Identify 8 types of waste to fend off hospital layoffs

With a watchful eye on money coming in and out from patients, reimbursements, and donors, more healthcare organizations are closely examining existing internal processes to save their wallets and their employees.

According to Lean management principles, based on the Toyota Production System, there are eight types of waste often seen at hospitals, according to a column in Hospitals & Health Networks Daily by Mark Graban, president of Constancy Inc., a consulting firm in Keller, Texas.

"Reducing waste is very different, in mindset and practice, from traditional cost cutting, as Lean waste reduction looks at how the actual work is performed rather than focusing on spreadsheets, budgets and financial benchmarks," wrote Graban. "Reducing errors, improving throughput, reducing staff frustration--all of these tactics reduce costs."

The waste often comes from operations, such as processing or even layout:

  • Defects, such as lost or mislabeled labs
  • Overproduction, such as over-ordered medications
  • Transportation, such as moving a patient a long distance from an operating room to recovery
  • Waiting, such as in the emergency room, which can result in poorer patient outcomes. Hospitals are currently addressing this by experimenting with booked appointments for less serious conditions or triaging by telephone.
  • Inventory, such as expired supplies because of overstocking or inefficiencies in rotating meds
  • Motion, such as staff walking more than needed to find surgical instruments that are grouped together
  • Processing, such as staff writing or repeating patient information in multiple forms. With meaningful use incentives in place, more hospitals and health systems are looking to integrate systems and avoid duplication with electronic health records.
  • Human potential, such as staff members not engaged in improvement activities. Among healthcare executives' top concerns, alignment in improvement certainly tops the list, but integrating quality into physician culture can help remedy ambivalence in quality and help them reach their so-called human potential.

"Traditional organizations might see that 60 percent or 70 percent of their expense is direct labor cost. This realization often leads to the idea that the clearest path to cost reduction is to eliminate people (again, often based on benchmarks)," wrote Graban. "Lean methodology takes a different view: Waste reduction cannot be used to drive layoffs, as that would put an end to staff engagement in the improvement process--a core Lean principle."

Organizations such as ThedaCare, Denver Health, and Avera McKenna have fended off layoffs, attributed to Lean management, according to the column. With hospitals across the country feeling the pressure of reduced reimbursements and staffing shortages, taking a Lean management approach to internal processes may be the trick to help organizations in a post-recession era.

For more information:
- read the H&HN column

Related Articles:
GAO: Medicare responsible for 40% of government waste
Hospital layoffs to follow Medicaid reimbursement cuts
EHR waste: States pay millions in incentives without verifying

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