Improving Safety & Quality Matters, but a $54 Million Cost Savings Makes for a Better Headline?


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I saw this article a few days ago in one of the larger healthcare industry trade publications:

How One Woman Saved IU Health $54 Million

The headline is misleading, as addressed in the opening sentence / sub-headline of the story (via HealthLeaders):

“With a little help from about 10,000 of her friends and colleagues, the head of Indiana University Health's office of transformation leaned in to cut waste and encourage value, one project at a time.”

That's more like it and more likely… Lean is a team effort that, ideally, engages everybody… so it's not surprising to hear about 10,000 participants and the need to share that credit.

Like almost every health system, IU Health faced financial pressures. I'll give their board credit for pushing for a method other than traditional layoff-based “cost cutting.”

“IU Health had already tried some performance improvement projects, but they were scattershot and not based on a unified philosophy. In order to improve results and scale the improvement process, the board challenged then-CEO Dan Evans to deploy a system-wide value-improvement tool that could enlist all employees.”

A few years ago, I participated in one of the “scattershot” initiatives – a Lean design process for their children's hospital, Riley Hospital for Children (read more here, written by the architecture firm I worked with).

IU Health's CEO at the time:

“…commissioned a study group that ultimately chose Lean because of its ability to engage large swaths of employees and because it “transforms culture,” says Alicia Schulhof, the former HCA chief operating officer whom Evans hired to direct the effort, and whom he eventually put in charge of IU Health's Office of Transformation.”

I believe strongly that the employee engagement in Kaizen is such a core part of the Lean philosophy, that it can't be ignored if you're going to call your efforts “Lean.”

The most successful organizations with Lean in healthcare move beyond the scattershot use of Lean tools and projects into an organizational transformation (as scary as that can sound to leaders who don't want to admit the organization needs transformed).

Schulhof adds:

“Six Sigma can be intimidating,” she says, referencing another popular process improvement technique. “[Lean] allows every one of our 35,000 team members to be a problem-solver.”

That's the goal at many organizations, ranging from ThedaCare to the University of Michigan Health System to Franciscan St. Francis Health – everybody being a problem solver, every day instead of just suffering through waste and problems or firefighting. It takes leaders at all levels to create a culture where people feel safe to speak up and their ideas get translated into action.

By the way, my Healthcare Kaizen co-author Joe Swartz and I are going to host another site visit to his Franciscan system (also in Indiana) to see and learn about what they've done in their efforts to engage everybody. We'll be holding this in May… more details to follow. Click to learn more.

Back to IU Health. I'm not trying to start a “Which is better? Six Sigma or Lean?” debate. Six Sigma methods have a role to play and can be compatible with a Lean culture. I don't dispute that. But I hear many health systems explain that they see Lean as “something everybody can do” while deep Six Sigma training is reserved for a relatively small number of people.

IU Health doesn't yet have “everybody” involved (but neither do the other organizations I mentioned)… but they engage far more people than most health systems.

Again, from HealthLeaders:

“Slightly fewer than 10,000 employees have participated in the project so far, but the transformation effort has reached wide–it's been installed at all 12 regions and 15 hospitals…

Schulhof does not prescribe efficiency projects. Her office and the consulting company IU Health hired to help with the process rollout train local offices in the statewide health system to find promising projects.

It's working. Over the past three years, efficiency efforts that Schulhof has overseen have yielded more than $50 million in savings.”

We've talked here on the blog about the limitations of the word “implementation.” You don't simply “implement a new culture” like flipping a light switch. It's a change process. You don't just “install Lean” like a new iOS update.

Now $54 million sounds like an impressive number.

In 2013, the system said they needed to cut (cue Doctor Evil) ONE BILLION DOLLARS from their cost structure.

How are they going to hit that goal?

Through Lean and additional methods? Through the broader and deeper adoption of Lean methods?

Through that desired cultural transformation?

More about layoffs:

“The Office of Transformation was created concurrently, but unrelated to, a reduction in force.

Schulhof had to convince the first of 12 local offices of transformation she would open during 2013 of the fact that Lean was not brought in to cut jobs. Indeed, she says, it was intended instead to remove redundancies in processes and reduce expenses to avoid the need to cut further jobs.”

Even if layoffs aren't being driven directly by Lean, having layoffs happening in parallel makes it more challenging to engage everyone in improvement because of the fear and anxiety involved.

Cost reduction is great… if done the right way (in a way that doesn't demoralize the workforce and hurt quality).

Too many in healthcare have associated Lean as only being about cost, which I've written about before:

So I was concerned to see the headline only focusing on cost, cost, cost.

But IU Health is doing more than that:

“Each IU Health region tracks its Lean projects using about 15 metrics that are the same across the system, and are based on quality, people (employees), service (patients), finance, and growth. On Schulhof's dashboard and those of people who are managing the projects locally, those metrics for each project appear either red or green based on progress against goals.”

I wonder what system she's using to track the projects and savings… and what her dashboard is if it's not KaiNexus?

The article shares an example of improving patient flow (which can improve quality and increase capacity):

“One project began in 2013 in the digestive and liver disease clinic, involving extremely sick patients, some with end-stage renal failure. The problem: a patient cycle time of almost 210 minutes.”

The time has now been “cut in half,” says the article.

I'd like to hear more, over time, about the cultural transformation, including their approach to coaching that's mentioned near the end of the article. Projects and cost savings are great, but without Lean becoming a management system and “the way we do things around here,” there's risk that the benefits and progress will fade.

What do you think?

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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.


  1. Hope our system executives don’t see this article. They will want to set up a bureaucracy to track and set goals for such a thing.

  2. One of the most frequent platitudes I hear regarding improvement initiatives is about “creating an army of problem solvers”. But this is something that sounds great in principle, yet often falls short when trying to transform organizations. I think a lot of organizations begin by creating problem-solvers before they truly understand which problems actually need solved. I would much rather have an employee who fundamentally understands where the organization is trying to go and the objectives its trying to achieve rather than an employee who has a good handle on the problem-solving process. So many organizations waste so much time “solving problems” that don’t impact organizational strategy to begin with. “Solving problems” doesn’t always equate to achieving mission objectives. I see so many “Parkinson’s Law” projects completed by well-intentioned problem-solvers.

    I think the recent journeys of hospitals like Denver Health and Hartford Hospitals illustrate the value of clearly defining strategy, whether it be via Hoshin, BSC, or any other methodology, and then deploying the resources necessary to meet those needs. Those resources may be communication strategies like AIDET, BPM technologies, or effective lean daily management. That helps them define and prioritize the enterprise problems to be solved before unleashing armies of folks without that defined North Star.

    It’s great to see IU Health get to that point fairly quickly in their Lean journey.


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