In this episode, Dr. John Toussaint explains why Lean healthcare transformation fails when it's treated as a set of tools instead of a leadership responsibility. Drawing on his experience as former CEO of ThedaCare, he discusses CEO accountability, patient safety, payment reform, and the management systems required to sustain improvement.
For episode #236, things are a little different. Today, I wanted to share a video discussion between my friends Ted Stiles and John Toussaint, MD.
Ted is a partner with the recruiting firm Stiles & Associates. John, of course, is the president of the ThedaCare Center for Healthcare Value and has been a frequent guest on my podcast series.
John's most recent book is Management on the Mend, which we discussed in episode #225.
Toussaint explains why many Lean efforts stall when they focus on tools instead of leadership — and why CEOs cannot delegate responsibility for transformation. Drawing on his experience leading one of the most successful Lean healthcare journeys in the country, he outlines the shift from “white coat leadership” to a management system built on humility, trust, and daily problem solving at the front line.
The conversation explores how payment reform, transparency, and rising safety concerns are forcing healthcare leaders to rethink how their organizations are managed — and why Lean principles, applied correctly, offer a proven path forward.
This episode is especially relevant for hospital executives, physician leaders, board members, and anyone involved in leading large-scale change in complex organizations.
Topics discussed include:
- Why Lean healthcare transformation must be CEO-led, not delegated
- The difference between tool-based Lean and a true management system
- Patient safety, reliability, and the unacceptable harm caused by medical error
- Leading with humility and moving beyond command-and-control leadership
- Empowering frontline staff to identify and solve problems every day
- Why focusing on ROI alone can derail Lean transformation
- The role of boards, finance, and HR in sustaining improvement
- Lessons from ThedaCare's Lean journey that apply beyond healthcare
For a link to this episode, refer people to www.leanblog.org/236.
For earlier episodes of my podcast, visit the main Podcast page, which includes information on how to subscribe via RSS, through Android apps, or via Apple Podcasts. You can also subscribe and listen via Stitcher.
Here is the video of their discussion:
Thanks to Ted and John for sharing it.
Here is the cleaned-up transcript of the podcast episode featuring Mark Graban, Ted Stiles, and Dr. John Toussaint.
Mark Graban: Hi, this is Mark Graban. Welcome to Episode 236 of the podcast. It is December 16th, 2016. Today's episode is different than usual. I am turning the hosting duties over to my friend Ted Stiles, who is going to be interviewing Dr. John Toussaint. This is a video that originally appeared on YouTube, and I'm sharing it with their permission for people who find it easier to listen to things in podcast audio format.
If you don't know him, I've known Ted for a long time in the Lean world. Ted is a partner at the recruiting firm Stiles and Associates. They do a lot of high-level executive placements for Lean specialist roles or executive roles in manufacturing, healthcare, and other settings. Ted is really committed to the Lean methodology in helping companies find the right leaders for those journeys.
John Toussaint has been a guest on many episodes before. Ted will introduce John more formally, but I would encourage you to watch the video if you'd rather do it in that format. Since this is the last podcast for the year, I want to thank all of you for listening. I appreciate that you take time to listen to the podcast, whether during your commutes or bicycle rides. Happy Holidays and all the best for 2016.
Ted Stiles: I'm joined today by Dr. John Toussaint. John is the former CEO of the ThedaCare Health System in Appleton, Wisconsin. Under John's leadership, ThedaCare pioneered one of the most successful Lean transformation efforts in recent history. Today, John helps other organizations navigate those same journeys via the ThedaCare Center for Healthcare Value, a non-profit group. He is the author of three books; the most recent is Management on the Mend. I'm pleased to have him here today. Welcome, John.
John Toussaint: Thanks, Ted. Glad to be here with you.
Ted Stiles: You get to travel around and see a lot of hospitals to evaluate them on cost and quality. How are we doing as a nation?
