Lean Management in Healthcare Lowers Costs, Improves Quality

Healthcare organizations have implemented a wide range of initiatives to improve care quality and patient experience while reducing costs. But a new study published by the Joint Commission is pointing to the success of lean management in healthcare.

The study conducted by Stephen M. Shortell, PhD, MPH, MBA, and colleagues at the University of California, Berkeley (UC-Berkeley), examined ten quality/appropriateness of care, costs, and patient experience measures using results from the 2017 National Survey of Lean/Transformational Performance Improvement in Hospitals analysis and publicly available data from CMS and the Agency for Healthcare Research and Quality (AHRQ).

Study results showed lean management implementation was significantly associated with lower adjusted inpatient expenses per admission, lower 30-day unplanned readmission rates, and appropriate or efficient use of imaging compared to the national average.

Hospitals using lean management across the organization also reported higher Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) patient experience scores.

Based on the data, Shortell et al. concluded that the degree of lean management implementation throughout a healthcare organization—versus mere adoption of the business approach—is more likely to be associated with positive hospital performance.

“Given these findings, it may be time for policymakers, payers and related change makers to explicitly promote health sector-wide implementation of the underlying principles of the Lean management system and address the deep-seated cultural barriers to empowerment of the frontline workforce,” Shortell said in a press release emailed to RevCycleIntelligence.

Lean management is a sociotechnical performance improvement strategy inspired by the Toyota Production System. With this approach, companies aim to improve quality, profitability, and overall performance by driving out waste and non-value-adding steps in every process.

In healthcare specifically, lean management aims to minimize waste with ongoing process improvement to improve patient satisfaction and patient outcomes while reducing costs, according to a NEJM Catalyst report.

The report identifies eight areas in which lean management can impact healthcare: wait times, inventory, defects affecting quality of care and reimbursement, patient flow, injuries, resources use, over-processing waste, and untapped human potential.

Organizations like Virginia Mason, creators of the Virginia Mason Production System (VMPS), have implemented lean management principles to improve the delivery of healthcare. A case study also showed that the approach reduces costs, accelerates the revenue cycle, and improving key quality measures, like waiting time.

The growing body of literature points to the effectiveness of lean management over other healthcare reforms like value-based payment models, accountable care organizations, and patient-center medical homes.

Research has demonstrated progress with the healthcare reform efforts, yet healthcare spending has continued to increase well over the rate of inflation while quality and patient experience improvements have varied by organization and region.

Moreover, recent evidence shows that a large share of hospital spending results in little to no benefit, with about $760 billion to $935 billion of waste in the system. That equates to about a quarter of total healthcare spending, the data reveals.

Healthcare organizations can reduce wasteful spending through the implementation of lean management. However, healthcare is not yet at the tipping point for lean management implementation, the researchers stated. Hospitals still largely use the method for individual projects or units, but not at the enterprise level.

The industry at-large could do a better job at encouraging implementation of the business strategy across entire organizations for lower costs and better quality of care, researchers indicated.

“This could be done, for example, through the stipulation in payer contracts that providers supply evidence of use of the Shingo principles and reward performance improvement from year to year,” Shortell et al. wrote in their study. “In general, payment systems that align with hospital goals of continuously improving care are needed.”