Using the Lean Startup model to drive healthcare performance transformation

By ​John S. Budd, Associate Principal, ECG Management Consultants, Atlanta, jbudd@ecgmc.com; Jeryll MacDonald, Director of Primary Care Operations, Columbus Regional Health, Columbus, Ind., JMacdonald@CRH.org; Angie Petro, Director of Surgical and Procedural Operations, Columbus Regional Health, Columbus, Ind., APetro@CRH.org; and Hudson Breaud, Senior Consultant, ECG Management Consultants, Atlanta, ahbreaud@ecgmc.com.

Health systems and integrated medical groups are notoriously slow to implement changes. Bureaucracies can limit operational leaders from making the small incremental changes necessary to make their business viable. Simple tweaks in a practice’s workflow can require sign-offs from an administrator, IT change control, a physician leadership council, patient financial services, system finance, planning and marketing — and the list goes on and on.

While some degree of oversight and change control are important to maintaining continuity, they frequently stifle innovation, creativity and employee engagement and can slow improvement. Research suggests that health systems that successfully reduce costs and meet the Triple Aim are those that are able to rapidly use data and move quickly. A study published in Frontiers of Health Services Management highlighted that in a review of more than 200 health systems, those that were able to deliver significant cost reductions were not defined by embracing a specific performance improvement methodology but rather they shared a culture of data being used to “drive a bias toward action” and where “speed to action” was the “prevailing mindset among senior leaders and managers.”1 

According to the 2019 MGMA DataDive Cost and Revenue, only the top 32% of multispecialty practices operate with a positive net income per wRVU without financial support from their health system.2 This puts most integrated medical group executives in the unenviable position of defending a loss leader to their organization and frequently experiencing pressure to reduce cost. What can medical group executives do in the face of these stark economics?

Lessons from Silicon Valley

Integrated practice leaders can learn from what many firms in Silicon Valley have already embraced. Strategic operational leaders must focus on rapid cycle experimentation and incremental development to quickly identify what creates value for customers and end users and to quickly abandon non-value-added activities. Developed by Eric Ries, the Lean Startup Methodology is one approach that has helped software developers rapidly test ideas by using a cycle of experience-based learning, building and measuring.3 At its core, this systematic process leads to a significant reduction of waste and can be invaluable for resource-limited healthcare organizations.

An overview of the Lean Startup method

The Lean Startup methodology provides a discrete framework for continuous healthcare improvement. Using agile development, the Lean Startup focuses on using validated lessons derived from the “Build-Measure-Learn” framework.

1. Build: Within the Build phase, leaders begin to set the groundwork for their experiment. Rather than focusing efforts on time-consuming planning and complex forecasts, leaders develop a series of testable hypotheses to unlock value for their practice and patients. Based on their hypotheses, leaders quickly begin the experimentation process by developing a minimum viable product (MVP) to test with early adopters. For example, a health system leader may hypothesize that moving a physician to triage in the emergency department (ED) may help reduce overall length of stay by expediting throughput. They may then design an MVP — a simple new workflow in which a physician moves to the front for one shift a week for a month — to test this approach. MVPs are ideally created on a small scale with the minimum amount of resources to test an initial proof of concept.
2. Measure: The MVP quickly starts the inertia for the learning process by testing the fundamental hypotheses and soliciting direct feedback. Using actionable metrics and qualitative customer insights, practice leaders can prove or disprove initial assumptions, and revise their MVP accordingly. Analyzing actionable metrics help discern if measurable improvement is being realized by focusing solely on metrics directly affected by the MVP intervention. Soliciting qualitative data directly from patients and/or staff is equally important to understanding and deriving insights not visible by a metric’s move of the needle. How has this bettered your experience, if at all? What would you change? Building on the physician at triage MVP example above, an executive may examine traditional ED performance metrics such as door-to-provider times with in-person observation and patient interviews to determine whether the new process is delivering on its hypotheses.
3. Learn: Building on what was learned from the MVP, practice leaders must decide whether to continually improve a product or to pivot in a new direction. After analyzing results and soliciting information from patients, staff and leaders, executives must determine if the MVP is unlocking value for their practice and their patients. Does the team need to change course? Pivoting is a much more likely course of action in the beginning. Leaders must become comfortable with failure as early hypotheses often are not successful but provide a significant amount of information for their team. As the learning cycle is completed, leadership is tasked with preparing to tackle another turn of the development cycle.

Figure 1. The Build-Measure-Learn framework

 
Over time, leaders will become more adept at navigating and moving quickly through the “Build-Measure-Learn” feedback loop. Even as the product inevitably becomes more complex, resources are deployed more efficiently as development teams begin working with fewer unknowns and uncertainties through continuous steering and improvement.