John Toussaint: We have a lot of improvement to be made, but I must say in the last two or three years, we're starting to see a lot more uptake of the principles-based approach to the Lean journey rather than simply the tools-based approach. In my travels, many hospitals are trying to apply the tools of Lean. However, what they're finding is that to sustain the improvements and build the culture, they need something else. That is really why we've gotten into the management system piece, because that's what is missing in most hospitals.
Ted Stiles: If we back out and look at just the current quality of our national health system in the last 10 years, do you see any gain?
John Toussaint: We're still making a lot of mistakes in the industry, so we're not a highly reliable industry yet. We really need to focus on reliability. There was an article published two years ago in the Journal of Patient Safety that showed anywhere between 240,000 and 400,000 people die in U.S. hospitals due to medical error every year. So, I would say that we still have a significant way to go in terms of trying to build systems that create reliable outcomes for patients.
Ted Stiles: You were a hospital CEO, so you know what that feels like to be at the helm of an organization like that. Is that what you suspect keeps most hospital CEOs up at night?
John Toussaint: I think more and more, the patient safety piece is what is really driving the change. There are a couple of different things happening. One is that the government is changing payment and actually reducing payment now to hospitals, so you really have to do more with less. The other is this issue of mistakes and problems has become pretty universally understood now. So patient safety is becoming top of mind for every CEO.
Ted Stiles: In the spring, the Senate passed the SGR Fix. Why is that so important to this framework?
John Toussaint: The SGR Fix related to a bill passed in the nineties that dealt with physician payments. It basically cut physician payments each year, but Congress would always repeal it. In March 2015, they decided to actually fix that bill.
There are two things that I think are the biggest news about this bill. One is it changes the payment system for physicians. The ACA (Affordable Care Act) changed the payment system for hospitals; the SGR Fix changed the payment system for physicians. Now physicians are actually going to be rewarded to deliver better health outcomes.
The other thing, which we worked hard on at the Center, was to release the Medicare data so that we could actually start to do reporting on individual physician performance and compare physicians throughout the country on cost and quality. That's a big deal. I think we're going to start to see more of this transparency of physician performance coming very soon.
Ted Stiles: Transparency is part of the ThedaCare Center's mission as well, correct?
John Toussaint: We have been involved basically in three parts of the healthcare reform activity. One is the redesign of care delivery processes using Lean or the Toyota Production System. Two is transparency: how do we get data out of sources like Medicare or commercial claims and build a reporting mechanism so people can understand how they compare to their peers? The third area is payment redesign itself. We have several experiments we're involved with to change from a fee-for-service payment system to a pay-for-health-outcomes system.
Ted Stiles: Give me a sample of how that work in payment redesign has been working.
John Toussaint: We are working with a large employer coalition and a few providers in two different markets to figure out how we could create a payment mechanism that would reward doctors and hospitals to deliver better health outcomes–better health rather than more care.
The other major reform initiative on payment we've been involved in is the Accountable Care Organization (ACO) programs directed by the Center for Medicare and Medicaid Services (CMS). We were involved in the Pioneer program. There were 32 healthcare organizations involved in that first experiment, and what it showed is that we can significantly reduce the total cost of care. Medicare can save tens of millions of dollars.
Ted Stiles: If you look at those top-performing Pioneer ACOs, is there a correlation between Lean and their performance?
John Toussaint: The top-performing one is the Bellin-ThedaCare ACO. Of course, ThedaCare has been on the Lean journey for a dozen years. They were able to reduce the total cost of care for 20,000 Medicare beneficiaries by 4.6% in one year. Using the principles of process improvement, they were able to dramatically reduce the cost and improve the quality. CMS reported the quality performance metrics last fall for all the ACOs, and the ThedaCare ACO was number one in the country. I think there's evidence that when you apply these principles, you can improve population health and reduce the cost of managing populations.
Ted Stiles: For some of our viewers that may not be familiar with that model shift, explain briefly why that's so different and perhaps better than where we currently are in this fee-for-service model.
