Driving Down the Cost of Health

This is a mantra across any business sector, but one that seems to hit our industry more than any other due to the widespread ramifications it has on providers, businesses and patients. Insurance companies are dropping reimbursements while the cost of providing outstanding service continues to rise, which generates swift repercussions that executives have to consider every day. To combat this, healthcare providers go through rounds of consolidation and back-office efficiency programs to drive out unnecessary cost.

But these fixed-cost efficiencies only go so far. There is not a day that goes by that another round of layoffs makes the news (http://bit.ly/1xJ4zSz). In some cases entire hospitals are closing. In others, it’s based on new budgetary realities. These cuts hurt the most because they directly affect patients and hospital cure rates, which then effects reimbursements. It’s a tough cycle.

Looking forward, baby boomers are entering a time when their health is starting to wane and healthcare service will be needed most. Perhaps hospitals will staff up as this wave approaches. Or a new approach will be developed to service this mega-demographic. Regardless, new capacity will be needed – either via giant new hubs or a multitude of spokes.

In some cases, retro fitting existing facilities can work. In others, breaking ground is the best answer. Much like an aging commercial aircraft, the cost to maintain an existing 737 gives way to buying a new plane with better fuel and flight efficiencies — and the investment is made.

The problem with building new healthcare facilities is that the reimbursement dynamic will never go away. Add in the Affordable Healthcare Act, or some form thereof, and the need for long-term efficiency and structural flexibility is critical. And it all starts from the planning stage.

Lean manufacturing practices have now entered the planning, design and construction space. Not only can lean efforts help expedite the project delivery and offer real cost savings on the capital expenditure, they provide a way for project teams to stay focused on the goals and values that are most important for the organization.

The parallel in the manufacturing world would be taking steps beyond measuring local efficiencies and bottlenecks to making sure that the whole production system meets the specific goals of the organization.  Simply reducing the cost of one manufactured part, or one floor of the building, is not significantly beneficial if the whole building program is not aligned with the organization’s needs. Unless waste is driven out, and flexibility is built into the long-term planning and operations of the facility, it will age quickly and become unable to operate profitably (much like the aging 737).

Building more valuable facilities, with less waste. Lean project delivery can help.