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Healthcare Business Intelligence Triples the Value of Lean Initiatives

Originally published October 17, 2006

One of the most promising management strategies in healthcare today is Lean. You may have heard of Lean strategy, or you may actually be involved in implementing a Lean initiative in your organization.

The reasons for pursuing a Lean strategy are obvious once you understand its value. Healthcare organizations, especially providers, are under immense pressure to improve effectiveness, quality, patient and provider satisfaction and patient safety, and – at the same time – do it more efficiently with less waste and cost. In the meantime, stakeholders expect increased profitability and return on their investment. This collection of competing forces is the sweet spot for a Lean strategy.

But as you will see, Lean by itself is an incomplete strategy for growth of the organization in terms of increased markets, increased revenues and increased innovation. Lean focuses on increased capacity of existing operations, which enables growth, but does not point to fruitful areas for investing in growth. For that, healthcare organizations who want a complete growth strategy need to add business intelligence. But first, let's take a look at the incredible value of Lean.

The Basics of Lean Strategy
Lean got its start in the manufacturing sector and grew out of a crisis in competitiveness for U.S. manufacturers whose products were both too expensive to produce and short on quality from the customer's perspective. Western manufacturers looked east and found strategies being employed to improve quality (Total Quality Management or TQM), efficiency (Just in Time or JIT), satisfaction (Customer Focused Quality or CFQ) and capacity utilization (Theory of Constraints or TOC). Lean as a strategy grew out of these various philosophies, taking the best of each.

Many people misunderstand Lean as a process improvement methodology. In reality, Lean is actually a purpose improvement methodology. Before any effort is put into analyzing and improving processes, the more important question of why a process is being performed is addressed. In Lean, everything must have a purpose. Everything outside that purpose is waste.

Lean practitioners will tell you that the philosophy behind Lean and the process for performing Lean analysis is simple. And it is. However, reaching this simplicity requires scaling two difficult mountains. The first is political and the second is cultural.

The political mountain comes from the current practice of dividing organizations into departments such as practice management, clinic management, hospital administration, finance, marketing, etc. Lean initiatives begin with the customer or patient in mind, and work their way back through the various departments to its source. Each departmental boundary that is crossed usually adds a layer of political resistance in terms of whose work is affected, whose roles are changed and whose responsibilities are impacted.

The second mountain is cultural. Lean thinking brings a whole new set of concepts such as the definition of the customer, the method for mapping the value of processes, and the sources and types of waste in the organization. Lean also brings a whole new language, including Japanese words such as muda (waste), kaizen (continuous improvement), kanban (pull-based flow system) and, my favorite, poke-yoke (mistake-proofing). Before the Lean practitioners can help the organization effect change, this cultural and terminology barrier must be overcome.

For the most part, Lean methodology relies on the concept of pull – that is, pulling only the time, effort, resources and materials into a system that are necessary to fulfill a particular purpose that is valued by the end customer (could be a patient, a payor, a purchaser, etc.). Defining a value stream involves a four-step analysis process.

Picture a train pulling cars. The engine is customer need. This engine pulls the product. This car pulls the process car, which in turn pulls the resource car. Here is a brief description of each car:

  • Customer Need: What is the purpose for the product? What value is it providing? How is the customer (patient, payor, purchaser, other stakeholder) using the product? What parts are they using? Could they use more? What parts are they not using? And what could they use that is not being delivered? Anything that is not serving the customer’s purpose for the product is waste.

  • Product: What goods, services and qualitative features are necessary to meet the customer need? Anything else is wasted output.

  • Process: What activities and work effort are necessary to produce the product? Anything else is wasted effort and wasted time.

  • Resources: What materials, information, knowledge, skill and people are necessary to perform the processes that produce the products to meet the customer need? Anything else is wasted input.

Analysis such as this usually starts out as a sequence beginning with defining the customer need (e.g., productivity on the job, a full lifestyle, etc.), and then moving on to the product (e.g., wellness, controlled chronic conditions, etc.), and so forth to processes (e.g., diagnosis, testing, treatment) and resources (e.g., labor, equipment, supplies, facilities). This type of analysis is referred to as a kaizen event, which is an extended white-boarding activity supplemented by measurements, strategic directives, surveys, etc. Rarely do these events end up as a straight-line sequential process as people bounce back and forth between the four “train cars.”

This process usually requires an outside guide (consultant) to help organizations see themselves from a new angle, and to use past experiences to surmount the political and cultural barriers involved.

The Value of a Lean Initiative
The potential value of a Lean initiative is tremendous and comes in the form of increased capacity.

Some Lean practitioners, consultants and guides will tell you that Lean is a growth strategy for your organization. Technically speaking, this is not accurate. Lean by itself is a growth-enabling strategy. Lean provides capacity for growth, and assumes that unmet customer needs exist and can be served by the organization’s products. To be a true growth strategy requires efforts to capture new markets, target new patient groups, pursue new innovations and snap up new Nobel prizes. This is not to diminish the value of Lean as a strategy. These are simply not in the scope of the Lean philosophy.

What Lean does, however, to facilitate these growth-oriented strategic moves is to consolidate and release trapped capacity.

You may want to target a new patient group such as younger diabetics in a clinic that houses a physician who is a beacon in diabetes care; but wasteful paperwork, chart reviews, insurance claims complexities and so forth have trapped your capacity to increase your patient load.