While this approach has been used to generate breakthrough products at firms such as Procter & Gamble, GE, Zappos and Intuit, the framework has been shown to be a model for performance transformation in medical groups. As Ries points out, any institution creating “new products or services in an atmosphere of uncertainty” is considered a startup and source of innovation.4

Using Lean Startup principles to drive medical group transformation

Columbus Regional Health Physicians (CRHP), an integrated medical group in Southeast Indiana, employed the concepts of the Lean Startup method to transform financial performance and employee engagement. CRHP had experienced mounting net investments in the practice as its parent health system, Columbus Regional Health (CRH), pursued an access strategy focused on growing specialty offerings in the region. Like many integrated medical groups that had grown through acquisition and employment, engagement and productivity had plateaued with increasing standardization efforts and the loss of autonomy at the practice level.

Figure 2. CRHP’s Rapid Transformation Cycle Framework

In 2018, CRHP leaders began looking for a spark to reengage practice management and embrace the spirit of ownership. Building upon the Lean Startup methodology and a concept called ”100-Day Workouts” pioneered by Chip Caldwell and Greg Butler,5 CRHP built and launched an improvement framework (Figure 2) it would later call Rapid Transformation Cycles (RTCs) with a few simple concepts based on the Lean Startup philosophy:

• Each RTC is centered around a theme with a manager-designed solution to be rapidly designed, implemented and refined within a quarter at each practice.
• All manager RTCs are transparently shared via an online project management software. Managers and directors are encouraged to “steal” successful ideas from one another and improve and build on concepts.
• Successful completion of RTCs is explicitly included in performance management and pay-for-performance incentives and annual evaluations at all levels of the organization.
• Managers learn from their peers. Once a month, all managers are required to lead an education session of their choosing as well as host an open forum for a discussion on current RTC success stories and challenges.

 
In November 2018, CRHP chartered its first RTC focused broadly on “flow.” Managers were tasked with using the concepts outlined above and Lean Six Sigma principles to develop hypotheses, or MVPs, to test within their respective practices that would incrementally improve total cost per wRVU or net income per wRVU in their practice.

“It would be a lie to say that we had this all figured out when we launched the program, but we really had to trust the methodology of getting the minimum viable product out in front of our users to drive improvement,” said John Budd, former Vice President of Physician Enterprise at CRH. “But the engagement from our leaders was nothing short of staggering.” During the flow RTC, managers generated and tested 145 improvement hypotheses across the network resulting in opportunities recognizing more than $400,000 in annualized improvement in 90 days. As one manager noted, “trying to work with my staff to get them engaged and working on workflows with a different mindset” has changed their approach to management and engagement with staff.

“We learned a lot of lessons very quickly about the process from our managers during the first RTC,” Budd said. “Based on their feedback, we refined the cadence of initiatives and were more deliberate in expectations.” Over the course of the next year, CRHP completed RTCs based on denials, gaps in care and used an RTC to broadly roll out daily huddles and visual management boards. The daily huddles and visual management boards have been identified as a manager favorite, with one manager noting “implementing a visual board and daily huddles has improved communication and gets information shared more quickly in my practice.”

The results of the RTCs at CRHP have been significant. The practices reduced their net investment per wRVU by almost 19%. They have also expanded by three practice locations and grown volume by almost 21%. Beyond financial performance, CRHP measured leader engagement using Gallup’s Q12 survey tool and found that its leaders were in the top 10% nationally for engagement. The RTC initiative provided CRHP managers and leaders a platform to learn from each other through the networking and sharing of ideas and engage further with their staff, sharing an insight that “including staff member in projects has allowed their input and makes them feel valued,” according to one manager.

Through consistent experimentation and staff feedback, CRHP leaders were able to overcome consistent barriers to operational improvement and allow managers to, as several put it, “enjoy the breakdown of [the] process” and “look outside the box for ways to improve.” The RTC model developed and tested within CRHP can be readily adopted by health systems and integrated medical group leaders ready to embrace a new spirit of innovation and experimentation once limited to Silicon Valley.

Notes

1. Caldwell C, Butler G, Poston N. “Cost reduction in health systems: lessons from an analysis of $200 million saved by top-performing organizations.” Front Health Serv Manage. 2010 Winter, 27(2): 3-17.
2. MGMA. 2019 MGMA DataDive Cost and Revenue. Available from: mgma.com/cost-revenue-data.
3. Ries E. The Lean Startup: How Today’s Entrepreneur’s Use Continuous Innovation to Create Radically Successful Businesses. 2011. Random House USA, New York.
4. Ibid.
5. Caldwell Butler & Associates. “100-Day Workout: Productivity Cycle.” Available from: bit.ly/39qxn76.