James Hereford, Katie Anderson and Joy Hereford discuss the rapid adoption of a lean management system at the Palo Alto Medical Foundation, a large, physician-led multi-specialty group practice in California.

In June 2011, we launched a very aggressive plan to adopt lean as a management system, in a bid to create an environment in which our organisation can respond successfully to the significant changes that are occurring in the healthcare system in the United States.

These changes are mostly driven by the financial pressures of healthcare cost inflation experienced by purchasers of healthcare, most typically businesses and government entities. The responses are:

  • Through changes to benefit plans, increasing deductible amounts to employees (patients), who in turn become more price-sensitive to healthcare services.
  • Insurers also are creating more narrow networks of best value providers, and our current cost structure makes it difficult for us to take part in these.
  • We cannot just be more affordable, we have to provide excellent value.

This level of change requires an organisational “lifestyle” change. The only way to achieve this across multiple dimensions is over time and by unleashing everyone’s capabilities to help solve problems – in other words adopting an enterprise-wide approach to operational management and improvement based on lean.


A focus on learning proved critical if we were to bring change in the way we manage our organisation, as well as the adoption of lean’s traditional principles, respect for people and continuous improvement.

There are three key sub-systems that must be implemented: daily management, cross-functional management, and strategic deployment.

The most important for us is daily management, which includes the use of standard work, continuous improvement, and standard management work. With standard work, we now have an environment in which the teams work in an ongoing pursuit of improvement.

Implementing daily improvement requires a commitment to training staff, but most importantly it requires capable management and therefore an investment in training managers too, through standard management work. This is more difficult to achieve, because it requires leadership to dramatically change its way of thinking.

But making lean a business-wide system also requires cross-functional management, which entails the understanding of how value flows horizontally through the organisation.

Over time, a successful lean company will see more emphasis being placed on the entire value stream, which in healthcare translates in a clear understanding of the patient’s requirements. That’s why it’s critical that participants in value stream work spend time talking with patients, walking processes with them, and working to understand what they sometimes cannot articulate.

Vertical alignment is important too, however, and that’s where strategy deployment comes in. It allows executives to think strategically and set a course for the organisation while promoting participation and direct involvement of all staff in how best to achieve that strategic direction, striking a balance between the needs of the company and its capabilities.


  • Over 1,000 MDs (medical doctors) in 38 specialties and sub-specialties
  • Approximately half of the MDs are in primary care fields: internal medicine, family medicine or pediatrics
  • PAMF serves over 780,000 patients through twenty-six main sites of care


Approaches to lean implementation tend to fall into two categories: the model line approach and the layering approach. We have chosen the first one.

A model line refers to taking one value stream, or one part of the organisation, and developing the full operating system there. The model line gets significant supporting resources in order to accomplish the change so that it can serve as a demonstration to the rest of the organisation.

The benefit of this approach is that it focuses the resources to achieve the change: if the company is serious about its commitment to lean, it cannot afford to have the model line fail, and will therefore be very attentive to the many needs and challenges that will arise in order to ensure success.

The first difficulty with the model line is that it focuses an intense amount of change in a limited time and space, which can create challenges for both staff and management. Secondly, the rest of the organisation is essentially observing the experiment, and executives will feel the pressure from other areas of the business wanting access to the same resources. In addition, if the results are not as dramatic as hoped, the overall change will be put at risk.

Despite these challenges, however, the approach allows a business to generate change at a sufficient scale and with enough completeness that it can be used as a springboard to create momentum for change in the rest of the organisation.


The Fremont Medical Center is a multi-specialty facility located in Fremont, in the San Francisco Bay Area. Within the medical centre, the primary care departments were chosen to participate, which are comprised of fifty-two internal medicine, family medicine and paediatric physicians.

We picked primary care because of the important role that it plays in managing the total cost of care. Fremont Medical Center is poised to make a significant transition from a revenue model that is based on fee for service, in which the organisation is paid on the basis of the production of relative value units (RVUs), to a payment methodology based on the organisation’s ability to manage the health of the specific population for which it is responsible. A robust primary care capability is essential for the success of this transition.

Fremont was also chosen for its size (not too big to make development of the model line difficult, but large enough for a meaningful demonstration) and for the willingness of the physician leaders to commit to the initiative.

The project began with a value stream event in which the current state of primary care was mapped and then the future state value stream was developed. This was a largescale event involving nearly 40 people, and included all of the physician leadership team, many front line physicians, other clinical staff, and leadership from other parts of the organisation. They were chosen strategically to support the overall buy-in of the change process and to build the foundations for the expansion of the model to other medical centres.

A core set of processes was identified for the development of standard work. These were very fundamental processes that we believed would form the “chassis” that would provide operational stability and to which other processes could be added over time in order to achieve the desired levels of performance. The key processes that were identified were:

  • The supply chain process of materials;
  • The management of clinical calls to the primary care teams at the medical center;
  • The management of the flow of visits;
  • The management of the flow of electronic medical record information and activities.

The first rapid process improvement event focused on the management of the supply chain and included the 5Sing of the exam rooms and the establishment of a kanban system to signal and manage the flow of supplies from the supply node in the building to the exam rooms.

The reason for the choice of the supply chain, beyond the obvious benefits of identifying waste and the capture of over $60,000 worth of materials that were returned to the material handling function, was two-fold.

