Editor's note: This blog is part of Fiscal Fitness, a regular H&HN series exploring the cost containment strategies hospitals are employing in response to reimbursement pressures and an uncertain economic climate. Read more at our Fiscal Fitness page.

Admit it. When you think about who's pioneering groundbreaking business techniques, rural hospitals don't come to mind first. But that's happening in western North Carolina, where five rural hospitals got together in 2008 to figure out how to do what they do better, from both a quality and a fiscal perspective.

Like many business executives today, these hospital leaders suspected that Lean methodology could help them step up their games. But because their operations are small, with tight margins and limited staffs, investing money and time on Lean training was something none could easily afford alone. So, in 2008, they formed the North Carolina Rural Hospital Lean Culture Transformation Collaborative.

"By doing it together they could learn and implement Lean more efficiently," says Jeff Spade who, as vice president of the North Carolina Hospital Association and executive director of the North Carolina Center for Rural Health, spearheaded the collaboration. For instance, because collaborative members are geographically close, they can share a Lean coach from improvement consultant Simpler Healthcare. The coach comes to the area once a month and moves from one hospital to the other. That saves 30 to 40 percent of the coaching expense, Spade says.

The first step in forming the collaborative was a series of informal workshops to create dialogue among the hospital CEOs. One-on-one sessions with executives nurtured a commitment to Lean and to the goal of improving care, eliminating inefficiencies in various processes and containing expenses. A "funding quilt" stitched together grant support from the Duke Endowment and a variety of federal, state and other sources.

The five hospitals agreed to a three-year collaborative to establish a base for Lean culture transformation. Each of the five hospitals hired at least one Lean coordinator, mainly from their respective current workforces. "We believe that person is usually already employed in the hospital," Spade says. Coordinators have come from nursing, infection control and quality improvement, though some do have Lean experience in industries other than health care.

A three-week training program was conducted for the designated Lean coordinators and the hospitals' executives. After that, the real work began.

A strategic analysis was conducted to refine how hospital leaders perceive their operation now and the future improvements to be accomplished. Then each hospital selected so-called, rapid-improvement events. The RIE process pinpoints a specific operational area — say, revenue cycle management. It spells out what problems need to be addressed and why, the steps for solving them, and how success will be measured. Everyone involved in the particular activity or process participates.

The overarching goal is to improve quickly and then continually improve "in small pieces over time," Spade says.

Each hospital in the collaborative chose different RIEs. For example, McDowell Hospital focused on the emergency department and surgery. Caldwell Memorial Hospital chose revenue cycle, inpatient flow, surgery, the physician network, the pharmacy and the safety net.

The results amazed everyone. Most RIEs met or surpassed the pre-established goal of 50 percent improvement within three years, and some hospitals have seen an overall return on their investment of greater than 6-to-1. Among the results were:

  • A 60 percent reduction in transportation time of inpatients to and from imaging at Ashe Memorial Hospital.
  • A 35 percent reduction in turnaround time for the top five laboratory tests ordered; and a reduction from 60 minutes to 28 minutes from the time the patient presents in the emergency department to the first intervention at Cannon Memorial Hospital.
  • A reduction in patient room turnaround time at inpatient discharge from an average of 90 minutes to 45 minutes. That brought an additional benefit: Aggregate capacity improved by 230 patient days, resulting in $398,750 net revenue with no additional staff or rooms at Caldwell Memorial Hospital.
  • An improvement of more than $400,000 in the revenue cycle at Blue Ridge Memorial Hospital.

"Caldwell Memorial Hospital is a leader among Lean-managed hospitals in the United States," Spade says. Its three-year return on investment for Lean transformation is 6.25-to-1. It has conducted 77 Lean improvement events since September 2008 and now manages five value streams with five Lean coordinators.

With the success of the Lean initiative, the collaborative is reaching out to other health care organizations in the hospitals' communities, such as physician practices, public health departments and home health agencies. "Health care is a product of these organizations working together," Spade says. "Think Lean across organizations, not just in a single organization." That's going to be especially crucial as accountable care and value-based payment gain traction.

The initiative has been so effective that a similar collaboration was launched among rural hospitals in eastern North Carolina. In 18 months, the hospitals have achieved 37 Lean improvement events and engaged 285 associates and leaders in rapid-cycle management. The early ROI for the collaborative is 3.7-to-1.

The North Carolina model has been adopted in Nebraska and Oregon, and versions of it are spreading to other states.

Bill Santamour is managing editor of Hospitals & Health Networks. Follow our tweets at www.hhnmag.com/twitter.