Each of these onerous activities holds a portion of your overall capacity. Lean applied to this area would question the purpose and cause of each of these activities and the tasks required to perform them. This information would be used to eliminate the waste and find better ways to do over the necessary activities. This released capacity could enable this clinic to become the kind of diabetes center you envision, with greater satisfaction for patients, greater satisfaction for providers, higher quality, fewer safety incidents and, of course, more patients and subsequently more revenue.

Lean increases capacity for growth, but how do you know where to target your efforts to make the best use of that increased capacity? The answer is business intelligence, and there are two types of business intelligence that apply here.

The first is strategic business intelligence, which helps to answer the question of how to use your increased capacity to grow intelligently. The second is tactical business intelligence, which supports Lean initiatives in a different way – namely, in terms of how to determine the right areas to develop increased capacity.

Strategic Business Intelligence Doubles the Value of Lean
Strategic business intelligence helps answer the business, clinical, research and innovation questions that CEOs, chief medical officers, chief nursing officers, chief quality officers, chief safety officers, chief research officers and CFOs need to answer, such as:

  • What service lines should we go into? Which should we exit? Why?

  • In what practices are we leaders in quality? Followers? Which should we put our efforts into, and why?

  • Where are we most profitable? Least?

  • What actions should we take to improve patient safety? Why?

  • What is our competitive position? Should we change it? To what, and why?

  • What are the most fruitful areas for our research dollars? Why?

  • What should our marketing and sales message be, and why?

Business intelligence helps to answer these strategic questions by combining internal data (e.g., patient data, sales data, staffing data) and external data (e.g., market statistics, partner data, payor data, etc.) into a historical repository for analysis of key trends, patterns, exceptions and opportunities.

The results of this analysis are used to make informed decisions regarding the direction of the organization, its performance and the value provided to the various stakeholder groups.

Lean initiatives, as stated earlier, increase capacity. They increase capacity to target new customer needs and the groups of patients with these needs. They increase capacity to expand your products (service lines). They increase capacity to serve more patients in a given time frame with streamlined processes. And, they increase capacity to make new investments by freeing up cash flow through smarter application of resources at the right time, in the right place and for the right reasons.

Working together, a Lean initiative is the right strategy to increase the capacity of your organization, and strategic business intelligence is the right strategy to help you decide where best to use this increased capacity.

Tactical Business Intelligence Triples the Value of Lean
The symbiotic relationship between Lean and business intelligence does not end there (although that might be enough). There are a number of forms of tactical value that business intelligence can provide to a Lean initiative.

Lean events and processes involve process definitions, measurements and establishment of control metrics to make sure the improvements stay on track. Much of this comes from the data that is known about the current activities and the inputs and outputs of those activities. This data can be directed during a Lean initiative to answer operational, administrative, compliance and clinical questions such as:

  • Which processes should we target for Lean analysis? Why?

  • How do we prioritize our Lean initiatives?

  • How do we know if the Lean initiative is successful? What factors do we use to judge this?

  • How do we sustain the new, streamlined processes?

  • How do our people know what they should be doing, and not doing?

  • How do we get this message out to our people?

These questions should be asked by your chief administrative, chief informatics, chief human resource and chief productivity officers, among others. If you know your organization's operational and administrative processes through analysis provided by historical customer, product, process and resource data (i.e., business intelligence), then you can pursue your Lean efforts with greater intelligence and greater impact.

Next Steps
Lean as a philosophy and a strategy has incredible promise. As a matter of fact, given the type of weighty issues confronting healthcare organizations today, it may be the most promising strategy to pursue to increase your strength, profitability, efficiency and effectiveness.

If your organization is already involved in a Lean strategy, then I suggest you double or even triple its value by bolting it to a strong business intelligence strategy. If you are new to Lean, I recommend researching the field for success stories that are similar in nature to your situation, your organization and your culture. There is a wide body of literature on lean principles, as well as a number of consultants practicing in the field. Some are devoted to practicing Lean specifically in the healthcare industry, while others have proven track records in a variety of industries. Either way, they can provide invaluable assistance to healthcare organizations just starting on the lean path.

With Lean comes capacity. With business intelligence come informed, appropriate uses for that capacity.

Thanks for reading. I look forward to your comments.

SOURCE: Healthcare Business Intelligence Triples the Value of Lean Initiatives

  • Scott WanlessScott Wanless

    Scott is the Healthcare Analytics Director for Cipe Consulting Group. He has more than 30 years of experience in business intelligence strategic planning, analytics application development and business analysis across numerous industries including hospitals, physician groups, healthcare payers, laboratory research, insurance, lending, manufacturing, retail and state government. Scott can be reached at scott.wanless@cipeconsulting.com.

    Editor's note: More healthcare articles, resources, news and events are available in the BeyeNETWORK's Healthcare Channel featuring Scott Wanless and Laura Madsen.

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Posted August 7, 2011 by jwillis_rn@comcast.net

Excellent post on integration of LEAN and Business Intelligence!  I work in a major medical center who began the journey of LEAN, but the momentum was quickly lost.  Lean Methdologies integrated with BI can add so many benefits to an organization... one of the biggest challenges is getting the executive team to understand the value and the return on investment.

Thanks, Scott, for sharing your vision.

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