Theory of Constraints Healthcare Logic Matters

A Guide to Implementing the Theory of Constraints (TOC)
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Introduction

Logic does matter, it matters a great deal. And perhaps the most important logic that impacts upon us is the fundamental conflict or generic “cloud” that underlies healthcare. If we don’t understand this then we simply can’t move forward. A cloud might sound like a funny name but that is what it is called and that is the terminology that we will use here. You will soon get use to it.

I wrote this cloud after asking someone to explain to me what the fundamental or generic cloud in public service healthcare is. I had an open mind and was interested to see what the response was – and I wasn’t going to do it for them. However, the response wasn’t forthcoming and one popped into my head and that is where it stayed until this page.

There is no point in “telling” the cloud to you, and there is nothing better than working through a cloud together, so lets do that, right now.

We are going to follow the procedure in the PowerPoints called Logical Types, Clouds, & Fantasies and the Reformulated Lieutenant’s Cloud. The rules for constructing systemic clouds are in these presentations and you can use the same approach for any systemic problem. There will also be abundant “symptomatic” clouds that will fall out of this systemic cloud that might better detail your own exact local problem. However, don’t lose sight of this generic cloud, it will be there, either “lying” below or “sitting” on top, or maybe “floating” above your own local description.

Let’s Start At The Start

A cloud is a graphical representation of an underlying conflict or compromise. It consists of 5 elements – boxes actually.

Let’s have a look at these.

The first element is an objective, the outcome that we seek. It is fed by two concomitant needs. The needs are in-turn fed by two “wants” and it is here that life gets interesting. The wants are mutually exclusive. We can have one or the other but not both; well certainly not both at the same time. The wants are in conflict with one another. We indicate this with the lightening-bolt-like set of arrows.

It might be more appropriate to address the “wants” as follows;

If we label one as a “don’t want” and another as “do want” then the conflict is more apparent. The negative or “don’t want,” by convention, is located in the upper position and the positive or “do want,” by convention, is located in the lower position.

Another way of wording these elements is as follows;

The needs can be viewed as requirements in order to meet the objective. The wants, in-turn, can be viewed as pre-requisites in order to meet the requirements. Of course the pre-requisites are still in conflict regardless of how we address them.

Now there is a small amount of short-hand which sometimes helps us in using and communicating clouds and we should incorporate this as well. We simply label the elements as A, B, C, D, and D’ (read as “D prime”).

Let’s have a look at this and let’s also revert to using “needs” and “wants” as the descriptions.

Let’s now fill in the specifics for public service healthcare – in particular non-acute or “elective” services – although the basic cloud covers other aspects as well (emergency department and nursing for example).

Cloud For Public Service Healthcare

We need to work around this cloud filling in the details. We are going to do this in a very specific sequence; clockwise from D then D’ then C then A and finally B. There are good reasons for doing this.

So we need to first ask ourselves what is it about healthcare at the moment that overall we don’t want? What is it that encapsulates all the stuff that we have to put up with in the current reality, indeed that we are often forced to put up with, that we do not like and that we do not want?

If we invoke the wisdom of an 8 year-old, then we can also test our current reality against Quincy’s Rule (1); what is it in D that is the answer to all of our sad questions?

For me, restricted access is the overarching description that best fills this entity. Sure, you may find other ways to express this same concept – lack of access, limited access, and so forth.

Let’s put this in and see.

How many of the current things that we have and that we do not want in public healthcare could be covered by this generalized entity? Or that we can trace back to this entity? Probably almost all of them.

The next entity, D’ is easier. It has to be mutually exclusive, that normally means that it has to be the opposite. It also has to be something positive that we do want in the near future. It also has to be the answer to all the glad questions according to Quincy’s Rule.

Let’s keep it simple and put “full access” as the description that best fills the D’ entity.

Let’s add this.

Let’s run a check. Can we have both restricted access and full access at the same time? Are they in conflict with one another? They would certainly seem to be so. Moreover, if we could have full access would many, or most, or in fact all, of the current problems go away? That would, indeed, seem likely.

So now we must ask what need in C is met by the want in D’ of full access. I think that if we had full access then we could ensure appropriate treatment. And that is the description that I am going to put into C.

Let’s have a look.

Let’s read C and D’ back and see if they make sense. We will use the formula “In order to have C it is necessary that we have D’.” Let’s read this through and see if it works.

