: LEAN Thinking, Womack and Jones 1996 Principles of LEAN Thinking 1.Specify value in the eyes of the customer. –The customer must be willing to pay for the activity –The activity must change the form, fit or function of the product –The activity must be done right the first time –Who are the “customers?”

17. Business Confidential, © Ortho-Clinical Diagnostics 2006 Principles of LEAN Thinking 1.Specify value in the eyes of the customer. 2.Identify the value stream and eliminate waste. 13% of hospital costs are due to controllable waste. Source: Zuckerman, Hadley, and Iezzoni, 1994

18. Business Confidential, © Ortho-Clinical Diagnostics 2006 Physician Clinic Pharmacy Treatment Clinic Check-In Treatment Center Phlebotomy Laboratory Testing Typical Organization is Silo-ed

19. Business Confidential, © Ortho-Clinical Diagnostics 2006 Value Stream – Anatomic Pathology Pathologist Specimen Collection Send to Grossing GrossingProcessing Embed & Cut Staining I I III Slide Making I I Patient & MD I Transcriptionist I

20. Business Confidential, © Ortho-Clinical Diagnostics 2006 Was this an “ER Problem?” “…empty beds are available in the hospital, but there aren’t enough nurses to staff them.” This is a Value Stream problem!

21. Business Confidential, © Ortho-Clinical Diagnostics 2006 Types of Waste – Lab Examples Defects Overproduction Transportation Waiting Time Inventory Motion Processing Human Potential Label on the wrong tube Drawing all blood at 4 AM Long walks, multiple handoffs Tube waiting on centrifuge to fill 50 weeks of supply Tech walking 80 ft to the printer Time/Date stamps added, not used Administration not listening to Med Techs or RN’s ideas for improvement

22. Business Confidential, © Ortho-Clinical Diagnostics 2006 Are We Tolerating Waste? Healthcare = Workarounds –Professor Steven Spear “Decoding the DNA of the Toyota Production System” (HBR) “Fixing Healthcare Today From the Inside” (HBR) Case Example: –10-20% of MD orders are missing EVERY DAY Call and get the order – done? Tomorrow, we’ll do the same Problems need to be seen as opportunities

23. Business Confidential, © Ortho-Clinical Diagnostics 2006 Laboratory Layouts Drive Waste Layout is driven by departments Benches interfere with straight-line walking, encourage batches

24. Business Confidential, © Ortho-Clinical Diagnostics 2006 Clinical Laboratory Product Flow

25. Business Confidential, © Ortho-Clinical Diagnostics 2006 Clinical Laboratory Timeline Total CT = 5.44 hours

26. Business Confidential, © Ortho-Clinical Diagnostics 2006 Med Tech Walk Pattern Pharmacist Walk Pattern Layouts Drive Waste of Motion Cancer RN Walk Pattern Miles per Day!

27. Business Confidential, © Ortho-Clinical Diagnostics 2006 Typical 5S Baseline  Unorganized Workbenches  Product Flow not Obvious  Time wasted looking for things  Hoarding of supplies  Poor Utilization of Space  General Clutter  Supply Shortages and “Hidden” Inventories

28. Business Confidential, © Ortho-Clinical Diagnostics 2006 5S Improvement Examples

29. Business Confidential, © Ortho-Clinical Diagnostics 2006 Principles of LEAN Thinking 1.Specify value in the eyes of the customer. 2.Identify the value stream and eliminate waste. 3.Make value flow at the pull of the customer.

30. Business Confidential, © Ortho-Clinical Diagnostics 2006 Mass Production Thinking Utilization –Keep expensive assets heavily utilized MachinesDoctors –The tradeoff is waiting time CarsPatients Lean Thinking Flow –Focus on reducing Patient Waiting time Reducing Patient Wait Times

31. Business Confidential, © Ortho-Clinical Diagnostics 2006 B A Blood drawn MD consult Needle into Port Check In / Check Out Moving from room to room Waiting for Check In Waiting for MD Waiting for Treatment Value Added NVA But Required NVA, “Pure Waste” Outpatient Oncology Patient “Flow”

32. Business Confidential, © Ortho-Clinical Diagnostics 2006 Re-Work Loops Cause Delays

33. Business Confidential, © Ortho-Clinical Diagnostics 2006 Batching Prevents Flow

34. Business Confidential, © Ortho-Clinical Diagnostics 2006 Batching Hurts Quality Lack of “standard work” and opportunity for “error proofing” – Anatomic Pathology Batch of slides made, 3 patients, risk of mixup? 2 nd histotech labels one slide at a time

35. Business Confidential, © Ortho-Clinical Diagnostics 2006 Batching Hurts Quality Lack of “standard work” and opportunity for “error proofing” – Pharmacy