John Toussaint: In the fee-for-service model, we're basically paid to do things to people. When the hospital is full, we're happy as healthcare executives. The more heart surgeries we do, the more heart catheterizations we do, the more we get paid. But scientific studies show that we over-utilize in heart care and orthopedics; there may be as much as 30 to 40% over-utilization in some of these areas.
What we need is a payment mechanism that allows us to do the right thing at the right time rather than more things at the wrong time. That's why we need to move to a health outcomes approach. From a patient perspective, I would rather be at home with home care than be in the hospital. So there's a way for us to redesign services to actually deliver better health outcomes.
Ted Stiles: It sounds similar to early stories in manufacturing when Lean was first taking hold, where organizations were paid based on how much stuff they made versus what the customer needed.
John Toussaint: I think there are a lot of similarities. We are doing unnecessary things. We have more inventory than we need. Our hospitals have more patients in them than we need to have. We need to build a system that's patient-centered.
Ted Stiles: There is clearly a growing body of evidence that this works in different health systems. Talk a little bit about what you see on that front.
John Toussaint: We work with 60 different healthcare systems around North America now who are committed to applying this methodology. We're seeing dramatic improvements. Sutter Gould used this methodology over the last four or five years to become the highest-rated clinic in all of California for customer service and quality. The Palo Alto Medical Foundation has done tremendous work on their patient satisfaction and quality scores. Gundersen Lutheran has the lowest total cost for Medicare patients in the nation. It doesn't matter where you are in the country or what kind of organization you work for; we're starting to see real results.
Ted Stiles: What was the original vision for the ThedaCare Center for Healthcare Value, and how have you had to change its focus through the years?
John Toussaint: I started the Center in 2008 after it became clear to me that this methodology had the potential to transform the whole industry. It is unacceptable that this industry is injuring and killing people when it's not necessary. In 2008, the board at ThedaCare basically said, “You need to go spend some time with the industry and teach them what we've learned.”
We started with the idea that we simply wanted to raise awareness that there was a different way to manage an organization in healthcare. We built a summit, wrote books and articles, and built the Healthcare Value Network for peer-to-peer learning. For about five or six years, we did nothing but awareness building. Today, Lean is part of the mainstream of healthcare.
Where we're moving next at the Center is to be more specifically involved with the transformation process. We're spending more time directly coaching CEOs because, frankly, they don't know what they don't know. We have a team of executives now that have done this and been at it for years to help accelerate their journey.
Ted Stiles: We see a lot of hospitals where Lean still seems very tactical and tools-based. Many feel like they're plateauing or having trouble sustaining things. What are they missing?
John Toussaint: In healthcare, Lean got the reputation of simply being a series of tools. Lean does have a toolkit, but the real component of the cultural transformation is the management system and the leadership system. It's the way we act and behave to build a culture of continuous improvement.
What happens is the CEOs delegate to a “Lean expert” to go do some Kaizen events and value stream maps. But you can't delegate the leadership aspects of this. You have to be directly involved as the CEO. That's where we see most organizations failing–they don't recognize that there's an overall management system required for success. That is why the book Management on the Mend was written.
Ted Stiles: What are the high-level hallmarks of that new management system?
John Toussaint: One of the key principles is leading with humility. That means you don't have all the answers. You need to get out to the gemba–where the value is created–and understand the barriers our frontline workers are facing. I see so many CEOs sitting in their offices all day; they don't have a clue about their business.
Another principle is respect for people. We respect our staff members to identify and solve problems every day. Usually, a frontline nurse identifies a problem, and it ends up on a manager's desk, where it often stalls because the manager is overwhelmed. We need to shift this to give workers the power to solve problems daily. It's a different leadership paradigm where the CEO is on the bottom supporting the staff members on the top.
Ted Stiles: Were you on the other side of that line at one point? Did you have to learn that?
John Toussaint: Definitely. I was a product of my environment. The behavior model for me was “the buck stops with me,” blaming, controlling–what I call “white coat leadership.” What we really need is improvement leadership: mentor, facilitator, teacher, coach, student. It's been a huge shift for me from this autocratic, top-down world to realizing my job is to be the support staff for my frontline teams.