In order to ensure appropriate treatment it is necessary that we have full access.

That seems to make sense to me.

Or we could test it using “we must have” rather than “it is necessary that we have.” Let’s try that as well.

In order to ensure appropriate treatment we must have full access.

That also seems to work.

In fact doing this normally flushes a few unstated assumptions out as well. The assumptions are viewed as “sitting” under the C-D’ arrow. They are additional sufficiency in what is otherwise a bare-bones necessity-based logic. Let’s work through the verbalization first and then draw it.

We will just tack on a “because” to the end of our last sentence; “in order to ensure appropriate treatment we must have full access because ... ?”

What shall we put in there? Well, I will put because the treatment is timely. I have no doubt that the clinical professionals will make sure the treatment is appropriate, but the sooner that it is done, the less invasive or disruptive or expensive it is likely to be. Let’s draw this.

Now just a note, full access doesn’t mean trivial access, it means access within agreed clinical guidelines. The public health service is not everything to everybody. There are some procedures that might be regarded as unnecessary or discretionary or cosmetic and are therefore better placed in the private sector. Also some referrals from general practice to specialists, as an example, may go no further than just a referral – they fail to meet the protocols of the specialist for further treatment. But access, and full access at that, to the necessary expertise for such a decision is often lacking or missing at the moment.

In fact we have just uncovered a jeopardy arrow. Let’s have a look.

Ensuring appropriate treatment is a vision of the future, it is not here yet, and in fact its very existence is jeopardized by the current restricted access that we are forced to put up with. C is jeopardized by D. That is; ensuring appropriate treatment is jeopardized by restricted access.

It is not a pretty sight, but let’s keep moving on. Let’s look at the objective in A.

What is the objective that we are seeking to meet? I think that it is quite simple, I think that it should be something as simple as “good healthcare.”

Let’s have a look.

Does that seem like a worthy objective? It is certainly positive.

It seems to make sense, so let’s run our tests and check this out.

In order to have good healthcare it is necessary that we ensure appropriate treatment.

That seems fine, lets check the other wording.

In order to have good healthcare we must ensure appropriate treatment.

That also seems fine.

Moreover, these verbalizations are starting to chase out assumptions “under” the A-B arrow. Let’s have a look.

It is necessary to ensure appropriate treatment because often intervention is the only recourse. Wouldn’t it be great if primary, proactive and preventative healthcare methods worked more fully – they have tremendous potential, and wouldn’t it be great if people would more actively take them up. However, many conditions are still beyond our current control and secondary reactive intervention is the only recourse available to us in order to ensure good healthcare. This is the major assumption here.

Now, this just leaves us with just one more entity, the need in B. The rationale for leaving this until last is that, arguably, it is the most important. It is something that exists within our current reality that is positive in its own right – we wouldn’t knowingly set out to do something negative – and yet it forces us to do the things that we don’t want to do in D. Moreover, the content in B also is absolutely necessary if we are to meet the objective that we have already agreed upon for A.

Therefore, given that A, C, and D’ are so important, and yet we still tolerate D – even though it conflicts with D’ and jeopardizes C – there must be a very powerful and positive reason for the existence of D that resides in B.

What are we going to put here in B? We need to ask; why do we comply with D? Why do we tolerate D? Why are we forced to accept D? What is the positive need in B that is powerful enough to explain this?

We must ask; what is the need that is protected by the restricted access?

Well, I am going to put “protect available funds.”

Let’s have a look.

Protecting available funds is clearly positive, so let’s see if it passes all of our checks.

Let’s look at B-D first.

In order to protect available funds it is necessary to restrict access.

In order to protect available funds we must restrict access.

Or in this particular case (B-D) we might add,

In order to protect available funds we are forced to restrict access.

We don’t want to restrict access but we are forced to so that we can protect our limited funds. Excellent, this seems to make good sense.

What then are the assumptions that support this logic? Let’s have a look.

In order to protect available funds we are forced to restrict access because capacity is determined by funding. That seems like a reasonable assumption to me.

We are almost there, let’s now check A-B.

In order to have good healthcare it is necessary to protect available funds.

In order to have better healthcare we must protect available funds.

That seems fine and, again, this flushes out the last and nonetheless important assumption that lies buried under the A-B arrow. Let’s have look at this.

We have to protect available funds because funding is limited. Healthcare is not the only benefactor of public expenditure, there are many other competing areas as well.

