It’s no secret that health care in the United States is an abomination. We spend more on care than any other developed nation, and yet have worse health outcomes. How did this happen?
A big part of the answer is the profit motive. Treating health care like a capitalist industry has driven US hospitals to cut corners and endanger lives, all to maximize returns on investment.
To do so, many US hospitals have adopted a management system first used in auto factories. It’s called “lean production” — and it’s literally killing us.
What Is Lean Production?
Lean production — “lean” for short, or “management by stress,” if you ask critics — is a management system developed by Toyota and first implemented in Japanese auto factories. Its goal is to eliminate inefficiency and waste, thereby increasing productivity and profit. Lean production enlists workers to carry out tasks previously done by management, stresses system-wide analysis to identify flaws, and looks to eliminate any potential excess. In the process, it undermines health, safety, and worker solidarity.
Before lean production was introduced in the US auto industry, the average auto worker toiled for about forty-five seconds out of every minute. The other fifteen seconds they spent drinking water, scratching an itch, stretching to prevent carpal tunnel syndrome, or just catching their breath. Since lean production was invented that number has jumped to fifty-eight seconds.
Beginning in the 1990s, lean production was introduced into US hospitals — and it took off in the early 2000s. The reason: the profit-driven incentives of hospital management.
For decades, US health care costs had been sharply rising. According to the Centers for Medicaid and Medicare Services, health care spending in 1960 was 5 percent of GDP. By 2000, it had ballooned to 13.3 percent. Increased spending, however, didn’t automatically translate into huge profit margins for hospitals. In general, the hospital industry operates on tighter margins than many other industries, and it has relatively high capital expenditures (hospitals have to update or replace expensive equipment and facilities relatively frequently), which further constrains their profit margins. So, while most hospitals in the United States are highly profitable, their profit relative to total expenditures is comparatively low. CEOs wanted to boost that percentage.
In addition, hospitals had been struggling to maintain their most profitable service — surgeries — as outpatient surgery centers became more prevalent. Surgical services traditionally account for a large portion of hospital revenue, but advancements in anesthesia and surgical techniques mean that surgeries which used to require a hospital stay no longer do. While this is good for patients — who can receive faster and cheaper procedures, with good outcomes and without having to stay overnight in the hospital — it is bad for hospital CEOs looking to buttress their bottom line.
Finally, in the early 2000s, hospitals were losing an enormous amount of revenue from un- or underinsured patients. While the Affordable Care Act has since boosted reimbursements — dramatically reducing the reimbursement problem for hospital management — it was a major financial issue for many hospitals at the time.
All of this meant that hospital CEOs felt a fire under their seats to improve their companies’ financial affairs. Public hospitals, operating on shoestring budgets and under pressure from austerity politicians, faced many of the same financial challenges in balancing their books. Hospitals across the country, whether private or public, for profit or not, went out in search of solutions to their financial woes. And that’s where lean production came in.
Lean Production: Claim and Reality
Any business struggling to turn a profit has two basic options: increase the price of their product or lower the cost of producing it. Because hospitals do not bill patients directly, but are reimbursed by insurance plans with set reimbursement rates, they cannot pass on increased costs to patients directly. Hospitals therefore have to tamp down costs to maintain their bottom lines.
Hospitals didn’t turn exclusively to lean production to solve their profitability problem. Hospital networks increased centralization by buying up many smaller hospitals, vertically integrated their operations, and adapted their services to a world where more care is received outside of hospitals. But lean production was a crucial part of the strategy to buttress profitability.
According to hospital CEOs, it was a win-win for patients, too. Hospital corporations that use lean production say it decreases costs and waste while improving patient care and experience. The only problem is that many times what’s good for a patient is bad for a company’s bottom line — and the idea that hospitals can maximize both is a fantasy. Lean production in health care has resulted in stocking fewer supplies, pushing patients out the door before they are healed, cutting staff, and much more that is good for shareholders and horrible for patients. What was bad for auto factories is even worse for hospitals.
Take the lean production principle of limiting “inventory.” Lean production says you should only have the materials required at that moment. In an auto factory, if you don’t have a part you need to complete production, the entire assembly line is aware, and — best case scenario — the issue is fixed to avoid lost productivity. When health care workers make management aware of a lack of supplies, often months go by without changes, if supply issues are fixed at all. When issues are resolved it’s almost always temporary.
There’s no immediate financial cost to the hospital corporation when a health care worker reaches for heart monitoring equipment and has none. The worker absorbs the stress of the situation and, wanting to provide the best and safest care, searches all over the department for the supplies she needs, while her patient goes without a nurse at her bedside.