36. Business Confidential, © Ortho-Clinical Diagnostics 2006 Flow and Heijunka You can’t have flow without some amount of “leveling” in the system “Leveled Production: –You won’t be Happy without it” »From Toyota publication

37. Business Confidential, © Ortho-Clinical Diagnostics 2006 39% of Samples Arrive in Just 3 Hours of the Day TAT expectations are constant Typical Hospital Lab  Not Level

38. Business Confidential, © Ortho-Clinical Diagnostics 2006 Shift Leveling Reduces Peak Costs

39. Business Confidential, © Ortho-Clinical Diagnostics 2006 Principles of LEAN Thinking 1.Specify value in the eyes of the customer. 2.Identify the value stream and eliminate waste. 3.Make value flow at the pull of the customer. 4.Involve and Empower employees. 5.Continuously improve in the pursuit of perfection.

40. Business Confidential, © Ortho-Clinical Diagnostics 2006 Pre-Lean Med Tech Quote: “With all of the automation, I feel like a robot.”

41. Business Confidential, © Ortho-Clinical Diagnostics 2006 The “Thinking Production System” “Perhaps the greatest strength of the Toyota Production System is the way it develops people. This is why the T actually stands for ‘Thinking’ as well as for ‘Toyota.’” –Teruyuki Minoura, Toyota

42. Business Confidential, © Ortho-Clinical Diagnostics 2006 Source: USA Today August 24, 2005 What Mistake-Proofing Means to Healthcare The Global Goal: Reduce Medical Errors “Human error is inevitable. We can never eliminate it.” ….. We can eliminate problems in the system that make it more likely to happen.” Liam Donaldson WHO World Health Alliance for Patient safety

43. Business Confidential, © Ortho-Clinical Diagnostics 2006 Traditional Approach: –“Naming, Shaming, and Blaming” Lean Approach: –Supports open reporting of mistakes –Root cause problem solving process –“Anyone can make mistakes” Lean Requires a Cultural Shift

44. Business Confidential, © Ortho-Clinical Diagnostics 2006 Error Proofing Example Micrograms or Milligrams? A medical mistake waiting to happen when written by hand

45. Business Confidential, © Ortho-Clinical Diagnostics 2006 Error Proofing Example Confusing Unambiguous (Lean)

46. Business Confidential, © Ortho-Clinical Diagnostics 2006 MD Resistance to Standard Work “… some surgeons make a tiny, mole-sized mark on a patient instead of a big, bold "X”…. I call them passive- aggressive marks…” –USA Today, 4/18/06 Which is More effective?

47. Business Confidential, © Ortho-Clinical Diagnostics 2006 Lab Benefits from Lean Productivity improvement >30% Space savings of >450 sq ft Standardized work practices Reduction in Errors and Error Potential Test Turnaround Time (CT) reduced by 50%

48. Business Confidential, © Ortho-Clinical Diagnostics 2006 Hospitals Avoiding Capital Costs From 60,000 sq ft to 40,000 sq ft for new lab –Cost avoidance of $800,000 Blood bank in new lab w/o adding 2,500 sq ft –Cost avoidance of $400,000 Hospital food service cancels new building –Cost avoidance of $7,200,000

49. Business Confidential, © Ortho-Clinical Diagnostics 2006 Improving Patient Satisfaction October 2005 Hospital System ED 60%Overall Rating 62%Privacy 78%Wait Time for MD 61%Likelihood of Recommending December 2005 96% 84% 96% 98% PATIENT SATISFACTION SURVEY SCORES

50. Business Confidential, © Ortho-Clinical Diagnostics 2006 Reflections on a Year in Healthcare Lean is a powerful methodology People are people Healthcare people have incredible intrinsic motivation Humility and asking questions is better than being a know-it-all Coaching the team to “do lean & be lean” is the only sustainable route

51. Business Confidential, © Ortho-Clinical Diagnostics 2006 A Call To Action What can you do? –Talk to hospitals and doctors in your communities –Get involved with hospital boards –Encourage employer health plans to push lean –Consider a career shift into healthcare –Resources: “Good News… How Hospitals Heal Themselves” (DVD/PBS) Hardwiring Excellence (by Quint Studer) www.ihi.org (Institute for Healthcare Improvement)www.ihi.org www.prhi.org (Pittsburgh Regional Healthcare Initiative)www.prhi.org www.leanblog.org (Mark’s lean blog)www.leanblog.org

52. World-Class Performance Lean in Healthcare Operations Mark Graban, LFM ‘99 Senior Consultant, ValuMetrix ® Services Ortho-Clinical Diagnostics, Inc. mgraban@ocdus.jnj.com www.valumetrixservices.com mgraban@yahoo.com www.leanblog.org