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Frugal innovation: Getting your practice to think ‘lean’
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Lean is a growth strategy, a survival strategy and an improvement strategy. The goal of lean is, first and foremost, to provide value to the patient/customer, and in so doing eliminate the delays, overcrowding and frustration associated with the existing care delivery system.
– Thomas Zidel, A Lean Guide to Transforming Healthcare
In last month’s column, I discussed a shift that the smartest practices are starting to make from a bias toward revenue management to greater efforts at cost management, and particularly efforts to reduce the cost of transiting the average patient visit.
This month I will focus on getting you and your staff into a cost-containing, frugally innovative, lean-and-ready-for-the-future mindset.
It all starts with a sense of urgency. Here is a little demonstration: Hold your breath for about 30 seconds. If you are under 40, make it 60 seconds — 90 seconds if you run marathons.
What happens to you physiologically when you hold your breath is that rising carbon dioxide levels send signals to the diaphragm to breathe. Delay and the signals get painful. Delay longer and you will pass out.
My hope is that well before the financial oxygen your practice needs to survive gets thinned out by Medicare fee reform, you will have already started to respond to today’s adverse business signals by trimming costs and boosting incremental revenue. With a bit of frugal innovation, your practice can avoid passing out in the years ahead.
An innovatively frugal mindset means you are more acutely, and urgently, attentive to your environment. That is why financial statements should be generated monthly, and early in the month, rather than quarterly or annually. You should be graphing visits and surgical cases monthly to spot trends early. When a key referral source tapers their support, you need a means to find this out near term, not a year from now.
“Frugal innovation” arose from one English translation of the Hindi term jugaad, which means an improvised arrangement or work-around obliged by a lack of resources. In India, jugaad is also the word for a kind of cobbled-together rural vehicle made from a wagon and a repurposed diesel irrigation pump. Kind of like taking Tono-Pen (Reichert Technologies) pressure measurements at the check-in desk because you do not have enough techs today. Crude but effective.
Frugal innovation is, of course, just another verbal handle, or jargon, to help drive forward important concepts of doing more — faster, more accurately and consistently, and with fewer resources. Many of these code words and associated management frameworks have arisen through the years.
- Value engineering — Launched at General Electric during World War II to overcome shortages of labor and raw materials. In this setting, as in ophthalmology’s likely future, necessity was the mother of invention.
- Kaizen — After World War II, American consultants in Japan produced a training film, Improvement (Kaizen) in Four Steps. The term stuck and was exported to America.
- Just-in-time production — Generally associated with the Toyota Production System. It was a tactic borne of necessity: Toyota’s president said, “Catch up to America within 3 years or Japan’s auto industry will not survive.” (Sound like ophthalmology?)
- Lean manufacturing — Also originated with Japanese manufacturing, this term was first cited by an MIT student in 1988 in his master’s thesis.
- Six Sigma — Developed at Motorola in 1986, the concept became widely known after being applied at General Electric a decade later. Strives to reduce waste by embedding Six Sigma-certified efficiency experts within an organization.
- Best practice — Broadly adopted by business, government and nongovernmental organizations to accredit the best, or at least a good, way of doing things. The American Academy of Ophthalmology’s Preferred Practice Patterns are an example.
Every business on the planet is now pursuing frugal innovation. You pour your own soda at fast-food restaurants. Technical support for your laptop computer is handled overseas 24/7. Toyota assembles a whole car with just 30 hours of human labor (while it still takes most ophthalmic practices 3 hours of staff labor to transit a single patient visit).
Ophthalmology has been at this for a while too. Changing from a $20 cataract brochure to a few print-on-demand factsheets. Changing from free patient limo rides to bus tokens for indigent patients. Changing from $50 postop get-well flowers to a $3 mug. And charging up to $95 for a refraction, which was once a bundled fee. In the future, our patients will self-appoint online; self-register at a reception lobby kiosk; be issued a kind of boarding pass directing them to special testing stations 3, 7 and 11; and then at the end of the line, finally see the physician. Or they may just step into a kiosk at the mall and be examined remotely by an ophthalmologist in the Philippines.
