Today’s Managing Health Care Costs Indicator is

$180  million

That’s the amount that the Seattle Children’s Hospital says it has saved in capital costs over the last six years by instituting lean techniques, or the Toyota method.  The effort is highlighted in an article in today’s New York Times.  

Seattle Children’s Hospital has invested in training and measurement and consulting services to adopt the Toyota method,  and has studied its processes and standardized, overcoming physician demands for autonomy and nursing demands for high (and fixed) staffing ratios.   The hospital has been able to increase its volume while resisting large new capital investments in its facilities. That’s important, because capital investments require higher reimbursements in the future.  The cost of servicing this type of debt (3%, 10 year amortization) is $5.6 million per month – so avoiding this new investment really matters

One of the ‘wastes’ that the Toyota system focuses its attention on is waiting.  Keeping patients waiting a long time isn’t just bad for patients – it’s really expensive.  An efficient system that eliminates the waste of waiting needs fewer staff, fewer  chairs, and even fewer new parking spaces.  The result is that a “lean” health care system is able to deliver care that is more likely to satisfy patients, and do it for less.

This is especially important as we travel into the post-health-reform world.  The pressures on hospitals to lower their costs will be very large.  Hospitals will receive $245 billion less  in increased reimbursements over the next ten years as part of the PPACA Act, and more patients will be enrolled in Medicaid, which historically pays very low rates.  It will be hard for hospitals to simply shift those costs onto those with employer-sponsored insurance, since that would raise employer premiums so much that more would exit offering health insurance altogether.

It’s heartening to see institutions reengineering to lower their resource costs. That’s the only way that we can succeed in expanding access dramatically without continuing to have rampant health care inflation.   Seattle Children’s Hospital is using techniques honed in the best manufacturing plants in the world to provide higher value.