Ted Stiles: When you're visiting a hospital, what are some of the visual cues you see that indicate a successful transformation effort?
John Toussaint: I'm looking for standard work at the leadership level. Is there visual management? Do I see leaders going to the front line not to tell people what to do, but to understand barriers? Do I see clearly displayed True North metrics? I went into a hospital the other day that had 55 True North metrics. You can't improve 55 things. We have to create clarity. In most organizations, there is no clarity about strategy or what problems we should be working on.
I'm also looking for model cell work. Instead of a gazillion things going on that aren't connected, I want to see an “inch-wide, mile-deep” approach to radically redesigning the work, whether in a clinic, ER, or surgical suite. When you add those leadership pieces together with the model cell, and then spread that model cell, that is the framework for success.
Ted Stiles: We are beginning to see leaders understand that they may be missing that component.
John Toussaint: One of the main problems we have in the industry is that we do not have the operational expertise required. That's the work you do, Stiles, bringing Lean thinkers into these organizations. I recommend CEOs bring somebody in who actually knows the Lean methodology, has operational experience, and understands the principles. We did that too late in our journey.
Ted Stiles: You're talking about people perhaps from other industries where this has been road-tested?
John Toussaint: It could be from other industries. We went to industry because 12 years ago nobody in healthcare had heard of this. I still think that's a very reasonable play if you can match the person to the culture. But we also have 10 years of experience in healthcare now, so we can start pulling people from there as well.
Ted Stiles: You talk in the book about the Central Improvement Team. Why is it important that they report up through the CEO versus the CFO or HR?
John Toussaint: Most CEOs don't know what they don't know, so they need to learn. The Central Improvement Office can be a place where they learn. I had to start from scratch. If the CEO isn't involved in building the competencies of the team, it will be considered just another management flavor of the day.
Ted Stiles: In the book, you also mention viewing that role as a rotational role to groom and develop Lean leaders.
John Toussaint: Yes, that was what my mentor George Koenigsaecker suggested we do. In the book, I also describe different ways of putting together your central office. For example, at HealthEast, they keep the central office small and go deep with the managers to teach the principles. The deployment will be situational, but the key is you must have the core competencies in that central office because this stuff is hard and takes time.
Ted Stiles: Most successful organizations we visit usually do both–they have external consultants matched up with an internal office. How critical is that combination?
John Toussaint: Some leaders like Catherine Juarez at HealthEast or James Hereford at Stanford are quite knowledgeable, so they might not need external consultants. But for the lion's share of CEOs today, they need external help because they don't know who to hire internally. They haven't been trained in quality improvement in medical school. Until our education system catches up to the need, we are going to need external consultants.
Ted Stiles: This is your third book. What did you want to accomplish with Management on the Mend?
John Toussaint: This book is written specifically for healthcare executives on the transformation journey. It is a compendium of learnings from studying organizations worldwide. It's not a prescription, but a guide. I give examples of how different organizations have done this–three different Lean central office examples, three different model cell examples. This is the best thinking for healthcare transformation from my perspective today.
Ted Stiles: Are you hopeful? Are we winning?
John Toussaint: I think it's a bit too early to tell, but there are emerging best practices throughout North America. The Secretary of the VA came out recently stating they will use the Lean methodology to transform the VA. The leader at CMS, Patrick Conway, did the same thing. We have leaders at high levels saying this is the way we will do things.
The private sector is acknowledging we have a problem and must do more with less. We have two paths: slash and burn, or apply a methodology shown to improve quality and lower costs. I'm optimistic because we have identified a methodology that can lead us to better health outcomes, and we're starting to prove that in scientific studies.
Ted Stiles: We are big fans of the work you do. For anybody interested in reading more on these topics, we highly recommend this book as well as John's other books. They can all be found on the website for the ThedaCare Center for Healthcare Value. Thanks again, John.
John Toussaint: Thank you.
Other Videos with John Toussaint, M.D.:
A playlist of four videos:
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