Adopting a frugally innovative mindset
Commercial enterprises, including the smallest ophthalmic practices, get more complex and costly to run as they grow. Bureaucracy and waste creep in by degrees and have to be periodically eliminated. Business leaders, advisors and academicians have been rediscovering and revising frugal innovation for generations now. Here are some tactics and tools to get started:
- Consider your provider’s sentiments carefully. Most physicians, when they are thinking like business owners, are enthusiastic about frugality. But when confronted with the behaviors they might have to personally change — working differently and harder, accepting trade-offs in technology adoption — most providers will resist change. Solicit your physicians to be part of a Frugal Innovation Task Force. Have them champion the plan.
- Use positive incentives initially (eg, “You will share in our savings on surgical materials”) and penalties later on (eg, “If you continue to use high-cost items, this will be charged to you directly”).
- Your foremost mandate as a practice leader is to use physician time efficiently. Physician time is the most costly resource in your practice. If you take a fairly successful surgeon’s $1 million in annual collections and divide it by the typical 2,000 or so work hours in a year, it comes to $8 per minute. With that in mind, should a physician spend 5 extra minutes with a patient to teach them about the details of their upcoming cataract surgery when the clinic is running behind? Should he go to his office and read emails when he has an open room and could jump in to start a patient visit? Or go to the sidelines and meet socially with a pharmaceutical rep for 20 minutes? Nope.
- Make sure that one key person in your practice clearly owns the mission of spearheading frugal innovation. Do not just put out blanket dictums to “please watch our costs.” In a large practice, this will be the chief financial officer; in a midsized practice, the office manager or administrator; and in the smallest offices, the physician-owner.
- Be as objective and measurable in your efforts as possible. Have the discipline to generate an annual budget. Generate monthly financial statements rather than quarterly or annual ones. And use an annual evaluation grid for every vendor (Table 1).
- Make sure everyone at the top of the organization understands the in-the-trenches basics of your practice. Very few surgeons have ever watched their techs work up a patient or watched their billing staff post and submit a charge. This also applies to managers. While most midlevel managers come up through the ranks and know how to do the jobs of the people they supervise, the administrators of larger practices are frequently separated from life on the assembly line. Get back in the trenches.
- It does not take much innovative thinking to realize that a core determinant of ophthalmic practice output and profitability is simply the tempo of staff and providers. Brisk, purposeful movement throughout the day simply gets more work done. Here are some pearls, courtesy of psychologist Craig Piso:
- Recruit hardworking people at the outset rather than trying to get naturally slow people to work more briskly.
- Select people who have already proven themselves in high-tempo settings: other high-volume clinics, restaurants or similar high-traffic service settings.
- Performance is always an interplay of individual work aptitudes and management effectiveness. While it is tempting to blame slow work on the individual worker, there is usually room for improvement in management’s efforts to bring forth more speed.
- High-energy all-stars always want to be challenged to go to the next level of performance, so keep raising the bar and rewarding performance along the way.
- It is beneficial to shift your frame of reference. Imagine your employees as independent vendors, selling you their time by the hour. Would you keep all of them or try out a few new vendors? If you currently employ a problematic physician and had an opportunity to hire them again, would you do so? If the answer is no, then why are they still in your practice? Although you are trained as a clinician to help everyone who comes your way, are there patients you should dismiss because of their low reimbursement, noncompliance or misbehavior in your office?
- Finally, avoid service wastes. Some of the best-known early rules on avoiding industrial waste were laid down by Taiichi Ohno, the father of the Toyota Production System. Ohno’s statements have been refined for service entities by Bicheno and Holweg, academics, consultants and co-authors of The Lean Toolbox. Things to avoid:
- Delay on the part of patients waiting for care.
- Duplication: having to re-enter data, repeat details on forms, copy information across platforms or answer queries from several parties within the same organization.
- Unnecessary movement: standing in unnecessary lines to check out or poor ergonomics at a workstation.
- Unclear communication, and especially the compounding waste of seeking clarification.
- Incorrect inventory: being out of stock, unable to get what was required.
- An opportunity lost to retain or win customers, a failure to establish rapport, ignoring customers, unfriendliness and rudeness.
- Errors in the service transaction: defects in the service or product-service bundle, lost glasses orders or a failure to address a patient’s chief complaint.
Next month, I will discuss five aspects of this new mandate toward frugal innovation and share a starter kit of tactics you can effectively employ in your own practice.