Now we can finally address a disquiet that we may have experienced earlier when we said that if we had full access many, or most, or indeed all of our current problems would go away. You may have wanted to say “yes but,” and that “yes but” was addressing the second of our two jeopardies within the cloud.

Let’s have a look.

Protecting funds is jeopardized by full access. This is why the statement that full access would remove the current problems caused the feeling of disquiet, we probably all went; “yes but we don’t have the money.” We all want to move to a better future but we are locked in place by our present.

So here we have a description of the generic cloud for public service healthcare.

We are locked into a conflict between restricted access in order to protect our funds and full access in order to ensure appropriate treatment. Both protecting our funds and ensuring appropriate treatment are necessary in order to have better healthcare.

Does that feel something like your reality? I trust that it does.

Please note, however, this is not a physician’s cloud. Nor for that matter is it the patients’ cloud, or the tax-payers’ cloud, or the managers’ cloud, or the Ministers’ cloud. Well actually it is all of these, but each of these might have a more specific and local “take” on the matter. The generic cloud must be capable of addressing, at a more symptomatic level, all of the constituents; the funders, the patients and the staff.

Now, nice as that may be, it has yielded about half of the information that is buried within it. You see we are locked into this conflict, and so strongly locked into this conflict at that, that we can’t see a way out. We can’t see a way out because of what we do know of the past and what we don’t know of the future. Our old “know-how” blocks us from accessing a new “know-why.” We are locked in by our own psychology. We need to break out.

Let’s go and have a look for the additional information that locks us in, and then we will search for a key to help us break out.

Hunting For Negative Fantasies

We are not so much stopped by something tangible or physical but rather we are stopped by ourselves. We stop ourselves with negative fantasies (2). Negative fantasies are an incredibly pervasive part of modern organizations and yet we hardly give recognition to their existence let alone their impact. If we don’t acknowledge them, let alone understand them, then how on earth can we manage them and overcome them? Let’s start then by acknowledging them.

First step, how do we find these things?

Well almost the same way that we found the assumptions. We found the assumptions by adding on a “because” to the end of our logical statements. The assumptions are presumed to be reasonable statements of the here and now. To access the future, however, we need to use “otherwise ...” This is the only difference.

Let’s try it out, firstly on the restricted access side.

In order to protect available funds we must have restricted access otherwise ...?

We have to ask what is the “otherwise,” and my interpretation is as follows;

... volume will rise & costs will balloon

Let’s draw this in.

”Costs will balloon” is negative, and it is also placed into the future. We fear that volume will rise and costs will balloon and we will not be able to protect available funds anymore. In fact to put it more succinctly, or maybe more frankly, we simply fear that we will lose control.

Lets add this as well.

A negative fantasy has a personal aspect to it, we personally fear that volume will rise, costs will balloon, and we will lose control. Moreover, the fear that that costs will balloon if volume rises is founded upon our past experience, our past reality, we know only too well how easy it is for this to happen.

If we look a little harder another distinction that makes negative fantasies different from assumptions becomes clear. Assumptions are about the side of the cloud where the assumption appears. Negative fantasies are about the other side of the cloud. Our negative fantasy is about the consequences of full access coming about. The negative fantasy is the rationale that we can use to continue to substantiate or rather entrench restricted access.

OK, then, what about the other side of the cloud? Is there a negative fantasy on that side too?

Let’s have a look.

Once again we need to use our “otherwise” to flush the verbalization out.

In order to ensure appropriate treatment we must have full access otherwise ...?

We have to ask what is the “otherwise,” and my interpretation of the “because is as follows;

... acuity will rise & costs will balloon

Let’s draw this in.

Oh wow! Do you see that? Once again “costs will balloon” forms the negative fantasy, although this time it is driven by rising acuity. Again this negative fantasy is about the other side. We know from past experience that restricted access only results in some people becoming even more ill until they have to be seen or they present as an acute patient. The negative fantasy is that this will become worse and worse.

Is there a similar entity about control? Well I think that there is, its similar but different.

Let’s have a look.

On this side we don’t fear losing control, we fear that we won’t gain control of the situation. People’s health will become worse and worse, the acuity will increase and costs will balloon.

Let’s put the two sides together.