First, we were able to free up space that would be critical to other processes. This included space for printers and for future relocation of clinical staff to support other workflows. But, most importantly, it created the first standard that leaders would hold using the new management system.

We worked with them to create standard management work to make sure standard work was being followed, with visual systems in place to make the results transparent to staff, and the establishment of schedules of daily activities that the leaders would need to perform.

This created a great learning opportunity for the operational and physician leaders in the medical centre to begin to understand the critical role that standard management work plays in supporting the key role of leadership. It also allowed for the establishment of linked checking by senior leaders, who also had to learn what the new management system required of them.

Senior leaders were challenged with the new form of leadership, which asked them to be coaches to the next level of leaders and to support them in their ability to check the standards and facilitate understanding of why the standard was not being held, if that were the case. Senior leaders have been trained over many years to be problem solvers, and the result is that they possess a large reservoir of answers that they are more than happy to provide.

Their answers were not necessarily always correct, but even if they were, that wasn’t the issue. When they provided the answers, they were taking ownership of the problems, ownership that rightly belonged to the clinical team. Senior leaders went through a separate training process to help them understand the change in their role in the new system, and the model line gave them a chance to try out the new behaviors.

Call management was a critical process to bring stability to the operation. Clinical calls were either being routed to an appointing call centre or to the back office number for the medical assistants (MA). The call centre is staffed with non-clinical workers and is located away from the practice teams, which meant the only thing they could do was either transfer the call to the team or take a message and transmit this to the team. If the call came to the medical assistant, they knew that they could not answer it: it would mean an interruption in the rest of the duties.

They knew from experience that they could not afford to get tied up on a call, because that meant they were not supporting their physician in rooming the next patient and other activities that were required of them.

Essentially, the effective first call resolution rate for our patients was 0%. No clinical call was resolved immediately (hardly making for satisfied patients), and messages were batched and dealt with later. The MAs would let the phone call go to voicemail, and they would one or two times per day transcribe the messages, first to a notebook and then to a staff message to the physician within the electronic medical record.

Questions, however, were often relatively simple to answer, and did not need to be handled by a physician. The solution was to create a call assist team of MAs along with a registered nurse. All clinical calls were routed to the call assist team, and they found that they could resolve over 50% of the calls immediately. The calls that could not be answered immediately were turned into a staff message and sent to the team. This was a significant improvement in our ability to meet the needs of the patient, and it also meant that the phones were no longer ringing at the medical assistants’ station and that we had reduced the number of this type of item in the in-basket of our physicians by 50%.

Flow management was the change that most directly impacted the physicians. The improvement idea was to tightly pair the medical assistant and the physician. In this arrangement, the medical assistant becomes the “flow manager” of the physician. They are still responsible for rooming the patient, but they take on the additional responsibilities of starting the agenda-setting process with the patient by eliciting all of the issues that the patient would like the physician to address, and what the most important issue is. There is then a warm hand-off of the information to the physician, who is able to start the visit where the medical assistant has left off so that the physician’s time is well managed and the patient’s expectations are met.

Another important feature is what happens while the doctor is seeing a patient. The medical assistant is utilising standard work to examine the electronic medical record in-basket, and is teeing up two to three items that the physician must do between visits. These are signaled through a visual system at the place where the MA and the MD are co-located, so that they are able to work together in close proximity and communicate easily. The ability to co-locate was facilitated by the 5S event and the space that was captured.

By maintaining a cadence of doing these three to four tasks between visits, the physicians are able to work their in-basket items (lab results, secure messages from patients, staff messages, telephone encounters, etc.) at a rate that allows them to empty their in-basket at or near the end of their scheduled clinic day. If they are able to chart in the room at the end of every visit and close the encounter, they are then able to go home with their work of the day completed.

This is a critical aspect to create operational stability in the age of electronic medical records. The processes that are used in most care settings are the same as they were fifty years ago, and the electronic medical record was largely just placed on top of those processes, leaving individual physicians to fend for themselves for how they would adapt to the new practice reality. The changes that were implemented at PAMF are the result of the work of many organisations, but the critical point is that the processes must be changed to reflect that new reality.

For each of the processes that defined the chassis, standard work was developed with associated standard management work, which was incorporated into the previous standard work and the visual systems that were already in use. In this way, managers were able to build up the breadth of their standard management work, which gave them time to begin to gain some mastery in the new management system.


This work was initiated in September of 2011. In the year that followed, Fremont has made significant improvements in its ability to manage the flow of work and to meet the needs of its patients.

Most importantly, it was able to implement key aspects of the new management system and create that “existence proof” that showed the organisation what the change was and demonstrated that it was in fact possible to change.

Fremont has not yet reached a highly capable operational state. There are many problems that must still be solved to support continuous flow within the clinic and to effectively manage the breadth and complexity of the needs of the patients that receive their care in our Fremont clinic. However, the problems can now be made almost immediately visible, and there is a method through which they can be solved, and those solutions can be integrated and maintained over time. This is a critical step forward.

The changes are also being adopted at three “beta” sites that represent, in total, nearly 40% of the primary care physicians within Palo Alto Medical Foundation. The process of spread that is being used is an “adopt or adapt” model of Fremont’s model line processes.

This process creates an environment in which sites can both challenge the existing processes and learn from each other. We will be able to learn from each other and adopt what we have learned quickly.