Lean Management in Health Care Delivery Is Late

August 13, 2015

Ola Orekunrin

In the midst of all the innovation, disruption, and new levels of efficiency in today’s world, health care delivery seems to have stoically refused to come of age. Rather than becoming increasingly accessible, efficient, and effective, it has largely become more bureaucratic, more expensive, more wasteful, and mostly devoid of the type of game-changing innovation we’re seeing in other industries. As a result, countries around the world are struggling to meet demand, and lower-income countries are predictably the hardest hit.

Consider: The UK National Health Service (NHS) budget stands more than $100 billion per year and is stressed covering 65 million citizens. Nigeria’s entire budget , by contrast, is $22 billion per year, 80 percent of which goes to recurrent government expenses such as salaries, travel, training, and perks. That leaves just $4 billion for health care, education, and infrastructure in a country with a population of 170 million people.

What can countries like Nigeria do to ensure that their citizens have access to basic health care? Part of the answer lies in reducing the size of government and redirecting the resulting, freed-up funds to the people. Another part of the answer lies in tackling the colossal levels of corruption that characterize countries like Nigeria. But even if we could achieve those two goals, the numbers still don’t work. To care for 170 million Nigerians in the way the NHS does for the people in the UK, Nigeria would need to spend $209 billion per year on health care — 20 times its current GDP.

It’s time for health care managers and innovators in such countries to embrace frugal innovation and the principles of lean management in health care to drive change.

The major costs of health care delivery are divided primarily among drugs and equipment, expertise, administration, and infrastructure (such as building hospitals and clinics). Countries like Nigeria can hack, short-circuit, trim, or curb all of these expenses, creating stronger, fairer, leaner health care delivery systems — systems that can compete with those in the West in terms of outcomes.

Leaders of these health care systems need to reconsider some basic questions, such as how many people actually need specialist, hospital-level care and how many can be treated effectively outside of a hospital, perhaps at home or at a smaller facility on an outpatient basis in their own communities. Those of us working in Africa may actually have something of an advantage here over our colleagues in more advanced, established health care systems. There are some things that big companies do better and there are some things that start-ups do better. Since health care in Africa is still at the start-up stage, it is more nimble, flexible, and agile than older, multifarious systems. By concentrating specialists in a handful of hospitals, promoting more community care, becoming early adaptors of telemedicine and remote monitoring, and using community health workers and other professionals (such as midwives and nurses) more effectively, we may be able to cut the costs of infrastructure (and slow their future growth) quickly.

We can also be more purposeful about identifying lower-cost, innovative solutions to health care needs. New technology expands the range of treatment options available to patients, but it often does so by replacing lower-cost options with higher-cost services. This trend may work for some, but in the developing world, we must find a way to provide health care for the millions who don’t have millions to spend. We need to find more solutions like the Embrace infant warmer, a lower-cost incubator that was developed in India. A conventional incubator costs about $20,000 in the United States. An Embrace incubator retails for about $200, a price that allows millions of low-birth-weight and premature infants across the globe access to a life-saving resource. Another example of low-cost, effective innovation is the Jaipur Knee, which retails for $150 in comparison to an equivalent product that retails for $100,000 in the United States.

At my own organization, Flying Doctors Nigeria, we have been able to bring the cost of a local/regional evacuation for a baby with congenital heart disease from $28,000 to just $750 by using private air ambulance pods, which fit onto scheduled commercial flights, allowing us to ensure high levels of patient care during transfer without the need for an entire aircraft.

Finally, health care administration could realize significant savings by applying lean management principles. The Institute of Medicine (IOM) estimates that the United States spends $361 billion annually on health care administration. That is more than twice what it spends on heart disease and three times what it spends on cancer. Simple billing systems and standardized pricing can reduce this cost significantly.

The current health care market consistently fails the world’s poorest people. It is ripe for disruption that allows us all to do more with less, and — critically — to do better with less.

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Originally published on Stanford Social Innovation Review

A groundbreaking initiative designed to bring more expert voices from the developing world into the global development discussion.

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