Do you see how powerful this situation is? Firstly, there is nothing here that any of us disagree with. It isn’t really even a conflict diagram, it is more of an agreement diagram. The vast majority of people are likely to be on the “upper arm” and they genuinely fear losing control. The consequence is that they are going to push like hell to make sure that full access is not granted. The people on the “lower arm” genuinely fear that they won’t gain control of the situation. The consequence is that they are going to push like hell to make sure that restricted access does not remain in force. We all agree about this and yet we end up in opposing camps.

Moreover, we don’t go inventing negative fantasies, they are not figments of our imagination, they are strongly founded in our past experience. And our past experience is that costs in healthcare continue to go up and up, regardless of the situation. It is a world-wide phenomenon. But the more important issue is that we fail to ask is; “does it need to be like this?”

The assumption that costs will rise faster than demand and faster than productivity is an unchallenged assumption. Moreover, it is corrupted inductive logic. We are using the past to foretell the future. We can’t know the future. It also runs the risk of becoming circular in its logic. There are many cases where costs increase because they are expected to increase. We have even quarantined this one in a special corner and given it a special name “health inflation” as though it has a special cause that we should not try too hard to understand. And that is a cause in itself.

Can you think why costs continue to increase? Think of the analogy of the chain.

We have to challenge its validity. Let’s do so.

Challenging Negative Fantasies

The “rising demand” that is said to occur from full access is a pervasive world-view in healthcare and it “feeds” the “costs will balloon” fantasy. We don’t need it, but it makes the whole fantasy even worse. Interestingly the “rising demand” idea seems to come from government treasury level and permeates down through to hospital management. It is an off-shoot of free-market philosophy that contends that the cheaper a good or service is, or the more attainable it is, the more people will avail themselves to it.

But wait a moment, if you have a perfectly good refrigerator, would you go and purchase another just because they had “never been cheaper?” This is flawed logic – is it not? The demand for refrigerators does not approach infinity as the cost becomes almost nil. Most modern economies experience this satisfaction, or maybe it should be saturation, of particular markets. Demand is finite, not infinite. The demand is about replacement not novelty.

However, “demand will rise” becomes the default rationale for not improving productivity. After all, it is argued, if we increase productivity more people will avail themselves to the service and we won’t be any further ahead. Well, we are missing a couple of important points here.

Firstly, note that I used “productivity” not “production,” so even if we could process more people with the very same finance, and thus not increase costs, we are defeated by the response that this only serves to stimulate further demand and we are no further ahead. It’s a circular argument and it drives me crazy. It seems that improving outcomes that are technologically driven – even if it is something as now basic as antibiotics – are OK. Improving outcomes that are productivity driven are not OK.

Not far from where I live there is a mission cemetery mostly “populated” in the mid to late 1800’s. It is a salient reminder of how fatal the simplest of diseases were in our very recent past – especially for children. Now the question simply arises, should we not have used antibiotics because that only increases the workload in healthcare? What a perverse suggestion! And yet today we routinely entertain the notion that we can’t do any better and if we did we would be “punished” by even greater demand. Where is our sense of challenge? In the words of Robert Pirsig (3); do we have no gumption left?

Secondly, this fantasy fails to recognize that there is a current pent-up or unmet demand for many services; so that better access will allow more people to use those services as needed. But this is not increased demand, it is current unmet demand. There is a difference.

Thirdly, it fails to recognize that most people do not wish to be hospitalized in the first place. We don’t produce new illness just to avail ourselves to better access. If you have a perfectly good heart you will not avail yourself to a by-pass just because it is possible. That sounds like nuts but it has to be said because currently it is unsaid. I fail to understand why this is never pointed out – but then it wouldn’t be negative fantasy if we were to go around and challenge the assumptions. The negative fantasy has a job to do – to preserve the status quo. And of course that only makes things worse.

Fourthly, the fantasy fails to recognize that “a stitch in time saves nine,” both literally and figuratively. Public healthcare systems restrict access to non-acute intervention, only to have to accept more and more acute interventions as a consequence. Many times there is a perverse financial incentive from central government for this to happen. Increasing the availability of early intervention will free up existing capacity that is currently swamped by acute admissions that should have been dealt with at a much earlier and simpler stage.

Negative fantasies don’t evolve out of the “ether” they have very real foundation in our past. Can you think why we fear that demand will rise and costs will balloon? Again think about the analogy of the chain.

So long as negative fantasies are allowed to remain unchallenged then we will not move forward. Not challenging them is part of their function. The effect, however, is only to make things worse. Our very real fear of repeating consequences from the past only ensures that we will repeat them, but even more so.

