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Lean Integration for Health Care: Healthy Data for the Future

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John G. Schmidt, coauthor of Lean Integration: An Integration Factory Approach to Business Agility, believes that health care in the U.S. will inevitably slide into adopting lean principles. But why should we wait for this desirable state? He explains the current issues that make lean crucial and the obstacles that we need to overcome in getting lean.
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Lean practices have moved well beyond manufacturing into other industries and functions. Now, with the 2010 publication of Lean Integration: An Integration Factory Approach to Business Agility, the concepts have been applied for the first time to data and systems integration. While the book has received strong endorsements from a wide range of industry leaders, discussions with professionals in the health care field question whether a methodology that has its roots in manufacturing is transferable to their industry. While no one questions the differences between manufacturing products and healing patients, is the resistance to lean warranted, or is this a case of the "not invented here" syndrome?

In this article I present the argument that not only is lean integration applicable to health care, but the health care industry is in a position to leverage lean techniques to achieve breakthrough benefits to a greater degree than in most other industry sectors. Specifically, the fragmented and siloed structure of health care, combined with sensitivity to data privacy and security concerns, along with the potential life-and-death nature of errors that demand the highest level of quality, are exactly the issues for which lean is ideally suited. I'll start with a brief definition of lean, present some examples of early adopters in health care, provide an overview of some of the core challenges in health care (particularly in the U.S.), and finally discuss how lean principles can pull it all together.

What Is Lean Integration?

Lean is a management system that emphasizes creating value for end customers and eliminating activities that don't add value. Its principles are derived from the Toyota Production System that was developed over 50 years ago, but since the 1990s this approach has simply been referred to as lean. While lean is rooted in product manufacturing, it's now widely regarded as a management approach that can be applied effectively to a wide range of product and service industries. Lean is closely related to—and borrows from—other methodologies, including value network, Theory of Constraints, Six Sigma, and statistical process control. Lean integration is a management system that emphasizes continuous improvements and the elimination of waste in end-to-end data integration and process integration activities.

Early Lean Adopters in Health Care

Lean management is already being adopted in various pockets in the health care industry and is quickly becoming entrenched in some organizations. This is not to say that the majority of institutions have adopted lean, but the practice started 15 years ago in leading organizations and is now rapidly expanding.

For example, Park Nicollet Health Services, one of the leading health care systems in Minnesota, has made a system-wide, fully integrated commitment to lean production. Using lean production techniques, Park Nicollet is measurably improving patient care and safety, as well as helping to control the rising cost of health care. Just about every administrative or management job opening posted includes "Process improvement (Lean, PDCA, Six Sigma, etc.)" under applicant qualifications. In a 2009 blog, David Wessner, CEO of Park Nicollet, wrote about how to apply visual management, andons, and kaizen events to everyday work activities in the hospital system. [1]

In his article "Building a Better Healthcare System," Glenn Bodison of the Quality Texas Foundation lists several other health care organizations that have chosen the Toyota Production System as their model for operations. For example:

  • ThedaCare Center for Healthcare Value (Appleton, WI)
  • Seattle Children's Hospital (Seattle, WA)
  • Avera McKennan Hospital & University Health Center (Sioux Falls, SD)
  • Royal Bolton Hospital (UK)
  • Virginia Mason Medical Center (Seattle, WA)

In an April, 2010 article in the Winnipeg Free Press, Dr. John Toussaint, president of ThedaCare, was quoted as saying that many of the processes hospitals have used for many years are "defective and wasteful." By removing the waste, he said, hospitals are able to "collapse" time and improve quality. [3]

Challenges of Applying Lean Integration to Health Care

While specific examples of highly effective and efficient health delivery systems can be found, on balance the U.S. health care system overall is pretty average compared to that of other countries. This might not be a bad thing, except for the fact that the per capita cost of health care in the U.S. is the highest by far in any country ($7,290), and more than twice the average cost ($2,962). [4]

There are four main root causes of the disconnect between high cost and only average outcomes:

  • U.S. health care system complexity results in considerably higher administration costs.
  • The U.S. legal system encourages litigation, resulting in high costs for malpractice insurance and defensive medical practices.
  • A large population of uninsured users of the system are receiving health care at public expense, but they depress the statistics because they receive less preventive care.
  • Other factors include a fee structure that rewards reactive rather than preventive medicine, rich infrastructure of high-tech diagnostic capabilities, and a high level of innovation in pharmaceuticals. Not all of these factors are negative, but nonetheless the U.S. is paying a 59% premium for health services in comparison to other countries that appear to be just as effective.

