Taking Improvement from the Assembly Line to Healthcare

The Application of Lean within the Healthcare Industry

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 Taking Improvement
from the Assembly Line
to Healthcare

The Application of Lean within the Healthcare Industry

Ronald Bercaw
CRC Press
Taylor & Francis Group
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Contents
Acknowledgments...................................................................................... ix
Introduction............................................................................................... xi
Author..................................................................................................... xvii
1 Critical Condition: Why Change Is Needed Now............................. 1
Introduction: The Perfect Storm.............................................................. 1
Quality of Care........................................................................................ 3
Access to Services..................................................................................... 4
Affordability of Healthcare Services......................................................... 7
Shortage of Resources.............................................................................. 8
2 Fundamentals of Improvement........................................................ 11
What Is Lean?........................................................................................ 11
Value-Added Activities........................................................................... 11
Non-Value-Added Activities................................................................... 12
Themes of Lean Improvement: Continuous Improvement..................... 14
Themes of Lean Improvement: Respect for All People........................... 15
Seven Wastes.......................................................................................... 16
Overproduction............................................................................ 16
Waiting......................................................................................... 17
Overprocessing............................................................................. 17
Inventory...................................................................................... 18
Motion......................................................................................... 18
Defects......................................................................................... 19
Transportation.............................................................................. 20
Principles of Improvement: Lean DNA.................................................. 21
Flow Concept............................................................................... 21
Pull System................................................................................... 22
Defect-Free Work......................................................................... 23
Visual Management...................................................................... 24
Kaizen.......................................................................................... 27

v
vi ◾ Contents

3 Tools for Improvement..................................................................... 29

Introduction to Tools............................................................................. 29
Takt Time.................................................................................... 30
Clinic Example.................................................................... 30
Direct (Time) Observation........................................................... 33
Loading Diagram......................................................................... 37
Spaghetti Mapping and Circle Diagrams...................................... 41
Circle Diagram.................................................................... 43
Flow Diagram with Value-Added/Non-Value-Added Analyses...... 45
Value-Added and Non-Value-Added Analyses.....................46
Standard Work............................................................................. 47
Process Control............................................................................. 50
Summary...................................................................................... 53
Putting Tools Together.......................................................................... 54
A3 Thinking................................................................................. 55
Value Stream Mapping and Analysis............................................ 57
Kaizen.......................................................................................... 61
5S.................................................................................................64
4 Case Studies..................................................................................... 67
Revolutionizing Emergency Services: Enhanced Quality and Access...... 67
Accelerating Productivity and Access in Diagnostic Imaging................. 73
Creating the Ultimate Patient Experience: A Visit to an
Orthopedic Clinic................................................................................. 78
World Class Care at Inpatient Medical Unit.......................................... 82
Beyond the Hospital: Continuing Care in the Community................... 91
Creating More Time for Quality Care: Streamlining Administration...... 98
Summary............................................................................................. 103
5 Getting Started............................................................................... 105
Define Measurable Outcomes.............................................................. 106
Select and Map Value Streams............................................................. 107
Begin Improvement............................................................................. 110
Sustain Improvement and Manage Visually..........................................115
5S............................................................................................... 116
Process Control........................................................................... 116
Results Management...................................................................119
Support Improvement with Lean Training and Coaching................... 121
Spread Improvement............................................................................ 124
Replication of Artifacts, Products, Solutions, and Process.......... 125
Adding Additional Value Streams............................................... 127
 Contents ◾ vii

6 Leadership Lessons Learned........................................................... 131

Participate............................................................................................ 132
Walk the Value Streams....................................................................... 132
Commit Resources to Ensure Success.................................................. 132
Facilitation.................................................................................. 133
Team Resources.......................................................................... 134
Improvement Supplies................................................................ 134
External Resources..................................................................... 135
Hold People Accountable..................................................................... 135
Engage Physicians................................................................................ 137
Establish Governance Structure........................................................... 138
Address Antibodies.............................................................................. 141
Develop and Deliver Communication Strategy................................... 143
Redeployment versus Unemployment.................................................. 144
Demand and Monitor Results.............................................................. 146
Expect Improvement!.................................................................. 146
Summary............................................................................................. 147
Glossary of Lean Terms........................................................................... 149
Acknowledgments

