What role does innovation play in establishing a culture of savings? We brought that question to Memorial Hospital & Health Systems of South Bend, Indiana. Phil Newbold (President and CEO) and Diane Stover (Vice President of Innovation Strategy) spent time with us last week discussing how their organization encourages a systematic approach to innovation to help reduce costs, increase revenue, and take better care of its patients. They share what they've gleaned from other industries and the benefits of engaging all their employees in the process.
It's worth noting the mixed opinions on what our healthcare system needs from its leaders. Philip Betbeze, a senior editor with HealthLeaders magazine, made the somewhat provocative suggestion last month that we need our hospital CEOs to be skilled operators and executors, not innovators. (See Hospitals May Need Operators, Not Innovators.) He believes this environment calls for CEOs to navigate with a heads-down approach to their operations.
What role do you see for innovation? I'm interested in your opinions here, so feel free to respond and share your thoughts. Regardless, I'm confident you'll find what Phil and Diane have to share as both interesting and educational. Enjoy!
MediClick: What role does innovation play in a tough environment for healthcare?
Diane Stover: Hospitals have a choice of hunkering down or being innovative with their operations. Over the past 18 months, most have decided to lay low and cut staff. That may protect you from the existing storms, but it won't get you out of the hole.
We see a lot of potential in harnessing the power of our 3,800 people. We depend on them to contribute to the solution when times are toughest. We don't have people hiding under their desks.
Innovation projects help us differentiate ourselves from competition. One of our key focuses is avoiding the commoditization track so common in healthcare. For example, we started a bariatric program despite heavy competition. We decided we would market it as more than a simple surgery-fix. Our program works with patients to help them root out the causes of the problem and address the broader issues. It's turned this into a successful product line.
Phil Newbold: Here's one good example of how our innovation methodology helped us hit a homerun because of the tough conditions of this economy. We always encourage our staff to go out and look for the silver lining.
Last October, our CFO was on a conference call with his peers across the country. They were talking about ways to make the best of this meltdown. He learned from another hospital that, if you have particular variable rate notes, there's a great opportunity to buy them back at a discount. You have to act quickly on these things, and so he pulled together a team to make it happen, got a sponsor (me), got board approval and began buying back our debt. First, he bought back a $54 million bond for 57 cents on the dollar. From the moment he got the idea to pulling the trigger, it took a total of six days! This was a huge boost to our balance sheet, and he went back and found another opportunity to buy back an outstanding $80 million bond for 49 cents on the dollar.
The point is, we have a specific methodology and it allows us to find good opportunities and act quickly on them. We refer to it as "Innovation Everywhere." Develop everyday innovators of all staff members.
We also know we don't have to develop all solutions ourselves, and it pays to go outside of healthcare to leverage the experience of other industries. We worked closely with Behavioral Science Technologies (BST) to develop our approach to patient safety initiatives. BST helped NASA after the shuttle disasters, and their experience helped accelerate our own innovations in patient safety.
MediClick: We've found that an important part of creating a culture of participation is engaging your people. How do you make sure your people always have their minds in gear looking for opportunities for innovation and savings?
Diane: Our innovation initiatives started 10 years ago when Leland Kaiser (a mentor to Phil) issued a challenge for us to show how hospitals make meaningful R&D investments. For the most part, they don't! So, we started a program of "Inno-visits" where we took executives, clinicians, physicians, and other members of our staff on visits to various companies and college technology transfer departments to observe and learn. Over the years, we've taken nearly 100 of these trips.
Among many things, we've learned that organizations have two major approaches to introducing innovation. First, there's the "smart man theory" where you lock a few people in a room and put them in charge of all the innovative ideas. And second, there's the "every man theory." It teaches that everyone is capable of contributing to the process of innovation. Obviously, we went with the latter and constantly work to engage the innovative natures of our people.
We adopted language of innovation to communicate ideas and expectations. We identified tools that gave us a methodology to follow. We chose Tom Peter's "WOW!" approach because it had the best tools, most flexibility, and offers real passion behind the ideas. We require our management to go through training in the WOW! program. And, we've made a heavy commitment to it.
MediClick: Many hospitals engage in savings or innovation programs only to see them lose focus. Those that have dropped the programs tell us 98% of the ideas contributed were low-value or frivolous. How do you protect against that?
Diane: Yeah, we've talked with a lot of hospitals that have dropped their programs. They're curious about how it is we've succeeded for over 10 years.
First, your program criteria must be tight and well-communicated. The system you put in place can't just be a suggestion box. You must allow people to talk themselves out of bad ideas. We have a web portal that incorporates elements of WOW! and Lean Six Sigma. When people submit ideas, they must estimate the value of the proposal, its impact, and tell us how passionate they are about seeing the idea work.
Second, there can be no stray dogs. What I mean is, they aren't allowed to throw an idea out then cut and run. They have to hold the leash. This forces commitment and cuts down on frivolous suggestions.
Phil: Management has to assign projects and hold people responsible for them. You simply can't allow too many small projects with minimal impact. They have to be key to the future.
But sometimes an idea comes before its time. It may not work today, but that doesn't mean you just discard it. For instances like this, we have a "cryo-tank" where we store older ideas that may not have succeeded on the first go-around, but have the merit and may be worth trying again. We had a bottled water project with Baxter that didn't work at first, but it's come around.
MediClick: How has your program helped your supply chain?
Phil: Our innovation programs led to a partnership with Wal-Mart where we helped develop their first urgent care centers. They do supply chain better than anyone, and we made it a point to learn from them. (And by the way, they were very willing to share their experiences. I guess it's because we're a hospital. I'm sure they're much less open to commercial organizations.) We've taken some of those ideas and put them into practice both in our supply chain and in our information technology department.
MediClick: Final thoughts?
Phil: Innovation is about being curious and nimble. If you're not curious by nature, you're not going to do so well with innovation initiatives. If you are curious, and you identify good ideas through your tools, you'll benefit and be able to act quickly.
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