Hospital Cost Reduction: Does Lean Provide the Answer?

H ealth care providers are facing increasing pressure to reduce costs. A major source of pressure is grounded in the U.S. government’s initiatives to make health care more affordable and to increase accountability. The most publicized initiative to address the cost of health care is The Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010. Two of the major goals of this act are (1) to increase the number of individuals covered by health insurance and (2) to slow the rate of growth of health care costs (Wilensky 2011). A less-known approach by the federal government to increase transparency of health care costs is publishing the amount of charges by different U.S. hospitals for common services provided to Medicare patients1. While the raw data is not adjusted for factors such as location and type of hospital, the variation in costs is vast. In an NBC News article, Maggie Fox (2014) reports that the cost of treatment for a heart attack is approximately $15,000 in Ogdensburg, N.Y., but over $66,000 in Brownsville, T.X. Actually, realizing a slowed growth rate long term is pivotal for the economy, as well as for health care providers who are balancing the pressure of becoming more efficient while not compromising effectiveness. Perhaps the application of lean manufacturing principles offers an approach for achieving these goals.