The Lean healthcare pioneers at Beaumont Hospital thrive in tough times.
Beaumont Hospitals in southeast Michigan is a successful pioneer in its efforts to implement Lean practices. Since 2001, when Beaumont initiated a move to Oracle enterprise software for its financials, supply chain, and human resources operations, it has altered both its financial picture and its culture.
Beaumont CIO Paul Peabody reveals that they reengineered hospital practices to match processes embedded in products such as Oracle General Ledger and Oracle Supply Chain. When Peabody's team of engineers completed an exhaustive analysis of business processes, they knew exactly what types of savings could be expected for processes such as hiring a physical therapist or ordering surgical staples.
Peabody contends that implementing Lean practices is a critical goal for the healthcare services arena because of today's shrinking margins. There isn't enough money to pay for healthcare as it is currently run, and it is imperative to reduce expenses in non-value-added areas. Beaumont is particularly pleased with changes in its supply chain. Healthcare organizations that are less efficient typically spend up to 35 percent on supplies, but in the five years since it implemented its Oracle system, Beaumont is coming close to spending only around 19 percent. In addition, US $50 million in expense has been taken out of the organization.
A year ago, Beaumont Hospitals in southeast Michigan purchased its region's first 64-slice CAT scanner so cardiologists could peer into the hearts of patients without the risk of inserting an exploratory catheter. Now, Beaumont is replacing the machine with an even more precise—albeit "phenomenally expensive"—128-slice scanner. How, in an era when insurers are ratchetting down reimbursements, can Beaumont continue to find the money to invest in the most-advanced medical technologies?
Beaumont CIO Paul Peabody and his team found money tied up in the antiquated business processes common to health services across the country. Starting in 2001, Beaumont began a move to Oracle enterprise software for its supply chain, financials, and human resources operations, using the software as a guide to enterprise best practices and the value of bringing Lean business and IT processes to the clinical setting. The experience has changed not only Beaumont's financial picture but also its culture.
The Road to Lean
"Take a good application system, put it on top of a bad process, and you get a bad result faster," says Peabody. It is an adage that could be engraved on Peabody's desk. But how did the CIO and his team get started on the road to Lean? To begin with, they took a site visit to Xerox to understand how they were using Oracle software to run a Lean operation. Next, the Beaumont team carried out an exhaustive analysis of the hospital's current business processes at its two Detroit-area hospitals, as well as its medical centers, nursing center, and other facilities, and compared them to the processes embedded in products such as Oracle Supply Chain and Oracle General Ledger. Then they reengineered the hospital practices to match. "We changed our processes, not the tools," says Peabody. "Oracle has worked with customers in every kind of business, learned the best practices in all of them, and combined them together in its software," he says. "There's no reason for an organization like us to reinvent the wheel." Once Peabody's team of engineers had finished the analysis, they knew precisely what kind of savings they could expect for processes such as ordering surgical staples or hiring a physical therapist.