Let's dig a little deeper into these root causes to see how much they add to the overhead of health care costs.

System Complexity and High Administration Costs: 14% Overhead

According to a New England Journal of Medicine study, 31% of U.S. health care costs are spent on administrative activities rather than health care delivery, while in Canada administration accounts for just 16.7% (a difference of 14%). [5] If you try to map the flow of money or the flow of services through the U.S. health care system, you'll either give up in frustration or end up with a migraine headache. The fact that these two flows are not aligned is part of the problem. The U.S. system has evolved over the past 80 years into mind-numbing complexity of silo institutions and millions of independent practitioners.

The end result is a doctor-patient-insurance company "dance" for many transactions. By contrast, patients in Canada, the UK, and other countries deal directly with the doctor and don't need to get involved in the payment process at all. In the U.S., it's common practice for the patient to first gain pre-approval of medical expenses from the insurance company before engaging with the health care provider. Then, after treatment is complete, the patient must fight battles in a complex appeal-and-grievance process when the insurance payment doesn't align with the provider's invoice. A major factor in the low level of customer satisfaction arises from the financial battles and administrative complexity, rather than with the actual clinical services.

Litigious Environment: 10% Overhead

According to a 2006 PriceWaterhouseCoopers study, 2% of U.S. health costs are for the cost of litigation and another 8% for defensive medical practices. [6]

The U.S. legal system makes it very easy, even cost-free, for patients to sue doctors or hospitals. Lawyers structure their fees as a percentage of the damage award, so essentially no cost is involved to the patient in filing a lawsuit. If the patient loses the case, there's no requirement to cover the health care provider's court costs or legal fees. This legal protection is deeply entrenched in the American culture and is generally a positive feature, but has unintended consequences:

  • Medical practitioners in the U.S. generally perform extra tests (many of them unnecessary) simply to reduce the risk of being sued for negligence.
  • The high cost of legal fees and malpractice insurance is included in the cost of medical services.

By contrast, countries with social health care systems provide legal protection to health care practitioners. For example, in Finland, a Patient's Injury Law gives patients the right to compensation, paid by the government, for unforeseeable injury that occurred as a result of treatment or diagnosis. Health care personnel need not be shown to be legally responsible for the injury. To receive compensation, it's sufficient that unforeseeable injury as defined by law occurred. Doctors comply with care guidelines set by medical experts, but these are just guidelines, and doctors are free to decide independently how to treat patients. The government doesn't dictate how doctors may treat their patients.

Uninsured Populace: 8% Overhead

According to a 2004 report by the Institute of Medicine of the National Academies, the U.S. is the only one of the 30 wealthy developed OECD countries that doesn't ensure that all residents have basic coverage. [7] This isn't entirely true, since if someone is really sick and walks into a hospital emergency room, that patient will receive care. These charity service costs are ultimately paid either by Medicaid (funded in turn by federal and state tax revenues) or by higher service fees to the rest of the population. Uninsured people on average put less effort into preventive medicine, so when they do get sick their hospital stays are often longer and more intense. The estimate of the number of uninsured residents ranges from 15.4% [8] to 29%. [9]

Other Factors: 27% Overhead

The U.S. has the highest rating across 190 countries in terms of access to medical services. This capability is satisfied through a high degree of specialization and comprehensive facilities. For example, the U.S. has 34 CT scanners per million people, while Canada has 13 and the UK offers 8. Similarly, the U.S. has 26 MRI units per million, in comparison to Canada with 7 and the UK with 8. This high capacity drives up costs and encourages unnecessary tests; if you have an MRI machine that's sitting idle, why not run a test, just in case the results might show something useful? Furthermore, the provider payment structure is based on a fee-for-service model that provides a financial incentive to perform diagnostic tests. From a financial perspective, the best patient a doctor could have is a new one with several medical conditions, which sets the stage for a high number of diagnostic tests.

Furthermore, according to several studies, the U.S. is the world leader in biomedical research and development, as well as the introduction of new biomedical products. The research and development of medical devices and pharmaceuticals is supported by both public and private sources of funding. In 2003, research and development expenditures were approximately $95 billion, with $40 billion coming from public sources and $55 billion from private sources. These investments into medical research have made the U.S. the leader in medical innovation, measured in terms of revenue or the number of new drugs and devices introduced.

How Lean Principles Can Pull It All Together

Specifically because the health care industry is so fragmented, it will inevitably adopt lean practices. Lean integration is a natural way to solve many cross-organizational issues by applying principles such as waste elimination, value-chain mapping, team empowerment, and optimization of the whole rather than the parts. Let's consider how the seven lean integration principles can have an impact on the root cause issues.

