Building a Profound Lean Infrastructure for Durable Success

Building a Profound Lean Infrastructure for Durable Success Sam Carlson, MD, FACP Chief Medical Officer and EVP, Park Nicollet Health Services John Black, John Black & Associates, LLC Revised 2/28/08

Conflict of Interest John Black of John Black and Associates LLC (JBALLC) John Black is President of JBALLC and his consulting firm consults to Park Nicollet Health Systems on Lean, Global Production System. The presentation could be perceived as a conflict as JBA receives payment for services for consulting to Park Nicollet on the Lean, Global Production System principles presented in this presentation.

Park Nicollet Health Services is… • Non-profit integrated care system • 8000+ employees • 600+ employed physicians • Over $1 billion annual revenue

Park Nicollet Health Services is… • Park Nicollet Clinic- 45 medical specialties and sub-specialties in 25 clinic locations in suburban Minneapolis • 3 million patient visits annually • Park Nicollet Methodist Hospital– 426 bed facility • 26,000 admissions annually • Park Nicollet Institute– Engages in research, education and innovation to improve quality and public and private decision making in healthcare. • Park Nicollet Foundation – The fund-raising arm of Park Nicollet Health Services, using philanthropy to build healthy communities by supporting patient care, research and education.

Why is PNHS Aiming at World-Class Performance? • We realized we were far short of where we needed to be • We knew we had lots of ineffective, non-value-added processes and activities • AND we knew the U.S. healthcare industry as a whole was not “world class” • Prior improvement methodologies weren’t having traction

Why Did We Take a Look at Lean? • Because we knew we weren’t delivering “world class” health care • Because we had heard promising reports about implementation of the Virginia Mason Production System (Lean) at VM’s Medical Center in Seattle • We were intrigued with its potential, but wanted to do a test run at Park Nicollet before departing from our six sigma improvement strategy

Construction of the Bridge in 1967. I35W Bridge, Minneapolis, MN, before and after collapse What Does Infrastructure Mean? Why Is It Important? PROBABLE CAUSE: • Federal investigators have concluded that steel plates on the [I-35W] bridge that collapsed last summer in Minneapolis were inadequate to hold the structure together… • Design changes in 1977 and 1998 added additional pavement and concrete barriers that increased the weight of the bridge… • Gusset plates are flat steel structures used to bolt together the steel girders that carry the weight of a bridge. Bridge engineers typically design the plates to be far stronger than the girders because if one fails, the whole bridge will collapse. • In the wreckage of the I-35W bridge, investigators found 16 gusset plates that were fractured… Eight of the plates were in the location on the south side of the bridge where the collapse began… What [engineers] found was that the half-inch thick plates should have been an inch thick – double the size… USA Today, 1/15/08

Creating the Vision “Everyone caring every day, creating with the individuals we serve optimal health and greater value”

By 2012, # unique patients served grows by 20% • #1 regionally in state of the art measures of quality & safety for high impact conditions 2012 • Reduce total risk-adjusted per capita cost of care relative to other MN care systems to below average • Patients respond positively to: “I get exactly what I want (and need), exactly when I want (and need) it” • Operating margin ≥ 3.5% Our Strategic Plan

Traditional PN Organization Chart

Kaizen Promotion Office Leadership Fellows Healthcare Lean Organization Prototype Lean Organization CEO Operations Finance Purchasing 25 President Human Resources Marketing Facilities JBA Consultants *KOT-Kaizen Operations Team 20 Model Lines Special Ops KOT 15 Cancer Hospital Surgery KOT KOT KOT 10 10 10 Surgery KOT 10 Cancer KOT 10 Service Lines Hospital KOT 10 Clinics KOT 10 Administration KOT 10

Model Line (Future) – Surgical Specialties Primary Care Defining Best Practice Guidelines Pre-Op Preparation Pre-visit L/T Use of Non-Surgeon Clinicians Total Surgical Specialties Patient Lead Time / 7 days Daily Management Boards Staggered Starts Day of Clinic Visit L/T Implemented Underway Not Started Standard Rooming 22 minutes Reduced Surg./staff NVA Time OR Scheduling Process Med. Rec. Post-Visit L/T Nurse Post-op Clinics TBD Case Carts: Standardize, Waste Pre-Surgery L/T 8 days Materials Flow Staggered Starts Day of Surgery L/T Accurate Surgery Times Standardize Rooms Pull Signals Visual Control Pre-Op Patient Prep 208 minutes PICIS: Surgery Information System Load Level During Day Staff Cross Training Turnover Time Instrument room OR 21 Load level by DOW Interoperative Standard Work for MDs Pat. Returns to Function In Patient Hospital TBD Pre-Op Preparation

