Hospital CEOs: Reform savings goals doable with lean, Six Sigma, Toyota methods

Looked at from one perspective, the $155 billion cost-savings goals President Obama has set for already-struggling hospitals are pretty darned intimidating. By one estimate, every U.S. hospital will have to cut an average $2.6 million per year in costs per year to deliver on their promise to the Commander in Chief.

Hospital CEOs aren't as gloomy as you might think, however. In fact, a few hospital leaders interviewed by USA Today seem downright optimistic that with the help of disciplines like Six Sigma, lean [1] and the Toyota Production System, there's plenty of opportunity to cut costs from the system. In fact, they argue that healthcare services--like consumer electronics--may actually get better as costs fall.

One health system CEO who feels prepared is Alan Aviles, head of New York City Health and Hospitals Corp. (HHC). HHC, a $5.4 billion public system that includes 11 hospitals, has seen several cost-savings victories of late. For example, the system recently saved $5 million by instituting just-in-time inventory management, and cut costs on gloves by almost $4 million per year by cutting down the varieties it stocked from 20 to just two.

Another example came from Geneva, IL-based Delnor Hospital, which was considering an $80 million expansion to care for the growing number of women choosing to deliver babies there. Before expanding, however, the hospital's lean management gurus did an analysis of existing patient flow, and discovered that patients were waiting hours to be discharged. The hospital tapped a nurse to manage discharges, cutting length of stay by 10 hours, and realized it didn't need to expand.

To get more savings examples:
- read this USA Today story [2]

Related Articles:
Case study: Hospital takes lessons from Toyota [3]
BIDMC uses lean production approach [4]
Talking lean management and EMRs with Simpler's Mike Chamberlain [5]