We need to break the cloud, we need to break the conflict, it is necessary but not sufficient to just challenge the fantasies, we must put up a credible alternative in place otherwise things will just “snap” back to where they were.

Negative Fantasy & Inductive Fallacy

This is a long section and you may wish to jump ahead to the next, but it would be worthwhile coming back later on.

Negative fantasy and inductive fallacy – strange bedfellows? No, not at all. You see, healthcare prides itself on being “evidence-based,” and this is part of the problem, rather than part of the solution. Evidence-based findings fall foul of inductive fallacy. Actually it is called The Problem of Induction, but if you change the grammar a little then inductive fallacy falls out and it is a sterling partner to narrative fallacy (4). And by the way, if we could remove narrative fallacy – the need to ascribe cause to individual random events – aka “making up stories” then we could winnow the relevant from the irrelevant much faster. But then I am forgetting that Shewhart gave us operating definitions for doing this in the 1920’s we just haven’t stopped to listen yet. The outcome of failure to listen is called numerical naivety and its quite debilitating. The cure, fortunately, is simple, accessible, and not at all painful (5).

Anyway, turning the grammar and the logic around, inductive fallacy allows us to assume that we can “figure out the properties of the (infinite) unknown based upon the (finite) known.” That we can “know the future, given knowledge of the past.” The whole of our negative fantasy is based on our very real past and its projection into the future – assuming that the future must be like the past. It then becomes self-fulfilling because we don’t do anything new. We are trapped in a double bind (6). The double bind is a consequence of our assumptions about reality, what reality is actually doing is another matter, it would be nice if the two coincided.

I can’t yet fully distinguish between a paradigm and a double bind, but I feel that a double bind ought to be worse. I can explain, but let me start with paradigms. Science, it is argued, proceeds step by step through a series of paradigms (7). Or maybe that should be hesitant leap by hesitant leap. I certainly subscribe to that, I would even go so far as to offer a special cause for it. But let’s looks at some simple examples.

Not very long ago, the people of Europe had little doubt about the fact of Noah’s flood. The evidence was abundantly clear for everyone to see – in the form of what we would now call glacial outwash moraine – the rubble left by the ice as it retreated back and up from the lowest level that glaciers reached at any given latitude during the last glacial period rather than the highest level of any flood, biblical or otherwise. The change in thinking required was paradigmal – and I mean amongst professionals, not the populace. There is only one or the other way of thinking about this, there is no middle ground. If you find that odd now, then remember that Copernicus’ discovery of a heliocentric universe came about from trying to accommodate nested spheres of the observable planetary orbits within perfect polyhedral; cube, pentagon, and so forth, as surely divine inspiration would have planned it.

When I started University, my lecturers – the older of them anyway – had been taught that the surface of the earth was a static sphere, and yet within their professional lifetimes the earth’s surface turned out to be anything but static. Static or non-static, its either/or, there is no half-way. This was a paradigmal change. Once, to believe that the earth’s surface was mobile would have been sheer lunacy, later to espouse that it was static was equal lunacy.

During my own professional exposure to the science of the earth I watched from the sidelines as “unifomitarianism” was replaced, or at least modified, by acceptance of catastrophism and Darwinian evolution was modified by “punctuated equilibrium” (8). Once to have believed that mass extinction could be a consequence of extraterrestrial impact was sheer lunacy. Nowadays to espouse that it isn’t is equal lunacy.

Was this a paradigmal change? Well sometimes I like to think that the fellows in this particular branch of the science were just a little “dull,” after all the new science was just an extension in scale of the old. But this would be unfair (as it was intended) because the whole of science got a wake-up call. In particular Mandelbrot demonstrated how power-laws underlie so many natural processes – the so-called fractal nature of things (9). And in fact this was paradigmal. Out went arteries and arterioles, veins and venules, and in came ...., um well nothing, you can’t replace 4 exam questions with “it depends.” And of course “business” picked up on the concept of deterministic chaos rather quickly, forgetting all along that it still didn’t know anything about the concept of noise in the system. Numerical naivety is still alive and well. And, as has since been pointed out, the exponents in fractals or power laws, even in deterministic chaos, are almost impossible to “know” (4). We can easily make complex fractal “pictures” from arbitrary values of the exponent, but we can’t easily extract the unknown exponent from a known “picture.”