Model Line (Future) – Surgical Specialties Primary Care Defining Best Practice Guidelines Pre-Op Preparation Pre-visit L/T Use of Non-Surgeon Clinicians Total Surgical Specialties Patient Lead Time 7 days Daily Management Boards Staggered Starts Day of Clinic Visit L/T Implemented Underway Not Started Standard Rooming 22 minutes Reduced Surg./staff NVA Time OR Scheduling Process Med. Rec. Post-Visit L/T Nurse Post-op Clinics TBD Case Carts: Standardize, Waste Pre-Surgery L/T 8 days Materials Flow Staggered Starts Day of Surgery L/T Accurate Surgery Times Standardize Rooms Pull Signals Visual Control Pre-Op Patient Prep 208 minutes PICIS: Surgery Information System Load Level During Day Staff Cross Training Turnover Time Instrument room OR 21 Load level by DOW Interoperative Standard Work for MDs Pat. Returns to Function In Patient Hospital TBD Pre-Op Preparation

Park Nicollet System of Care To Care for Patients the Right Way JUST IN TIME Jidoka One-by-one confirmation to detect abnormalities. Stop and respond to every abnormality. Separate machine work from human work. Enable machines to detect abnormalities and stop autonomously. • Operate with the minimum resource required to consistently deliver • Just what is needed. • In just the required amount. • Just where it is needed. • Just when it is needed. Leveled Production (Heijunka) Cost ReductionThrough The Elimination of Muda (Waste or Non-Value Added) Standard Work People Takt Time Production Materials Standard Work in ProcessKanban One Piece Flow ProductionSupermarket System Machines Andon Operational Availability Pull System Production © 2008, Park Nicollet Health Systems & John Black and Associates LLC

Kaizen Office Locations • Park Nicollet Methodist Hospital • Inpatient and Surgical/Orthopedic Services • Visibility Room • Park Center Campus • Specialty Services (CV/Onc/Medical Specialties); • Primary Care • Corporate Services • KPO Offices • Stand-up wall

Strategy and Tactics • Kaizen Guidance Team • CEO/CEO/CMO/VP and Chief of KPO/Consultants evaluate the overall plan and progress • Kaizen Leadership Team • All service-line chiefs/VPs with Sr. Leadership and KDs: yearly plan/timeline and progress • CEO weekly “wall walk” and review • Progress towards yearly goals • Working the visibility room • Monthly reviews of corporate health, quality, and access data; setting longer-term strategy

CEO Weekly Wall Walk

Succession Planning and Replacement Tables

Park Nicollet Leadership Fellows at Boeing 777 Factory

RPIWs Jidoka Daily Management Boards KPO 3P 5S VSM Wall Walk Just-In-Time KEEP Leadership Fellows Developing Our Own “World Class” Leaders

What Does “World Class” Mean?

“World Class” Companies Excel in Five Areas

What Does “World Class” in Health Care Mean? • Safe • Effective • Patient Centered • Timely • Efficient • Equitable

The Importance of Going to Japan • Understanding the possibilities • Seeing with “new eyes”

Learning from Manufacturing Companies in Japan

Learning from Manufacturing Companies in Japan • Yamatake Corporation • Isehara Plant • Shonan Plant • Toyota Motor Corporation • Kamigo Plant(Engine) • Motomachi Plant(Assembly & Welding) • Tsutsumi Plant(Assembly & Welding) • Toyota Boshoku • Kariya Plant • Denso • Takatana Plant • The Yokohama Rubber Co. Ltd. • Hiratsuka Plant • Aisin • Nishio Plant • Yamaha Motor Co. Ltd. • Yamaha

The Infrastructure Must Be in Sync with the Improvement Plan • Improvement efforts must not get ahead of infrastructure • Model lines should be an inch wide and a mile deep

Taiichi Ohno’s Seven Wastes Overproduction Time on Hand (Waiting) DefectiveProducts MUDA Transportation Movement Stock on Hand (Inventory) Processing © 2008, Park Nicollet Health Systems & John Black and Associates LLC

The Seven Flows of Medicine Flow of patients Flow of clinicians Flow of medication Flow of supplies Flow of information Flow of equipment Flow of process engineering

Surgical Services Case Study Background • Approximately 17,000 surgeries performed at Methodist Hospital in 2006: • Each surgery requires multiple instrument trays with potentially hundreds of instruments/supplies • Multiple surgeons means multiple instrument/supply preferences • Techniques and instruments added over time, but many old instruments remain unused in trays, demonstrating both reprocessing and inventory waste: • Range for unused instruments has been 22-50% • Mean score for unused supplies is 25% (but as high as 88% for certain procedures) • 16 RPIWs done over 2-year period to reduce unused instruments/supplies across all surgical specialties.

