This article was originally published in the September 2001 issue of AGI's newsletter, TOC Times

In her thirteen-year tenure at The Goldratt Institute, Tracey has been developing, teaching, and implementing TOC with individuals and organizations worldwide, including Intel, ITT Defense, Ford Electronics, and the Department of Veterans Affairs Health Administration. She is currently focusing her energies on spearheading TOC in “for-cause” organizations, particularly healthcare, community development, and government. and doing a lot of groundbreaking work in the development of strategy - from the boardroom to the front line - using TOC's Thinking Processes.

“What if my organization’s goal is not to make money?”

Case Study: Healthcare

Part 1 of a Series

By Tracey Burton-Houle, Partner - AGI

“THE GOAL was great, loved IT’S NOT LUCK, but it doesn’t apply to us. Our goal is not to make money.”

Ten minutes into my first presentation to healthcare professionals on the application of TOC to healthcare, the CFO of one of the top teaching hospitals in the U.S stood up, stopped me in mid-sentence and made the above proclamation, his body language communicating to everyone in the auditorium that anything I had to say from that point forward would be a waste of their time. Two and a half years later, during my second presentation to healthcare professionals... (just kidding!)

At that time, I was totally caught off guard - I was assured by the individuals who brought me in to speak that everyone had “read the books” and was “very supportive,” including this CFO! I could think of only one thing to do. I dredged up some ancient memories I had from reading The Haystack Syndrome¹ years before, and an even older article that I don’t even remember the title of, that talked about “black boxes” and “money-making machines,” and I began talking about goals, necessary conditions, their role in decision-making and strategy, and the similarities and differences between organizations whose purpose is to make money and those whose purpose has little, if anything, to do with it. To be honest, when the discussion began, I was concerned about how I was going to bring it all together into a coherent and convincing response for the audience. Imagine my surprise when I realized that the discussion was completely changing my perspective of how TOC can be applied to any organization - or any system for that matter – and why it achieves the dramatic improvements in performance that it does!

What I didn’t realize was that while I was having my major “a-ha!” experience, another “a-ha!” was occurring in the audience. The way they described it was that the discussion broke a stalemate that had been crippling their organizations for years. They had been spending their time debating who was right - was the goal of the organization the delivery of quality healthcare like the clinical managers insisted, or was it making money as the administrators claimed? The discussion brought them to realize that they can’t deliver quality healthcare now and in the future without money, that they can’t make money (oops!) generate revenues without delivering quality healthcare, and that TOC can help them do both. With this realization, and the realization that both parties were essential to the team if the organization was to succeed, did they happily give up their notoriously adversarial roles and really begin to listen, not necessarily to me, but more importantly, to each other. Thank goodness for the CFO! (By the way, over time he became one of the biggest champions of TOC in his organization.)

Why did I share this story with you? Because from the very first moment I began working in healthcare to this day, over two years later, I’ve constantly run into obstacles like the one above that have forced me to challenge my understanding of TOC, how to implement it in organizations, even how to talk about and present it! TOC practitioners are so accustomed to people claiming that their environment is different (so much so that it’s one of TOC’s predicted “layers of resistance” for which we have this nifty process we pull out and use whenever we hear it) that when someone says something like healthcare is different from industry, TOC practitioners don’t really listen. I didn’t either. And it makes sense in a way that we have this reaction...

Of course, Drum-Buffer-Rope and Buffer Management² apply in healthcare! Where don’t they?! Just think about a pharmacy or the ongoing problem with the national blood supply for a moment and the Replenishment² solution is a no-brainer. And what organization doesn’t need Critical Chain Multi-Project Management³ to at least manage their improvement projects and IT departments, if you think about the massive changes going on in healthcare in general, and everything they’re trying to do with electronic medical records specifically. It’s obvious to TOC practitioners how each and every application of TOC can be applied in healthcare! In fact, all preliminary reports indicate that the results we’ll see from applying these generic solutions in healthcare will make the impressive results that industry has achieved⁴ pale in comparison!

What’s not at all obvious is how these pieces all get brought together to create a complete vision of how TOC can systemically and dramatically improve healthcare systems, and how we overcome the obstacles to its buy-in and implementation. Think back to that CFO. Think about the obstacle he expressed after having “read the books” (and he did read them, as his later questions revealed!) Can you imagine a more fundamental obstacle to have than that one? If he had not stood up, but had just sat there with that obstacle hounding his thoughts, he would never have stopped reading his mail to even listen to the presentation. Can you imagine how much stamina, conviction and fortitude are required for people with obstacles of this magnitude to continue exploring TOC if it doesn’t appear to appreciate the magnitude of the real obstacles and challenges they face?

Let’s face it. The vast majority of the intuition and knowledge base that exists in TOC comes from our collective experiences in applying TOC to industry or industrial-type settings, and mostly on a very localized basis. Think about the literature that exists, the presentations you’ve seen, the case studies and the educational materials that are out there, where they begin and the assumptions that they make - about what people understand, their history, the current state and culture of their organizations, what they believe and what they’re willing to accept. Starting with these same assumptions and taking these same approaches in healthcare appears to be putting more obstacles in the way of them implementing TOC than they are removing. If we are going to make significant, lasting, system-wide improvements in healthcare, we must recognize and understand the seemingly huge differences between healthcare and industry, and prepare to step up to the unique challenges faced when implementing TOC in healthcare - whether we’re implementing DBR in a clinic or doing corporate level strategic planning for a national healthcare system.

The objective of this series of articles is to initiate a discussion that will result in a collective vision for healthcare and a plan for going about getting the buy-in to implement it. Each article will seek to begin to document what is known about different obstacles/challenges posed by implementing TOC in healthcare, what has been done thus far, what’s understood and what’s not, and to figure out where to go from here.

Wouldn’t it be wonderful if the outcome of this effort were a complete body-of-knowledge (a recognized oxymoron) on implementing TOC in healthcare that could be used to remedy the state of healthcare worldwide?

Future Planned Articles in the Series (working titles only):

• What is a “Healthcare System?” (or, Who the Heck Built this System Anyway?): Goals, Necessary Conditions and Measurements for Healthcare
• When Your Inventory Walks Out the Door On You (or, Car Parts Don’t Complain): Patient Care, DBR, Replenishment and Buffer Management
• When Your Inventory Doesn’t Walk Out the Door on You: When Patients Are Projects
• Is Mafia Offers in Healthcare an Oxymoron?
• Is there ever pleasing a payer? (or, You Expect to Get Paid for That?)

Please email your suggestions for future articles, your comments or questions to me at tracey@goldratt.com.

¹ Goldratt, E. The Haystack Syndrome © 1990, The North River Press.
² Goldratt, E. It’s Not Luck © 1994 The North River Press
³ Goldratt, E. Critical Chain © 1997 The North River Press
⁴ Mabin, V. and Balderstone, S. The World of the Theory Of Constraints: A Review of the International Literature © 2000 by CRC Press LLC.