Total cost of Lean for the Saskatchewan healthcare system
We report the total cost of Lean implementation in Saskatchewan in this section. The first column of Table
3 presents the total numbers of Lean events until April 2014. This information was compiled from the PKPO Kaizen database [
23]. Although the database is updated on a regular basis, there is incomplete information for 5S events. At the time of our review of this database, there were thirty-three 5S events that took place from March to December 2013. Based on this information, we estimated that the total number of 5S events during the course of two years would be around 80. As indicated before, using the total number of individuals and average numbers of participants in Kaizen basics workshops and the NAT, we estimated the total number of corresponding events.
The table shows that the RPIWs and training workshops are the most frequently occurring activities implemented in Saskatchewan Lean transformation, followed by 5S events and mistake proofing projects. The table suggests that there were about eight RPIWs and 23 Kaizen basics workshops implemented across the province in a given month. However, one needs to interpret these numbers carefully given that there were limited numbers of events implemented in 2012 compared to more recently the. It is likely that the average number of events during 2014 would be higher.
Next, we estimated the total cost of each type of event during the course of Lean implementation until April 2014. For this, we used three scenarios. Under the low cost scenario, we assumed that the opportunity cost of Lean event participants’ time was equivalent to the lowest 25th percentile of the wage distribution for the corresponding job. Alternatively, we assumed that it was equivalent to the 75th percentile of the wage distribution under the alternative, high cost scenario. The third option (average) evaluated the opportunity cost of the participants’ time at the mean wage level for the corresponding job [
25]. The total cost of each Lean event for each scenario was estimated and is presented in Table
3 using the corresponding unit cost for each event presented in Additional file
1: Tables S1-S7.
Table
3 shows the corresponding total costs for various Lean events, which suggests that the highest amount of resources are devoted to the RPIWs. The Kaizen basic workshops’ total cost of more than $5 million was higher than the total cost for all 5S events, mistake proofing projects and Kanban events, combined. Our estimates show that the total cost of implementing these Lean events ranges from $16 to $19.5 million depending on the assumption made for the value of participants’ time in these events. This implies that the annual cost of implementing these events at the same rate would be around $9 to $10 million. However, the actual cost depends on the number of events implemented and other types of Lean events that are taken into consideration. One could use unit cost of each event (Table
2) to compute the projected cost under various assumptions regarding the numbers of events that would be implemented.
In addition to the cost components mentioned above, there were also two additional sources of costs attributable to the Lean. The first was the consulting fees paid to the JBA as part of the contractual agreement with the JBA and the Ministry. According to the contract agreement, the consulting company agreed to deliver services to assist and to play a direct role in the implementation of the Lean, as well as to provide certification and training for the Lean specialists across the province. The details are documented in the contract agreement between the provincial government and the consulting company [
34]. The original agreement was a 4-year contract with a total payment of $40 million. However, the government recently renegotiated the contract to end it after three years and four months with a total payment of $32.6 million. This total payment reported by the Government of Saskatchewan implies an average monthly payment of $815,000 over the course of the program, which is lower than the average monthly payment for the first two years of the contract. To compute the total consulting fees paid to the JBA, we used $815,000 as an average monthly payment for two years, which leads to a total payment of $19.56 million for a 2-year term (Table
3).
The second cost component was the expansion of QI teams in each health region due to the Lean initiative. This is, however, not straightforward to compute, given that the previous QIDs (or individuals engaged in QI work) in health regions were transformed to become the KPOs with QI personnel transferred to the new offices after the beginning of Lean. Although our primary interest is related to the additional costs, as compared to the pre-Lean period, among QI teams across the province, this information was not readily available to us. Therefore, we used the following approximation in our estimation of additional costs regarding the expansion of the QI labor force in the province.
We reviewed the human resources at the KOT/KPO at the SHR. Our choice of reviewing the SHR human resource database was determined by online availability of this information, the larger population of the health region, and the high numbers of Lean events completed in this health region compared to the rest of the province. Our review showed that the SHR has a Kaizen Operating Team (KOT), in addition to a KPO with a total of 25 Lean specialists, 4 KPO lead specialists, 8 leads (managers), 11 additional staff, and a director of the KPO [
35]. The KOT is a new initiative solely associated with the Lean initiative; therefore, we included all KOT personnel costs as part of the additional costs of Lean. The question that remains is the proportion of KPO personnel solely associated with the Lean initiative. Based on our review of the names listed on the SHR Quarterly Review [
35], we determined that about half of the personnel of the KPO were new employees, suggesting a total of 13 new hires (6 KPO specialists, 2 KPO lead specialists, 2 managers, 2 analysts, and 1 project coordinator). We used the same methodology to estimate the total wage and benefits paid for these personnel using average wages and benefits [
25,
36]. Our estimations suggest that the annual personnel cost attributable to the Lean initiative is $2.40 million for the SHR (see Additional file
1: Table S7). We have no information for the rest of Saskatchewan; therefore, we assume that the associated cost in all other health regions, the PKPO, and the Ministry of Health is equivalent to the corresponding cost at the SHR. This suggests that the annual cost attributable to the expansion of QI teams in the rest of the province is $2.40 million. This results in a total 2-year cost of $9.6 million. We inflate (deflate) this total by 10% in order to calculate it for high (low) scenarios. We believe that this is a conservative assumption given that the rest of the province has a substantially larger population than the SHR.
Our estimates presented in Table
3 could underestimate the true cost of the Lean initiative in Saskatchewan. Due to lack of data, there are other components of associated costs that are not incorporated into our estimates. For instance, there are also costs associated with recruitment and retention of personnel. Given that Lean training is a complex and human resource intensive investment, retention of the trained personnel within the provincial healthcare system becomes especially valuable. If the healthcare system were to lose trained personnel, it would be an additional cost to the system since the new hires may need to be trained in Lean. The cost related to recruitment and retention can be estimated using the training cost and number of trained personnel who left the system. This issue is not taken into account in our estimates since we do not have information on the number of trained personnel who left the healthcare system during this period.
When we estimated the additional cost due to new hires to the KPOs/KOTs, we included only their salaries and benefits. It is plausible to expect that there were additional operational costs associated with new hires. Office space, utilities, and supplies would be some examples of additional costs due to expansion of QI teams in the province that were not included in our cost estimations.
Given that the Lean implementation required substantial resources to be directed for its activities, the regions with fewer resources and less capacity have had considerable difficulty in delivering their day-to-day clinical or non-clinical goals [
30]. Proportionately, smaller and less well-resourced health regions reported in the qualitative interviews [
30] feeling disadvantaged and having experienced a greater burden from the implementation of Lean compared to their counterparts with larger budgets. It is likely that resource allocation for the Lean implementation will lead to fewer services being delivered in these regions. We cannot estimate these without collecting relevant data.