What is Your Health System Doing to Reduce Costs? Process Improvement or Layoffs?

While Lean is not primarily a cost-cutting methodology (or, we could say it’s not focused ONLY on costs), cost reduction is a common end result of improving safety, quality, flow, and other factors.

Since 60 to 70% of a hospital’s costs are labor, typically, it’s tempting for hospitals to slash headcount when things get tight financially. This is a common healthcare response and Lean provides a great alternative to morale-damaging layoffs.

This infographic / chart in the most recent edition of Health Leaders caught my eye:



I was happily surprised to see that “process improvement” was at the top of the list while “labor reductions” was at the bottom.

Ironically, I was recently told of a health system that eliminated their Lean/P.I. department in the name of short-term cost cutting. Ugh. See here.

This recent Becker’s Hospital Review piece called out “9 Ingenious Ways to Cut Costs at Your Hospital” called out many cost-cutting tricks, but didn’t mention Lean and process improvement, unfortunately.

Copying things other hospitals did, like energy savings and putting coffee pots on timers will have a trivial return compared to teaching methods like Lean and Kaizen. It’s like the difference between giving a person a fish (copying this improvement) versus teaching them how to fish (how to identify and implement improvements of their own).

Is your  organization  doing things to cut costs in these challenging times that are destructive or constructive?

Thanks for reading! I’d love to hear your thoughts. Please scroll down to post a comment. Click here to be notified about posts via email. Learn more about Mark Graban’s speaking, writing, and consulting.

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an book titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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1 Comment on "What is Your Health System Doing to Reduce Costs? Process Improvement or Layoffs?"

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  1. That is definitely very good news. Although resources are still borderline thin, there does seem to be a lot more Process Improvement focus going on in our hospital as well. Our Performance Improvement team has just started a Bronze Lean training for employees similar to the one offered by SME/ASQ/Shingo. A sense of urgency seems to be rising. Let’s keep it going!

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