Let’s step out a moment. Evidence of glacial moraine existed since the civilization of man – the two are connected in time. Evidence of a non-static earth’s surface existed way prior to man. Evidence of extraterrestrial impact didn’t suddenly appear. The evidence was always there, but it can only be recognized within its paradigm.

Modern so-called “evidence-based” medicine is also always “within” paradigm; the current paradigm.

Want to test this? Go and write a research grant application for something “outside” the current paradigm. You will have a snow flakes chance in hell of success – and we say that we crave innovation – but only if it is within paradigm – and if someone else has done it first. And every time I do this I am reminded of Gregory Bateson’s admonishment that knowledge is recursive (10), which I take to mean nested and circular. New paradigms break out of the old circularity.

Now notice something here. In all of these examples, we are “of” the system. We didn’t evolve separately of the earth, we are a consequence of it (10). We “try” to stand dispassionately to one side and investigate our surrounds, but nowadays most scientists acknowledge, if not occasionally celebrate, the social context in which this “dispassioned” search takes place (how else can we excuse the inevitable cock-up). But what then of investigating non-physical things – social things for instance. This raises all the previous issues to a higher order or to a higher logical type. We are no longer “of the thing” we are intimately also “in the thing” as well. And this is where inductive fallacy runs riot.

When we research “social things” we are both “of it” and “in it,” we are doubly bound, and usually unaware so. Our logic is so incredibly recursive, and correctly so, that we can’t break out of the circularity.

Let’s have a look at a concrete example.

Drucker wrote an article for the Harvard Business review in 1963 entitled “managing for business effectiveness (11). It was essentially about power-law distributions (Pareto distributions but he didn’t use that terminology) as applied to income streams and to cost streams in a firm. He commented;

“'Revenue money' and 'cost money,' to put it dramatically, are not automatically the same 'money stream.' Revenue produces the wherewithal for the costs, of course. But unless management constantly seeks to direct these costs into revenue-producing activities, they will tend to allocate themselves by drift into 'nothing producing' activities.

One major reason why managers do not, as a rule, understand this fact is their mistaken identification of accounting data and analysis with economic data and business analysis."

Accounting data and analysis exists within a paradigm that says that all indirect costs can be apportioned, that is – allocated, across the business in some direct relationship to “effort.” Economic data and business analysis – in his opinion – suggested that there was a power-law proportionally at work. That a few products and/or a few customers make an disproportionate contribution to the income of the firm is well understood, but that a few customers might make a disproportionate call on indirect costs is not so well recognized. But the key here is the mistaken “identification” by managers. That is to say that their accounting paradigm does not allow them to see the evidence that an economic paradigm would. And note, it was managers not accountants that he was addressing.

He went on further to say;

“I am aware of the work done on these and related problems of accounting theory and practice – indeed I owe whatever understanding of accounting that I have to this work and to the accountants engaged in it. But it will be years before the results of this work will penetrate accounting practice, let alone change the way businessmen use or misuse accounting data.”

This has been a well known problem for a long time. In 1987, twenty three years after Drucker, Johnson and Kaplan encapsulated the problem in book “Relevance lost: the rise and fall of management accounting” (12). And still nothing happened. The evidence was there, but there was no action. The cost accounting paradigm is pervasive. So pervasive in fact that Kaplan went on to write numerous books “within” paradigm trying to “fix” the observed anomalies (13). Johnson in contrast went outside the paradigm and embraced Deming’s more systemic approach to business (14).

However, it took someone from outside of the accounting system, Eli Goldratt, to really break out of the circularity. In 1985, two years prior to Johnson and Kaplan’s book, Goldratt presented a paper at the Institute of Management Accountants’ annual convention (15), that paper was entitled “cost accounting, public enemy number 1 of productivity.” The need arose because operational decisions were yielding (and always had yielded) profits that far exceeded those that cost accounting decisions suggested should occur. Accounting professionals were certainly aware of the problem but they weren’t doing anything to address it. That has since changed with the work of Corbett, Caspari and Caspari (16, 17), and more recently Ricketts (18) who has extended the principles into service applications.

