My Article: “Lean as an Alternative to Mass Layoffs in Healthcare”


Almost two years ago, I wrote an article for called “How lean management helped hospitals avoid layoffs.”

Here in 2012, I see headlines daily about a hospital somewhere in the U.S. who is “forced” to lay off staff (or they say they “have to” or they “have no choice”) in an attempt to cut costs. They usually blame a dip in demand or the reimbursement cuts of the Affordable Care Act, aka “ObamaCare.”

I wondered if there are still hospitals, even now, that are holding to a “no layoffs due to Lean” policy or a broader “no layoffs” philosophy… so that's my new article, published in Becker's Hospital Review: “Lean as an Alternative to Mass Layoffs in Healthcare.”

As I saw yesterday in this article, “Layoffs At Saint Joseph And Saint Joseph East Hospitals,” quotes a hospital spokesperson as saying:

Unfortunately, when we see a decrease in patient demand, we must also adjust our staff accordingly.   This is a responsible business practice.

You “must”? Well, sure… unless you choose not to. Nobody is FORCING hospitals to lay people off. That's their choice. There are other ways to reduce cost (like Denver Health's $125 millon plus  bottom line impact) through real efficiency improvement, quality improvement, etc.

But, as CEOs I interviewed for my Becker's piece pointed out:

  • Demand for services will be going UP in coming years, as more people have coverage, we have more retirees, and (hopefully) the economy improves.
  • If you lay off people now, you'll end up re-hiring as demand comes back up or you'll end up rehiring because that's what hospitals do (throw people at a problem) when they don't have Lean as a process improvement strategy.
Layoffs harm morale. They are “traumatic” to the organization, as one CEO I interviewed put it. Poor morale can impact quality, safety, and productivity.

In the Lean world, we have Toyota as an example of a company that does NOT lay off workers when demand drops (due to the economy or natural disasters, as I've blogged about here, comparing GM and Toyota). When work is slow, Toyota INVESTS in its people – training them or paying them to do volunteer work (a great leadership development activity and a way to give back to the community).

Toyota famously takes the long-term perspective (and they have the cash in the bank to make it possible to keep people on the payroll when demand is weak).

Laying off people is a choice. Choosing NOT to do so can be good for the organization – as morale is better, loyalty is higher, and performance is higher as a result.

From my Becker's story, about one CEO who now believes Lean is a better alternative to traditional slash and burn layoffs:

One CEO who is questioning the use of layoffs as a cost-reduction method is Gary J. Passama, the CEO at NorthBay Healthcare in Fairfield, Calif. In a  blog post, Passama wrote that NorthBay has “unfortunately had to deal with various cost crises by laying off staff” during his tenure, adding that senior leaders sometimes “really have no choice” about layoffs.

Mr. Passama now questions if their past layoffs really reduced costs in the long term. He wrote, “After a year or so, the employee count is back up and the savings evaporate,” adding, “There has to be a better, longer lasting and less traumatic way to deal with such fiscal situations.” Like many healthcare CEOs over the past ten years, Mr. Passama has learned that there are, indeed, other choices, and Lean management is one of them.

I hope you'll check out the story and comment here or on the Becker's site. There's already one comment from a person who says it's “unrealistic” for hospitals to not lay off people.

In my piece, I quote and cite organizations like:

  • Denver Health
  • NorthBay Healthcare
  • Park Nicollet Health Services
  • Martin's Point Health Care
  • Oregon Health & Science University
  • St. Boniface General Hospital
  • IU Health System Goshen Hospital
  • ThedaCare
  • Akron Children's Hospital
  • BJC Healthcare
  • MemorialCare Health System
  • Seattle Children's Hospital

I hope they prove the commenting skeptic wrong, that it will continue to be realistic to avoid layoffs in this healthcare climate.

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.



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