I went through our new book Healthcare Kaizen to categorize the different improvement examples in the book…
We have, by my count, 124 examples from hospitals and healthcare organizations around the world., not including the fun examples from Chapter 12 that illustrate Kaizen in daily life. You can see some of the examples by registering to get Chapter 1 or use the Amazon “look inside” feature.
Each Kaizen example can have an impact in one or more categories:
- Patient safety (24)
- Staff safety / ergonomics (8)
- Quality / outcomes (43)
- Service / patient sat (38)
- Cost (35)
- Staff satisfaction / time savings / easier work (77)
Many of the improvements have an indirect cost impact. In some cases, it's very straight forward, where you reduce the unnecessary use of some supplies. Two of the improvements in the book had a very large financial impact:
- Reducing the denial of billing claims by about $250,000
- Reducing the occurrence of hospital-acquired pressure ulcers (bed sores), which saved about $600,000 in unreimbursed care
Adding up only those cost savings that were listed in the Kaizen Reports, the total cost savings of the examples in the book is approximately $1,150,000 a year. That's a very conservative estimate of the cost impact of improved quality, staff time that's saved, reduced length of stay, etc.
We quoted Dr. Deming in the book on the topic of adding up cost savings:
He that expects to quantify in dollars the gains that will accrue to a company year by year for a program for improvement of quality expounded in [Out of the Crisis] will suffer delusion. He should know before he starts that he will be able to quantify only a trivial part of the gain.
– W. Edwards Deming, Ph.D.
Cost savings isn't the only reason to do Kaizen. Not every improvement has a Return on Investment (ROI) that can be easily calculated.
Engaging people in Kaizen improves staff satisfaction. This leads to better patient satisfaction. Saving staff time leads to better quality and patient safety. This leads to shorter length of stay and reduced costs. It all goes hand in hand.
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I believe in what Phil Crosby used to say – “Quality is free”. I’d also go on to add a saying that I think was by Dr. Deming “The real numbers are unknown and unknowable”
Putting these two together leads one to question the amount of time and effort that goes into trying to quantify the gains from kaizen down to the last dollar and cent. As long as we’re in the ballparl, we’re close enough. It’s the right thing to do.
I agree, Al, that we can’t quantify each kaizen to the exact dollar. As we describe in the book, each kaizen report (before and after) at Joe’s system used to say “optional” for cost savings and they have now taken that field off of the report. They only attempt to estimate a cost savings if it has a clear and significant cost or revenue impact, not for each and every one. I agree with that approach.