Surgical Services Case Study RPIW Methodology Standard Work RPIW target: Reduction of unused instruments/ Supplies across all surgical specialties Baseline for change 5 weeks prior to RPIW: * Scope & procedure/case types selected * Product quantity analysis (PQA) data collected * Supply pick lists color-coded to identify utilization * Instrument counts/tray compiled During Prep Weeks: * Data collected on instruments (used vs. nonused) by following trays after surgery * Cycle times for tray processing & supply picks measured * Surgeon-unique additional instrumentation evaluated Makeup of Teams Each team included a circulating nurse & a surgical scrub tech Surgeons used as content experts to RPIW teams Surgeon meetings during RPIW week; discussed: * Display of new recommended trays & supplies by procedure * Consensus on standardization

% of Case Volume % of Unused Evaluated Instruments Difference (2004-2006) (Pre- vs. Post-Standardization) 18% reduction in processed instruments (translates to 79,530 fewer instruments handled & processed per month) Surgical Services Case Study Results at End of 2006

Time Savings • Reduction of instruments significantly affects workload of scrub tech & instrument room staff • 79,530 fewer instruments processed per month = 2,615 fewer instruments per day • Time savings per day: 20,917 seconds (349 minutes, or 5 hours, 50 minutes) • * Assuming 3 staff members touch each instrument for 2 seconds (scrub tech touches them twice) • Follow-up Audits • 30/60/90/120 day audits in place to maintain gains. • Each RPIW audits previous case cart standardizations. One instrument tray is evaluated for compliance with standard. • Standard work is in place for surgeons to reintroduce an instrument. • (To date, no surgeons have utilized this process.) Surgical Services Case Study Follow-up/Implications:

Point Improvements Line Improvements Verticaldevelopment Line Line (Link processes to create a cell) Point Point Point (Eliminate wasteat source - Just start somewhere) • Change production method from “Push” to • Plan for Leveling “Pull” • Develop Standard Operations • Quickly Solve Flow Problems • Practice “Visual Control” Goal: Flow vs. Batch Goal: A Model Line Spatial Improvements Plane Improvements Height3rd Dimensional Plane Other processes make point and line improvements based on the model line (Link cells to produce a product) (Link all elements from concept to customer) Goal: Spread Across Plane Goal: Raise to Other Planes Where Does PN See Itself Now? 5-10 Years Critical Transition from Point to Line 10-15 Years 15-20 Years © 2008, Park Nicollet Health Systems & John Black and Associates LLC

5 Year Block (Point): Surgical Specialties In Patient Hospital Primary Care Total Surgical Services Patient Lead Time 14.8 days 43.8 minutes TBD 15.1 days 415.5 minutes TBD Pre-visit L/T Day of Clinic Visit L/T Post-Visit L/T Pre-Surgery L/T Day of Surgery L/T Pat. Returns to Function OR 21 Med. Rec. Pull Signals Turnover Time Materials Flow Visual Control Instrument room Staggered Starts Staggered Starts Load level by DOW Standard Rooming Pre-Op Patient Prep Pre-Op Preparation Standardize Rooms Pre-Op Preparation Staff Cross Training Nurse Post-op Clinics Load Level During Day OR Scheduling Process Accurate Surgery Times Daily Management Boards Reduced Surg./staff NVA Time Use of Non-Surgeon Clinicians Defining Best Practice Guidelines Case Carts: Standardize, Waste Interoperative Standard Work for MDs Implemented Underway Not Started PICIS: Surgery Information System

10 Year Block (Line): Surgical Specialties In Patient Hospital Primary Care Total Surgical Services Patient Lead Time 7 days TBD TBD 22 minutes 8 days 208 minutes Pre-visit L/T Day of Clinic Visit L/T Post-Visit L/T Pre-Surgery L/T Day of Surgery L/T Pat. Returns to Function OR 21 Med. Rec. Pull Signals Turnover Time Materials Flow Visual Control Instrument room Staggered Starts Staggered Starts Load level by DOW Standard Rooming Pre-Op Patient Prep Pre-Op Preparation Standardize Rooms Pre-Op Preparation Staff Cross Training Nurse Post-op Clinics Load Level During Day OR Scheduling Process Accurate Surgery Times Daily Management Boards Reduced Surg./staff NVA Time Use of Non-Surgeon Clinicians Defining Best Practice Guidelines Case Carts: Standardize, Waste Interoperative Standard Work for MDs Implemented Underway Not Started PICIS: Surgery Information System

Dramatic Improvement in Health Care is Possible Through Lean! “It was exciting to see the chance for making changes, since there is no time in our typical day to make the changes we would like to make. Also, this process was good because we didn’t have to talk it to death. It was fun, and a good experience.” (Clinician, RPIW team participant) “I was struck by the complexities of our systems, and how presumably small changes in a process can have such an important impact on the work of others in the system. It is a challenge to develop new procedures in a way that benefits all the participants on the clinical side, and keeps focus on the ultimate goal – doing what is best for the patients.” (Clinician) “This was the best RPIW ever! I finally feel as though someone actually cares that I work at home until 12:30 many, many nights. This has changed my life! Please keep the DA!!!” (Clinician) “The improvements will have a great impact to the amount of time saved preparing for a case. This saved time will be directly shifted to the patient, increasing the amount of time the RN will have for patient care.” (Clinician) “I never felt like I was at a hospital, because having worked at the Marriott for over 20 years, I felt that the Park Nicollet staff totally embodied the service philosophy and took care of my father-in-law’s needs.” (Patient, RPIW team participant)

QUESTIONS?

Building a Profound Lean Infrastructure for Durable Success