Lean transformation in health care: Interview with Simpler’s Marc Hafer (transcript)

This is a transcript of my recent podcast interview with Simpler Chief Executive Officer Marc Hafer.

David E. Williams: This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog. I’m speaking today with Marc Hafer. He’s the Chief Executive Officer of Simpler.

Marc, thanks for joining me today.

Marc Hafer: You’re welcome, David. Nice to be here.

Williams: What does Simpler mean and why is the word Simpler in the title of your book and also the name of your firm?

Hafer: Simpler is a firm that was founded on the basis that we could teach the principles of the Toyota production system in a simpler manner than the way that we had learned it from our Japanese senseis. When Ed Constantine founded the organization, it was all about being respectful, and yet at the same time being very direct in coaching our clients toward a systematic approach to solving business problems using the basic tenets of the Toyota production system.

Williams: How have things evolved since then?

Hafer: We started out as a firm that was focused on industrial businesses and manufacturing because that’s where all of us originated. Over time we’ve developed a consulting practice that has broadened the reach of what’s commonly referred to as lean management into a variety of industries well outside of the origins of Toyota, which of course  is in the automotive industry.

We’ve expanded into the public sector into the Department of Defense and eventually in 2003, we expanded into the healthcare industry, principally the healthcare provider industry. We do some work in pharma and we do some work in medical devices, but within Simpler healthcare refers to hospitals, clinics, and healthcare providers.

Williams: What do you see hospitals doing to improve and how is the success of these attempts being measured?

Hafer: I believe that healthcare has a long history of working on quality improvements and  improving the overall operations of their firms, but when we entered healthcare, we didn’t really see a systematic approach to transforming healthcare. We saw a lot of good ideas, but seldom did we run into someone who had a systematic methodology for transformation.

That created an opening for us to introduce the Simpler business system and our systematic approach to improving a number of performance dimensions. What we teach and what we are seeing more of is a focus on the business of healthcare, as well as the practice of healthcare.

The difference is that the practice of healthcare is at the point of care, but the business of healthcare is making sure that that it can be done affordably and repetitively.

Our systematic approach teaches organizations to focus on human development, quality of care, access and service, as well as productivity and improving  cost structure. This allows organizations to be competitive now and into the future.

Williams: How different are hospitals from industrial organizations in terms of the approach that you take? Are they different also from entities in the public sector, such as the Department of Defense?

Hafer: The motivations are different. I don’t think that the approach to transformation is necessarily different, although you have to take into account the nature of the workforce and the nature of their training. The motivation in healthcare   is obviously very patient-centered or at least it should be  versus the industrial sector, which is profit oriented.

Therein lies the big difference between healthcare and the commercial or industrial sector. I think there are actually more similarities between the public sector and the Department of Defense and healthcare because only in a few cases is there a profit motive. It’s more about providing quality and stretching the dollar to be able to do more with the same amount of resources for the betterment of mankind. This is the case in both healthcare when treating patients and  the Department of Defense when supporting the fighters of a war. The motivations are what distinguish healthcare from say, the industrial sector.

Williams: What are some of the things that an organization could do to assess itself to determine its readiness to begin the transformation process?

Hafer: Successful lean transformations are led from the top, and so having engaged CEOs, , the CMOs, the chief financial officers, chief operating officers and the  whole C suite on board is important. Having that engaged C suite is really the key to being successful with the lean transformation approach. As we assess potential clients, that’s what we’re looking for.

We’re not looking for an organization that has had lots of different programs that have been delegated down into the ranks of their organization. We need leaders who are going to be hands on in learning to identify waste, ,which is new learning for them. It’s a new way of looking at their business that they’re not familiar with.

One must be willing to roll up their sleeves to teach, and to coach the development of their teams to be able to see waste and to eliminate waste from their operations. We need an engaged C level within any organization, but especially in healthcare because it’s not something that can be delegated.

Williams: How big of an influence is the Affordable Care Act having in getting hospitals and other provider organizations to act? Is that a major factor in what you’re seeing?

Hafer: Yes it is. The Affordable Care Act and the initiatives spawned by that coming out of CMS are having a significant impact on motivating organizations to innovate, to not improve healthcare on the margins, but to radically change the way that healthcare is delivered for the better.

When I say for the better, I mean, first and foremost for the betterment of the patients, but also to make healthcare affordable. It has gotten completely out of control from our perspective. What CMS and the Affordable Care Act are doing to stimulate that improvement is actually a misunderstood blessing in disguise.

The organizations we work with are very positive on the stimulative effect of the act. I’m not necessarily endorsing the entire act per se, but there are a lot of elements of the act that are very positive in the way it’s motivating organizations to improve.

Williams: During the first presidential debate, both candidates were praising the Cleveland Clinic, which is of course a famous place. If it had been up to you and you’d been prepping the candidates, is there anybody else that you would have pointed to and what would you have had them say about that institution?

Hafer: Well, first of all the Cleveland Clinic is highly regarded and well known for a reason. They are really outstanding and more so than just some organizations who have a good PR machine. There’s really substance behind their image and their reputation. We’ve seen that firsthand. We haven’t had the opportunity to personally work with the Cleveland Clinic, but we’re well aware of their work behind the scenes and I would highly endorse their methods.

But on the other hand, there’s more going on than just the major institutions like the Cleveland Clinic, for example, with small rural hospitals in North Carolina banding together.

The largest public hospital institution in New York City, New York City Health and Hospital’s Corporation, has also done tremendous work over the last five years to not only improve their cost position, but to improve their access and overall quality of care delivery to the largest population center in the United States.

And then there’s everything in between: Faith-based organizations, non faith-based organizations, large and small, public and private, for profit, not for profit, there’s a wide range of hospitals that over the last five years have gotten on board with applying lean management approaches to improving healthcare, and this is really still relatively new in the United States.

I would pinpoint it back to about 2001 or 2002, so it’s only about 10 years into the advent of lean in healthcare in the United States. That momentum has gained a head of steam in the last three or four years.

There’s a long way to go, but there are lots of organizations besides the Cleveland Clinic who are doing great things out there. We just need to shine a light on more of those to demonstrate that it’s not just the purview of the big guys, but it’s large and small alike.

Williams: Tell me a little bit about your book “Simpler Healthcare”. What kind of reaction have you gotten and who’s the main audience for it?

Hafer: We wanted to give some vignettes or insights into organizations from around the globe that we’ve worked with, and how they’ve applied lean management principles to improving quality and access, lowering costs, et cetera. There are a variety of these different types of organizations, three in the United States, and three outside of the United States.

We chose two of our clients from the NHS in the UK to be featured, as well as one of our clients in Singapore, along with three hospital systems in the United States just to demonstrate the variety of applications and how applicable it is across the board.

It’s not just one type or organization, but many types of organizations that have been successful. We also featured in each case what we call the X factor –the key ingredient that you wouldn’t find in a book that says, ‘follow this book and this is the systematic approach to transformation.’

In every case we cited, there was something unique about that organization that really put them over the top. And oftentimes it was the element of leadership, and the impact of the CEO or the impact of the leadership team and how they got involved and engaged in the transformation that was featured as the X factor.

We’re excited about it and it’s received a good reception. I think that it should serve to motivate folks who are on the fence wondering if this is for them. I think we’ve demonstrated through a variety of examples that this can be for everyone.

Williams: I’ve been speaking today with Marc Hafer, CEO of Simpler. We’ve been talking about lean management in healthcare. Marc, thanks so much for you time today.

Hafer: Thank you, David. I enjoyed it.

October 24, 2012

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