Another “waste” lean production tries to eliminate is “overproduction.” In a factory, this one is obvious: you made more of your product than there is demand. You now not only pay the costs of producing the product but of storing it until it can be sold. In health care, one example of “overproduction” is a patient who remains hospitalized unnecessarily. That’s fine if the person is actually ready for discharge. Yet the more common scenario is hospitals pushing providers and nurses to kick out patients before they are safe to go home: postpartum mothers forced out the doors without adequate recovery and education; patients with drug abuse problems discharged without adequate support from social workers.
More than any other “waste,” lean health care is obsessed with eliminating staff. That’s no wonder, since staffing makes up about 50 percent of the average hospital’s operating budget. There are two basic ways this plays out.
First, hospitals staff the bare minimum number of workers necessary to maintain operations. Oftentimes staffing is totally inadequate to provide safe care, leading to massive delays, inadequate education for workers, and overburdened staff who are still expected to make safe decisions eleven hours into a shift with no breaks to drink water or use the restroom. Preventable death and disability have become a routine cost of doing business in US hospitals. Some of this affects the bottomline of hospital corporations in the form of lawsuits and fines. But the biggest sanctions, like closing down operations until fixes are made, are rare.
Second, the workers who are staffed for a shift are expected to do more with less. In fact, this is exactly what lean production wants. From a hospital CEO’s perspective, if he can run the hospital with 30 percent fewer staff, make basically the exact same revenue, and maintain a decent patient satisfaction score, why hire more workers?
When Workers Become Management
One major aspect of lean production in auto factories is offloading some of the work of management onto workers. The goal is to get workers to push themselves and each other to work harder while reducing the need for direct supervision. We can see comparable systems in health care today.
“Clinical ladder” programs, now widely implemented at US hospitals, allow health care workers to earn higher pay by doing projects, usually yearly, and meeting other criteria designed to improve productivity and efficiency. For example, a nurse might design a system for auditing her department’s compliance with the charting requirements for psychiatric patients. Once she has developed the audit tool, her clinical ladder bonus will likely be dependent on her regularly using the tool to ensure her department is complying. Now a nurse (and union member) is going around to her fellow workers and doing a task of management.
What makes this system even more effective for management is that the clinical ladder projects are often administered by union members in collaboration with management. When a health care worker submits her project, a union official might even be the one to approve or deny it.
The result is a situation where management has less work to do, workers keep an eye on each other’s productivity, the bottom line is improved, union members resent the union, and solidarity is kept at bay.
A Better System
Some of the ideas put forward by lean production proponents are good for workers and patients. The lean principle of eliminating unnecessary motion, for instance, prompts hospitals to put supplies closer to where workers need them. Workers don’t have to waste time walking across the department, and the patient receives care more quickly. But this overlap of what’s good for profit, workers, and patients is the exception.
Most lean principles are an absolute disaster for patient safety and working conditions alike. As working conditions continue to deteriorate, many nurses and other health care workers have stepped away from the bedside. Hospitals are finding it nearly impossible to find sufficient staff — and it’s their own fault. Their adventure in lean production has produced a staffing crisis in health care that we’ll be dealing with as workers and patients for years.
The root of the problem isn’t the greed or insensitivity of any given hospital executive. The real issue is the profit motive in health care. As long as people can make money off of our health, the entire field will be incentivized to cut corners, endanger patients and staff, and squeeze out every dime it can.
It doesn’t have to be this way. We can replace a rotten system that incentivizes lean production with one that supports safe staffing and comprehensive care. That means fighting for Medicare for All, while also fighting to fully fund our public health systems and forcing politicians to run them to maximize health, rather than minimize costs.
Health care workers have shown they’ll be at the forefront of that fight. In 2020, public health care workers at the San Francisco Bay Area’s Alameda Health System won a historic strike that resulted in the County Board of Supervisors firing the negligent and austerity-obsessed hospital board. These workers, represented by Service Employees International Union local 1021 are continuing their struggle to fully fund and retake public control of the health system, which has been semi-privatized in the name of efficiency. And last year, health care workers at the University of Illinois Chicago won three hundred new nurse positions by shutting down the public health system for over a week. These workers proved that lean production employers can be resisted through collective action on the job.
When health care workers stand together and build solidarity with patients and the broader community, we can fight austerity and lean production. And we can finally win a health care system that puts public health over hospital profits.