Executive Interview with ThedaCare Center for Healthcare Value President and COO Helen Zak

Helen Zak

Healing Health Care

When Jim Womack told me in 1997 that he was thinking of taking on the health care system because he had seen unfortunate events happen to his father-in-law, I told him, “It’s a swamp — you’ll sink.” But between then and now, he, like so many of us, has seen enough success in manufacturing and some supply chain enterprises that when we take another look at health care — 17 percent of our GNP, of which fully one-third represents administrative costs — we might ask, ”Why not health care?”

As someone who accidentally tripped into the system last fall, I can say I’ve seen the best and the worst, the most inspirational and the most venal human interactions.

So the least we could do for the doctors and nurses is to fix the damn system. Drain the swamp. Or at least stand on a stump and take a good look.

And that’s probably what Jim Womack was hoping would happen. Inevitably, a few more people had similar epiphanies, all of whom, like myself, had been directly touched by the health care system.

The story goes that out in Wisconsin, Jim Womack had a most persuasive conversation with the redoubtable Dr. John Toussaint, convincing him that by starting a 501C3 dedicated to trying to drain the swamp, the doctor might, just might, impede the bad health care, mistakes and non-integrated, massively manual systems. Toussaint is one of those charismatic leaders whose simple touch seems to grow new movements in a desert where nothing thrived before. Soon his little 501C3 was joined by collaborators; several best-sellers, webcasts, seminars, a Shingo and now a health care conference continue to make history as they highlight the success stories in an area that has to be as ripe for innovation as the great endless prairies appeared 200 years ago to short-sighted Easterners fenced in by limited land and scarce resources.

There is opportunity “out there” in the health care business, but it is not entirely a neat and seamless follow-on to innovations fostered by the Toyota and other industrial engineering systems because health care is a different game, played with very different and initially unclear rules. And the winners are not necessarily the guys who end the game with the most money. It’s the people who, after all the prescriptions and interventions, are left standing (and walking) with their lives, families, wallets and retirement accounts left intact.

One of Dr. Toussaint’s brave and brilliant followers is a former Lean Enterprise Institute executive and pioneer, Helen Zak. Zak holds an undergraduate engineering degree and two master’s degrees in management as well as a clear willingness to see and encourage change-makers in an area that is so in need of, and so resistant to, upheaval. Zak acknowledges the contribution Toussaint made opening this new frontier. He’s made history, and thankfully he and his followers are being recognized for their accomplishments. Praise and recognition go a long way toward keeping one in the game, even if, as Womack discovered, the game is played out in a swamp.

As CEO of Thedacare, the Wisconsin health care consortium formed by Dr. Toussaint in 2008, Zak shared with Target Online her approach to this new challenge.

Zak: I was with Jim Womack (as CEO of LEI) from 2001 to 2010. I’ve been applying lean all my life, learned it at GM.  Health care is tremendously different and many manufacturing people have trouble transitioning — they don’t have the people skills. It’s a different ballgame on the culture and the transformation model; no doubt you need strong people skills. 

Target Online: I’d like to take a look at health care as an industry — what’s the basic data from 5,000 ft. up? We know that health care represents 17 percent of U.S. GDP. GM at one point estimated sticker price contained for every car about $1,200 for employee health care costs. In terms of where you think the waste and opportunities are to be found within the health care industry, what are the most important areas we can make an impact on in the short-term?

Zak: In manufacturing, when we first got started, we had 95 percent waste and 5 percent value-add. Well, it’s the same in health care. But health care professionals get very defensive because they believe all the workarounds, all the band-aids that have been applied are value-added. There is no system architect in health care. In industrial companies we have engineers — people who create systems — but there isn’t that role in health care. There is no chief engineer. Instead, you have clinicians versus administrators, and in many cases, they are taught to hate each other in school. That division starts in education. The health care operating system just evolved. Also, we see a big difference in opportunity.

Q: It certainly sounds like the business is running to different goals?
A: Right. The other difference is competition. We know that any industrial company not using lean thinking is out of business; corporate competition is the driver, so costs go down. So you might say industrial companies have developed improvement muscle. But health care doesn’t yet have the muscle for the improvement, they don’t have deep knowledge.

