IHI Research Associate Jeff Rakover and IHI faculty member Brian Maskell describe the potential benefits of applying Lean Accounting to health care.
A decade ago, leaders from Intermountain Healthcare estimated that up to 35 percent of health care production represents waste. Today, providers continue to face the challenge of how to improve efficiency and reduce waste to deliver better health care value.
Despite having more data than ever before, many health care providers struggle to improve the quality of care while managing costs. While many have succeeded in tracking key quality measures, regular tracking of efficiency and cost measures often remains difficult.
Methods from other industries can help health care providers and leaders understand their overall levels of efficiency and quality performance. Instead of wading through what often feels like a “data dump,” these approaches can help identify the most useful information for better management.
Tools to Measure Value
Some organizations have tried to measure value by complementing quality measures with methods like activity-based costing (ABC), but ABC and related methods require significant investments of time and resources. Lean Accounting offers tools to make it easier to routinely assess the value of health care. Lean Accounting refers broadly to applications of Lean thinking principles to accounting and financial functions.
Managers in many industries, such as manufacturing, have used Lean Accounting to great effect for more than two decades. Applications of Lean Accounting in health care are relatively early in development, with preliminary testing of this method in emergency department care and joint replacement surgery. Especially for clinical services with regular, predictable work flows, Lean Accounting provides the needed structure and valuable data for better process management, quality, and efficiency.
Benefits of the Box Score
A component of the Lean Accounting method, the “box score” tool developed by Lean expert Brian Maskell, offers a method for continuous value management. The box score is essentially a dashboard that includes three types of metrics:
- Quality measures that relate mainly to areas like safety, defects, and operational efficiency measures (e.g., on-time starts).
- Capacity measures that compare overall staff time availability to actual productive utilization of that time
- Financial measures that address major cost items (e.g., supplies) and traditional measures of profitability
These box scores help frontline managers understand the weekly performance of their clinical services on a single sheet of paper. In the health care context, this service might be a “production line” for hip or knee replacement, heart surgery, or cataract surgery, for example.
The box score is determined in real time. Instead of monthly or quarterly reports, the box score helps frontline managers and financial staff understand performance as it occurs. This method highlights immediate opportunities for improvement based on timely data and cooperative, practical problem solving.
In addition, leaders can use the box score to model the impact of various management decisions — anything from switching to a different staffing structure by minimizing use of per diems, to changing supply purchasing (e.g., keeping a larger inventory of already purchased items rather than keeping items in consignment).
To introduce the box score, clinical service managers require basic data on cost and quality, and need to collaborate with financial staff to make these data available on a regular basis. Several infrastructure elements can facilitate the introduction of the method:
- A well-developed value-stream map that includes information on the clinical service’s process steps, and also key data elements such as time involved for each step and specific staff involved;
- High-quality, regularly updated data on key cost items, such as materials and supplies for procedures; and
- A commitment to improvement and standardization (where it makes sense), with at least a rudimentary understanding of standardization methods in health care and the science of improvement.
Hospitals are often flooded with data — from clinical analytics systems, external benchmarking, and other sources. However, service line leaders may find it challenging to link performance measures to strategic goals. Applying Lean Accounting methods can help organizations find the right set of measures to monitor routinely for true continuous improvement.
Jeff Rakover is an IHI Research Associate and a member of the IHI Innovation Team.
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