What did Goldratt do? He moved the goal posts into the next town. He recognized that out-flowing streams of physical product and the concomitant inflowing streams of revenue did indeed follow power-law relationships, but in addition that the power law was referenced with respect to just one place – the constraint in the system, and ultimately with time rather than unit output. Accounting professionals had known that for more than a century, but Goldratt did something about it – he codified a new set of accounting assumptions to accommodate that understanding (19). Moreover, he recognized that indirect costs can not be allocated to anything. There is no natural basis for doing so. He removed the psychological crutch that people had been depending upon for so long. And if that is frightening, it ought not to be. Indirect costs that can no longer be “expensed” to everything else come under considerable and real scrutiny for the very first time. The assumption that costs must rise with output is broken, they can no longer allocate themselves by drift into “nothing producing” activities.

Health costs currently balloon because our accounting and operational assumptions are, still, frankly, corrupt.

Deming had this to say from an operational perspective (5);

“No one gives a hoot about profits – if they did they would be interested in learning better ways to make them.”

If you nominate a “for-profit” organization, I will show you how, within a few hours, that they make conscious decisions to produce product that generates less income than other products that could equally be sold and that would generate more income. Moreover, such firms actively promote such inverted priorities. Every single “for-profit” firm that makes management decisions based upon cost accounting does this. Every single one.

Now if that is the case for “for-profits” and it is testable if you choose to test it, what then is the case for “not-for-profit” or rather “for-cause” organizations which use cost accounting for decision analysis? What is the chance that it is any better? Absolutely zero. What is the chance of being worse? Very, very, high indeed. Health costs balloon, we know that, we just didn’t know why.

Maybe out of pure theatre, or perhaps more correctly the need to shock people out of their complacency, Goldratt called cost accounting “public enemy No. 1.” But I think people miss the point, cost accounting is “of us,” and we are immersed “in it,” it is our invention and it doesn’t work. We and our psychology are the real problem. Cost accounting is merely a symptomatic outcome of our psychology.

Operating large serial dependent variable businesses is something that is so new and so different from what we have done in the past that we fail to notice that this new way of operating also needs new ways of thinking. And they are not really new ways of thinking, they are just new ways of rearranging our old ways of thinking (we can’t do things that we are not genetically capable of). In the physical sciences where historic reality is unchanging, it is our current thinking or interpretation that changes. In contrast in this particular social arena our current reality has changed while our historic interpretation of it has remained unchanged. That is a very substantial difference for sure.

Inductive fallacy seems to require that we do depend upon outsiders to break the circularity (7, 16). We do need someone from outside of the current smaller system to show us the rules for the larger surrounding system. We need someone from the larger surrounding system to show us our errors of logical type. The philosophy, or the epistemology, of this has existed since 1913 – if only we would stop for a moment to listen. Deming put it thus in 1994 (20); “The prevailing style of management must undergo transformation. A system can not understand itself. The transformation requires a view from outside.”

I’ll repeat again, Donald Berwick’s suggestion, that in order to do this requires an attitude of respect among strangers.

Remember; “paradoxes [and paradigms] are generally paradoxes [and paradigms] only because they are based on a logic or rationale that is different from what we understand or expect (21).”

If healthcare is to remain “evidence-based” then it also is to remain locked into its current paradigm, a victim of its own inductive fallacy.

Remember in 1963 Drucker said it could be quite a while; 1963, 1973, 1983, 1993, 2003 – how many decades exactly must we wait? Are we clever or are we not?

How Do We Break The Paradigm?

Well, you know, we have broken the conflict 3 times already; in each of our specific “No Delays” approaches to; (1) emergency department, (2) non-acute surgery, and (3) nursing and discharge. We broke the conflict by recognizing that healthcare processes are just like the human body – there is always a rate limiting step.

We need to remember that;

Now ask yourself.

If we don’t know where the rate limiting step, the weakest link, is in our system, then our cloud looks like this;

In fact this cloud is predicated upon the fact that every link is in viewed as the weakest link. That is certainly how it feels to anyone trapped within their local performance measures. That is why managers must protect available funds. With every link behaving as though it is the weakest link there is no end to the demand for funds and in the end we must restrict access in order to cope.

That is also why we fear full access. With every link behaving as though it is the weakest link there is no hope of rapidly increasing productivity and therefore we must assume that costs will balloon.

What we need is to allow ourselves time;

We need to recognize the existence of just one, not many, rate limiting steps. After all, if we don’t know where the rate limiting step is in our system, what is the probability that new expenditure will go to one of the many non-rate limiting steps that can not increase productivity? About 100% – right? We know this already, this is why healthcare seems like a bottomless pit.

