Henry Ford Health System Labs Show How Lean Methodology in Healthcare Increases Revenues

Clinical labs managers can benefit from this Lean hospital case study

EXECUTIVE SUMMARY:  Here’s a major accomplishment by the lab division of a nationally-recognized health system that has gone unreported until this DARK REPORT intelligence briefing. This article explains how using the quality management system of ISO 15189 and the Lean methodology in healthcare allow it to absorb shrinking lab budgets while improving quality, and, at the same time, improving service levels to such an extent that the lab is generating several million dollars of increased annual outreach revenue as a result of its improved quality and better service levels.

This article is an excerpt from a 3,400-word article in the Feb. 29 issue of THE DARK REPORT. Full details of the process used by Henry Ford Health System laboratories to implement Lean methods, and how the project dramatically improved revenues, are included in the original article, available to paid members.


AS HEALTHCARE TRANSITIONS away from fee-for-service payment and adopts new models of reimbursement, every clinical lab will need to deliver more value with its lab testing services. At Henry Ford Health System in Detroit, the laboratory division has blazed a path of improving lab performance specifically to enable it to add value to the health system, physicians, patients, and providers it services. Part one of this multi-year journey was to introduce Lean throughout the laboratory. Part two was to adopt the QMS of ISO 15189. Now comes part three, where these accomplishments position the lab to add value to improve patient care.

Labs across the country must deal with the twin squeeze of shrinking budgets and the need to test more specimens with those reduced resources. This is why some innovative lab organizations are adopting the quality management system of ISO 15189.

The benefits of a quality management system (QMS) are substantial. Labs that have incorporated ISO 15189 into their daily operations report significantly lower costs because of the ability of lab teams to identify systemic sources of errors and reduce or eliminate them. Revenue at these labs typically increases because the lab does a better job meeting and exceeding the service expectations of physicians and its other clients.

Of equal importance, labs using ISO 15189 today report that this QMS is now the essential foundation that supports the lab team’s effort to deliver more value to the stakeholders it serves, including hospitals, physicians, patients, and payers.

Lower costs, improved quality, and increased revenue are among the major benefits that resulted from what is believed to be the nation’s largest deployment of Lean methodology in healthcare and ISO 15189 in a major laboratory organization. At Henry Ford Health System, in Detroit, its five largest hospitals have now earned CAP lab certification with ISO 15189.

It is important to understand that the implementation of ISO 15189 across all of these HFHS laboratory sites is no one-off management strategy. “Rather, this step was taken after a full 10-year journey to introduce Lean, Six Sigma, and process improvement techniques into the daily operations of our labs,” explained John Waugh, the System Vice President of Pathology and Laboratory Medicine at HFHS.

“Currently, we have outside ISO inspections at the laboratories of our five largest hospitals,” he said. “We operate to ISO standards at a total of 34 laboratory sites in our health system.”

According to Waugh, use of this QMS has measurably improved the productivity and performance of the clinical laboratory division at HFHS. “Our lab outreach program increased net revenue by $2 million,” he said. “Meanwhile, rates of errors—a metric to which we rigorously manage each day—decreased by 73%. For example, complaints associated with phlebotomy dropped by 64%.”

What makes these performance metrics impressive is the size of the laboratory division at Henry Ford Health System. Staffed by more than 700 people, the labs perform millions of tests annually for the system’s acute-care hospitals, nine emergency rooms, and 30 clinics in and around Detroit.

“In 2005, we began our Lean journey with a vision to create a world-class laboratory organization,” he stated. “One year later, in 2006, we developed the Henry Ford Production System.

“We started with three goals,” he continued. “One, to become a world-class laboratory organization. Two, to adopt a culture of relentless improvement; and three, to establish a culture in which the staff are taught Lean and empowered to use Lean.”

How could your lab business benefit from implementing the Lean methodology in healthcare? Have you already implemented it, and if so, what are the results? Please share your thoughts with us in the comments below.




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