There are many people and organizations and one deity to thank for their con-
tributions in creating this book.
A special thanks to the many healthcare organizations that allowed me the
precious gift of working with them to achieve improvement. I assure you I have
learned as much from you as you have from me.
To Lynn Harrison, Heather Wood, and Mike de Graauw who all provided
valuable feedback on parts of the manuscript.
To Jerry and Al, who as my Sensei provided me the core knowledge about
Lean improvement. I will always be grateful.
To Mike D., Scott, Heidi, Bob, Laurie, Mike E., and Steve: Collectively you
make up some of the great Lean minds of this century. The world is a better
place with all of you in it.
To Heather, Derrick, Ashley, Michael, and Ryan: You had to deal with my
absences far more than anyone ever imagined. I love you all!
Finally to Tami, none of this work would be possible without your love,
guidance, and understanding. For countless small reasons and several larger
ones, this woman leaves me in awe and in love.

ix
Introduction

After having worked in management in industrial operations for a decade, I

found myself promoted into a new position as site manager. In this role, I had
operating responsibilities for everything in the local organization except sales.
The plant was a corporate acquisition from a private owner completed about
three years earlier. We had the right things in place to be successful.
The market had been growing by greater than 10% yearly. The plant was filled
with many experienced, 20+ year employees with all kinds of technical experience.
Product engineering had the latest technology in design software, and a team was
motivated to deliver. The corporation had capital to support any investment we
needed, and we had a North American sales force with penetration into every
major market. We had just completed a new IT system start-up and had the latest
enterprise software to link our plants, sales, and corporate offices together. Despite
these advantages, we were hemorrhaging losses. The plant had made no money in
the three years since the acquisition. It was my job to bring my operations expertise
to this facility and convert it to a profitable contributor to the organization.
In my third week, near the end of January 1998, we faced a “special visit.” The
CEO of the corporation, the CEO of the division, and all the division vice presi-
dents were coming to the plant for a tour and division board meeting. We com-
pleted all the necessary steps in anticipation of the visit. First, we cleaned the place
from pillar to post. This was no small feat as we had inventory everywhere. Then
we organized round-robin presentations by department heads to update the status
in their respective areas of responsibility. Finally, we choreographed the plant tour.
We identified speakers and scripted the key points for discussion. Everything went
off without a hitch. Until I was asked for an executive summary of what it would
take to make the plant profitable. As I stammered through the obligatory, “I’ve
only been here a few weeks” line, I gave a few of my early impressions on areas of
focus for the next 90 to 180 days. As a whole, my comments were pretty lame.
The day closed with comments from the corporate CEO. “We’ve been trying
for three years to get this plant profitable; I’ll allow one more year to get the ship
turned.” I’ll never forget those words, “You have one more year.” Aside from the

xi
xii ◾ Introduction

fact that I had just bought a new home, I hadn’t sold my current home; even
worse, I hadn’t even relocated my family yet! What would I tell the staff associ-
ates in the plant? They had their lives and their families tied to the success of the
plant as well. Nearly 500 lives would be affected by the plant’s success or failure,
and a failure would exert negative impacts on the supply base and community.
Well, we had a year. I hoped it was enough.
It was time to get to work. I did all the traditional things that I learned ear-
lier in my career. We had to cut costs, reduce lead times on products, and dra-
matically improve our quality. Fortunately, we didn’t have to worry about sales!
In no particular order, over the next six months, we executed the following:

◾◾ Turned over ~50% of the management personnel. The fastest way to

change the people was to change the people.
◾◾ We consolidated all raw materials to a single vendor. Bidding the group of
materials allowed us a favorable purchase price variance.
◾◾ Cut all discretionary spending: office supplies, coffee, magazine subscrip-
tions, bottled water.
◾◾ Put a freeze on capital spending. Depreciation was only running about 5
to 6% of sales, but we needed every percentage on the income statement.
◾◾ Implemented work center productivity measurements. We needed work
center standards and accountability.
◾◾ Improved the costing accuracy of the engineering team to better match
actual production.
◾◾ Initiated ISO 9001 certification at the division level, hoping this would
improve our quality.

