Magazine article Industrial Management

The Economics of Lean Six Sigma in Healthcare

Magazine article Industrial Management

The Economics of Lean Six Sigma in Healthcare

Article excerpt

Considering how competitive markets are today, most organizations constantly seek new ways to improve methods and gain market advantages. With lean and Six Sigma methodology, manufacturing companies have taken a big leap toward developing cost-saving projects that procure competitive returns. In many cases, organizations have combined the two methodologies for lean Six Sigma programs.

Healthcare is no different in its moves to cut costs while maintaining a competitive edge. Although many hospitals - and other organizations, to tell the truth - react to financial pressures by reducing staffing levels, service lines or capital investment, these cuts can harm the enterprise. This is particularly true regarding the satisfaction of two major hospital constituencies, patients and employees. The negative reactions this can lead to, combined with the following research results, suggest that healthcare ought to focus on maintaining and exceeding employee and customer satisfaction levels. Just like in manufacturing, lean Six Sigma will give healthcare organizations the opportunity to cut costs, increase efficiency and maintain their competitive advantage without resorting to cutting services or adding automation.

The origins of lean Six Sigma

To understand lean Six Sigma in this context, it is best to analyze its effect and implementation at Motorola, one of the first organizations to successfully implement Six Sigma.

At Motorola, Six Sigma quality level means 3.4 defects per million opportunities. Furthermore, Motorola assumed that a process might shift 1.5 sigma from its target. Six Sigma achieves process improvement through DMAIC, which stands for the five phases of a project cycle: define, measure, analyze, improve and control. This model helps reduce process variation, improve quality and decrease costs. Motorola followed this model to success.

The define phase is the beginning of any project. During this phase, the problem statement and project goals are defined and documented. In the measure phase, data is collected to describe the current state. This data is used during the analyze phase, when data evaluation leads to improvement recommendations. The team uses the improve phase to test possible solutions and select the best one. The final phase, control, is to select the best solution. This phase ensures the problem remains fixed.

Whereas Motorola takes advantage of Six Sigma, Toyota capitalizes on lean methodology. Lean, derived from the Toyota Production System, has helped Toyota become a global giant and stay consistently profitable. The primary objective of lean implementation is to eliminate waste or nonvalue-added activities. Nonvalue-added activities include anything the customer is not willing to pay for or activities that don't produce final products. Eliminating them helps any organization reduce costs while maintaining a competitive market edge.

As one can see, the primary purpose of lean and Six Sigma is to reduce costs. Because they have the same goal, many practitioners have decided to use the two in conjunction. Lloyd C. Patterson supports the use of the two together by explaining that "Lean and Six Sigma can exist separately, but the benefits of bringing them together are tremendous, such as the alignment of an organization's resources and the creation of a single improvement strategy" in his May 2009 article titled "Better Together" in Six Sigma ForumMagazine.

Although both tools began with manufacturing companies, they can be applied to other industries, namely healthcare. Healthcare will undoubtedly benefit directly if the industry can reduce expenses without curtailing competitiveness. By reducing error and cutting costs, healthcare can focus more on improving patient and employee satisfaction.

Let's examine a few U.S. healthcare facilities that have attempted lean and Six Sigma initiatives, highlighting the importance of these two continuous improvement methodologies. …

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