Eliminate Waste

"Waste" is in the eye of the beholder, and lean demands that you eliminate waste from the customer's perspective. The one thing on which everyone in the industry agrees—payers, regulators, doctors, nurses, hospitals, laboratories, pharmacies, medical product manufacturers, researchers, and so on—is that the goal is to improve health and quality of life for human beings. This goal makes patients the customer. Lean techniques such as value-stream mapping help to model the end-to-end flow of services that result in patient care, clearly identifying which activities are value-added (from the customer's perspective) and which are not.

Once the picture is clear, then everyone can work together to drive the changes that eliminate waste. This is still a challenging issue, given the diverse range of incentives to all the actors in the value stream, but we have a much greater chance of achieving meaningful improvements if we focus on the customer and a shared goal.

Automate Processes

Most U.S. medical practitioners still use paper as the predominant medium for medical records. This fact makes it very hard (impossible, really) to share information for a referral, or with a team of providers treating the same patient. The technology clearly exists to move beyond handwritten prescriptions or fax and courier as the predominant means of exchanging medical records. Lean integration shows how this goal can be achieved incrementally and in a sustainable manner.

Empower the Team

A core principle of lean integration is bottom-up rather than top-down changes, driven by front-line staff. While government support and top-level management engagement is needed, leaders at the top are often disconnected from the day-to-day realities of the work, and hence are unable to make the best decisions. The people doing the work need to be empowered to drive change, by giving them the information they need to see the whole picture, and by supporting their ideas with appropriate tools and resources.

Continuously Improve

Solving the health care root cause issues is a "boiling the ocean" problem—the way to boil an ocean is one bucket at a time. Continuous improvement means just that—the changes never end. Lean integration shows how changes can be made—incrementally, bottom up, and without end—to achieve breakthrough results.

Build Quality In

Lean integration provides techniques to error-proof IT practices. This is just like the light-bulb factory that figured out how to stop testing every light bulb: by designing and building them in such a way that 100% of them work. There's a widely held believe that errors are inevitable, especially in the complex world of computer software, so we put a ton of effort into testing. We need to break this pattern and instead start asking the question, "How can we change the process to build in quality, to the point where testing is redundant?"

Plan for Change

One of the five integration laws described in lean integration is "There is no end state." For example, it's a mistake to build electronic medical record systems based on monolithic and rigid data models. Rather, they should be built in a way that accommodates the natural learning curve associated with a new capability. For example, the ideal data model is one with effective-dated metadata, in which the database retains the "meaning" of data and its relationships with other data elements over time.

Optimize the Whole

Sometimes, to optimize the whole, you need to sub-optimize the parts. For example, from a medical provider's financial perspective, it may not be optimal to take proactive steps to prevent a patient from becoming ill; but from the perspectives of the patient and the overall health system, this attempt would clearly be beneficial. Over time, the policies and reward structure of everyone who plays a part in the system will need to change, adapting to a new set of metrics designed around holistic patient care. In the meantime, we need to recognize and highlight the leaders who are demonstrating the right behaviors.

Getting Started

Not all of these lean practices are easy to implement without significant policy changes and top-level support, but that doesn't mean that we need to wait for all the stars to align before getting started. Lean is intended to be implemented incrementally and can have a big impact even if we start with just one or two principles. It won't take too many years before we'll be able to look back and say, "Wow—what a difference!"

For more about lean integration, check out the book's website.


[1] David K. Wessner, "Lean Healthcare Grand Rounds: A blog for lean thinkers who are transforming healthcare with the Toyota Management System," August 25, 2009.

[2] Glenn William Bodinson, "Building a Better Healthcare System" (PDF), Quality Texas Foundation.

[3] Winnipeg Free Press, "Turning St. B into a Lean Machine," April 28, 2010.

[4] Organisation for Economic Co-operation and Development (OECD), November 9, 2009. Online database available at http://www.ecosante.org/oecd.htm.

[5] Steffie Woolhandler, M.D., et al., "Costs of Health Care Administration in the United States and Canada," New England Journal of Medicine, August 21, 2003.

[6] PriceWaterhouseCoopers, "The Factors Fueling Rising Healthcare Costs 2006" (PDF), January 2006.

[7] Institute of Medicine of the National Academies, "Insuring America's Health: Principles and Recommendations," January 13, 2004.

[8] U.S. Census Bureau, "Income, Poverty, and Health Insurance Coverage in the United States: 2008" (PDF), issued September 2009.

[9] Families USA, "New Report Finds 86.7 Million Americans Were Uninsured at Some Point in 2007-2008," March 4, 2009.

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