As we made changes, sales continued to increase. The margin line moved a bit
and the machine centers performed better under a standard cost system, but
the profit and loss statement was still dismal. On the balance sheet, despite the
growth in sales, our annualized inventory turns plummeted to about 5%. We
had six months to go and I was out of bullets. I didn’t know what else I could do
to improve the performance of the facility. We needed a miracle.
Call it fate, call it dumb luck; Miracle 1 arrived in the form of a mass mail-
ing—a conference flyer. After reviewing the flyer, I proclaimed, “That’s exactly
what we need. Where do I get this lightning in a bottle?” “Apply the Toyota
Production System” to your organization read the flyer and

◾◾ Reduce lead-times by up to 80%

◾◾ Improve productivity by 25%
◾◾ Reduce inventory by 50%
◾◾ Reduce defects by 75%
 Introduction ◾ xiii

There was a small problem, however. We had no money to send someone to

the conference but the seed was planted and I went to work to find someone who
could help. Miracle 2 arrived. I was introduced to Jerry McCormick, principal
of J.D. McCormick and Associates. Jerry had recently retired as the vice presi-
dent of operations at Milwaukee Electric Tool and started a consulting practice
based on the application of Lean principles to cellular manufacturing. Before
working with Milwaukee Electric Tool, Jerry had a very successful career with
Vickers Hydraulics in Arkansas. He was and remains the epitome of a southern
gentleman and an outstanding operations expert.
Shortly after our initial phone call, Jerry visited our facility. We walked
through the operation and Jerry asked a lot of questions. What types of products
do you make? What types of volumes do you produce? How many employees do
you have? What markets do you serve? What is your cost structure? Many of the
questions were typical for purposes of assessing a business.
At the end of the tour, I asked Jerry what he thought of our operation. He
responded with a smile, “I think you have done a nice job with a batch opera-
tion.” I had no idea what that meant at the time, but looking back his com-
ment was very gracious. In Lean terms, you will frequently here about a batch
or traditional operation versus a Lean operation. Most of us have learned and
continue to learn about traditional operations, with optimization of machine
and work centers reinforced with standard cost systems that encourage “waste-
ful” operations. We’ll discuss the comparison of traditional versus Lean opera-
tions in more detail in Chapters 2 and 3. What I want to highlight here is
that I spent more than a decade learning and mastering a system that was
antiquated, ineffective, expensive, wasteful, and delivered poor quality. The first
lesson to learn when embarking on a Lean journey is that the principles, applica-
tions, and techniques of Lean go against everything that you have spent years trying
to master.
This makes the learning curve very steep because you need to accomplish
two tasks to be successful. First, you must learn and understand the “new” way
of doing things. Second, you must unlearn the old ways of doing things. As you
ponder that concept for a moment, I suggest a bit of self reflection. How often
in your career or life have you had the opportunity to unlearn something? To
be great in a Lean organization, you must apply the principles of improvement
to everything your organization does. If we had time to think about problems
and issues, that might not be too difficult, but we are bombarded every day
with issues, questions, and challenges. Our past training and experience guide
us to think in a certain way. In the heat of the moment, we always rely on our
strengths that are aligned with our traditional training and experiences. We’ll
discuss some approaches to help guide our thinking and break this habit in
Chapter 3.
xiv ◾ Introduction

After hiring Jerry, we went right to work. The physical changes happened so
fast, it is difficult to recall the discrete steps. At a high level, the following actions
were completed:

◾◾ The facility was reorganized into six cells: three based on product family,
one shipping cell, one engineering cell, and one customer service cell.
◾◾ Ninety percent of indirect labor was reallocated directly to cells. The func-
tions that remained centralized included planning, human resources, and
accounting. Departments dissolved included maintenance, scheduling,
receiving, quality, and material handling (accounting and sales were cor-
porate functions).
◾◾ The entire facility was trained in Lean principles.
◾◾ The entire facility implemented a 5S system.
◾◾ All scheduling and materials management were placed on a pull system
resulting in a 200% increase in inventory turns.
◾◾ One item flow covering standard work, balanced work, operational meth-
ods sheets, visual management, and process control was implemented
over a 90-day period. This changed the profitability of the operation from
negative to positive.
◾◾ We developed a cross-trained flexible workforce and tied wages to an
individual’s ability to demonstrate proficiency in multiple jobs and imple-
mented a profit sharing incentive.
◾◾ Indirect labor cost was reduced about a third within two years.
◾◾ Engineering prototype development was reduced from 17 days to about 3.
◾◾ Square footage requirements for the facility shrunk from 140,000 to less
than 90,000.
◾◾ Sales grew ~50% over a three-year period.
◾◾ We realized that with all this improvement, we had a long, long way to go.

The evolution of this plant was the most rewarding activity of my career to that
date, and I became a life-long disciple of Lean improvement. The actions that
unfolded created opportunities for many people; 140 jobs were saved, impacting
500 people when you count families. Tax money was provided to the commu-
nity. Customer needs were satisfied, and we were rewarded with growth of sales
and profits. Everyone shared in bonus opportunities. Members of my staff were
promoted across the organization because of their Lean knowledge and ability
to apply it to produce results.
Over the next 10 years, I was blessed with the opportunity to apply Lean
principles to electronic power reliability systems, test and measurement equip-
ment, a wide variety of U.S. Navy, Army, and Air Force maintenance appli-
cations, U.S. Pentagon business systems, carpet backing, furniture, retail and
 Introduction ◾ xv

distribution, and both U.S. and Canadian healthcare systems. What I have
learned over this time is that the principles of improvement are universal. They
can be applied in any industry. Factors such as union or non-union status, public
or private organization, shop floor or administration level, local or international
operation, manufacturing or engineering methods, simple or complex systems,
small or large size, horizontal, vertical, or no integration, highly leveraged or
limited IT capability do not matter. If work is done, “waste” is present. If waste
is present, improvement can occur through the application of Lean principles.
This book is about the application of Lean in healthcare. The lessons about
embracing improvement as a strategy began 60 years ago on a factory assembly
line and eventually moved to programs within our current complex medical
environment. We begin with a call to action. The healthcare system faces a
storm composed of high cost, the stress caused by an aging population, and a
shortage of talent that imposes new demands never seen before on our com-
munities, our states or provinces, and even our countries.
Learning some tools and results obtained from these tools is not sufficient.
The first chapter focuses on how to get started on your own improvement jour-
ney. We’ll cover the necessary steps to determine the outcomes desired, select
the areas of focus, deliver the improvement, sustain the results, and then spread
the progress to other areas. This chapter is followed by reviewing critical suc-
cess factors. The lessons learned can be shared to help mitigate project risk and
shorten the learning curve for your organization. Chapter 3 presents an over-
view of the tools used in the healthcare setting to help us “see and eliminate”
waste. After some discussion of tools, we use case studies to illustrate how the
application of the tools in healthcare led to world class rates of improvement
in the areas of emergency medicine, diagnostic imaging, orthopedic clinics,
general internal medicine, administration, and finally community care. We
conclude with the leadership challenges your organization must address to get to
the tipping point—the place where the culture of your organization is changed
and can deliver continuous improvement in clinical quality and patient safety,
lead time and/or access, productivity and/or cost, and staff development and/or
engagement.
Those who work in the healthcare field today receive the greatest gift anyone
can ever receive: the ability to serve mankind and make the world a better place.
Because of your calling, you are in a position to receive this gift every day. I am
hopeful that this book, in some small way, can help you take even better advan-
tage of your gift.