Q: So that sounds like tremendous opportunity?
A: That’s where the pioneers are learning in health care — people like Patty Grabow, Gary Kaplan and John Toussaint. There is still no Toyota of health care! We have to look at industry. Five years ago, no health care CEO would draw on industry knowledge — “We’re health care, we’re different,” — but that is slowly changing. I’d say one of the characteristics of health care leaders is that they are very risk-averse — it’s a way to keep your job, to keep the board out of it — don’t get on the front page of the newspaper and keep the doctors happy! That’s an especially high price. 

Being risk-averse also means not being willing to expose problems and run experiments. There’s no focus on getting better, and who knows what the real costs are anyway. So now the whole health care world is turning topsy turvy — for health care leaders, everything is changing.

In some cases, health care is still looking for a silver-bullet solution. If you overlay on that some unfamiliarity with lean skills — and some hospital professionals on the cusp of retirement — it’s going to be harder to get the organization to where it should be. But I see some opportunity there because there are a lot of retirements coming up and the people replacing them have risen in a system where at least improvement is not foreign word.

Q: So one of the answers is attrition, but as we’ve learned from manufacturing, the system is sometimes a barrier as well.
A: It’s all opportunity. But bringing us back to lean thinking, the system — you tripped into it — because health care is vertically organized, actually the patient holds information and moves horizontally through the system. So we ask, “How could this be?” At progressive organizations like Thedacare, we are now focusing on the patient and their journey through the system, horizontally.

Some day, there will be a chip embedded in our person because the information flow and patient flow are two different things — that’s part of the problem. It’s one of the things that developed over time — the “five why’s.” The question is, “How can we make this better for the patient?”

Q:  So your role is a special and unique one, correct?
A: Yes, I like to think that what differentiates the ThedaCare Center for Healthcare Value is that we help change the behavior of health care leaders and the behavior of the organization.

Q: Let’s talk more about the difference between manufacturing and health care. What areas do you see are bigger and more problematic in health care compared to manufacturing in terms of lean implementations? After the quick hits, improvements get tougher. What’s the toughest nut to crack in health care, and have we found our solution yet?
A: The toughest nut to crack — in the whole system — is the management system, and because of the way health care is managed, it is fundamentally broken. We see an environment that is very dictatorial. Doctors are taught, “I am the one who makes the decisions,” so everybody looks to them for answers. But in the new work order, the leader doesn’t have to be an MD. We’re coming from a very top-down organization. We call this improvement leadership versus white coat leadership:

So the whole way the system is managed is hard work; it’s the hardest nut to crack.

There is another area that we’re looking at as well, the whole payment and incentive system. The way people get paid is by volume, by procedure, like in the old piece work days when people got paid by the piece — poor quality didn’t matter. So that’s the way health care professionals get paid, and you can take out all the waste in the system, but if people are not being paid for value, then you are disincentivized for doing improvement. Now this is driving bad behavior, for the doctors to make money — it’s not about how healthy or how well he did, the pinning surgery, for example, it’s how many can we get through to make money. This approach is changing, but it’s a tougher nut to crack. It has to change or it will bankrupt us. The incentives have to drive different behavior. Again, we’re touching on fear and a tendency to be risk-averse. But there are some interesting experiments going on with payment models.

Q: That’s right, the money is there. We’re looking at a spend-management case that does the same big cost savings that we¹ve had in manufacturing/supply chain. 
A: For hospital spending and elimination of waste, a good example of improvement is at Intermountain Health. It has done some incredible work by comparing its supply chain to industry and retail supply chains, and redesigning its health care supply chain to use principles used by retail and industry. 

Q: So where is the innovation coming from and who is the farthest along?
A: Virginia Mason, Gary Kaplan, Christie Clinic, Alan Gleghorn, ThedaCare, Dean Gruner — they’re all pretty remarkable and they have the numbers to prove it. Plus there is lots of innovation around the fringes. Toussaint talks of taking a different approach to solving this very big challenge. He calls it a “gang tackle!”