And if we don’t know where the rate limiting step is in our system, what is the chance that productivity improvements will be focused on that one critical step that will increase productivity? About 0% – right? Once again we know this already, this is why healthcare seems like a leviathan. We have to know where the leverage points are, we have to know how to treat the cause and not the superficial symptoms.

It is our way of thinking in the past that has been wrong. It is fear of revisiting these outcomes caused by wrong thinking that locks us in place via our negative fantasies.

To break the cloud we have to introduce something that is missing;

Then the following will happen;

We introduce new knowledge, new know-why, of the systemic nature of public service healthcare. The know-why exists, we have seen the results that can be achieved. If we approach the matter systemically, then we can rapidly improve output, and move towards full access and we can do so without endangering funds. In fact we must do so without endangering funds, there is no other choice.

What If People Miss The Point?

Well, what if people miss the point? Moreover, how would we know that people have indeed missed the point? Fortunately this is quite easy to detect. There are 4 major sets of D-D’ conflicts that people will put forth if they don’t agree with the solution, or if the do agree with the solution but feel threatened by it. All of these are built around the negative fantasy that underlies the B entity. Like a LEGGO construction you can slide these different major D-D’ conflict sets into the pre-existing A-B-C form. Let’s leave these objections for another page, they are too important to squeeze in here and deserve a page of their own. You do need to know how to interpret these objections otherwise you won’t know how to address them should they arise.

Some Public Results

Although we have only looked at the logic of clouds, Goldratt’s Thinking Process is well embedded in healthcare – I know that simply from the volume of visits the Thinking Process section of this website gets from health providers (commercial and governmental). Finding published evidence of this is more difficult. However, while hunting up information on jeopardies in clouds I checked back on a presentation by Richard Reid of the University of New Mexico (22). This describes a not-for-profit, or rather a for-cause healthcare organization; Planned Parenting of New Mexico. Richard and his team applied Goldratt’s Thinking Processes to this organization and derived a cloud using a process known as the 3 cloud method. The A, B, & C, of the cloud that they derived are essentially the same as we have arrived at here. A copy of the presentation made to the 2005 conference of the Theory of Constraints International Certification Organization is attached via the references below. There are comprehensive logic trees, if you are interested in the detail of this approach then this is a very thorough and useful piece of work to examine.

And just to demonstrate that the Thinking Processes have, in a relative sense, a long pedigree in healthcare, Antoine van Gelder showed in 1991 a very concise analysis of the problems in outpatient clinics at Pretoria Academic Hospital using some very succinct cause and effect (23). This presentation can also be accessed via the references below.

Summary

We need both sides. We need management to firmly protect available funds. We need clinicians to firmly ensure appropriate treatment. But we shouldn’t let fear of the non-systemic actions of our past stop us from new systemic improvements in the very near (immediate) future. We need to use a systemic management approach and we need to include both managers and clinicians in the education so that we are all talking one language, and one that we understand.

In prior pages we have examined 3 logistical solutions for each of the major sections of public service hospitalization. Each of these solutions raises productivity, that is we can do more with existing resources without people working harder, and my preference would always be for people to work less hard, and we can do that too, if we think about it. In fact it becomes a virtuous cycle.

Harking back to Edward Bear in the introduction, we need to stop banging our heads against the stairs just long enough to work out that there is another way. The other way is systemic and depends upon identifying the weakest link in the chain and fully protecting that link. Often, protecting the weakest link means not doing what we formerly considered “our best” in the non-constrained areas. It means much better collaboration and cooperation across all the multifaceted aspects and multitasking resources of the non-constraints.

The weakest link is a proxy for the whole system.

References

(1) Rackham, N., (1988) SPIN selling. McGraw-Hill Inc., 197 pp.

(2) Harvey, J. B., (1988) The Abilene paradox and other mediations on management. Lexington Books, 150 pp.

(3) Pirsig, R. M., (1984) Zen and the art of motorcycle maintenance: an inquiry into values. Bantam Books, pg 367.

(4) Taleb, N. N., (2007) The black swan: the impact of the highly improbable. Random House, pp 40-41.

(5) Wheeler, D. J., (2000) Understanding variation: the key to managing chaos. Second edition, SPC Press, pg 97.

(6) Bateson, G., (1972) Steps to an ecology of mind. The University of Chicago Press, 533 pp.

(7) Kuhn, T. S., (1996) The structure of scientific revolutions, 3rd edition. The University of Chicago Press, 212 pp.

(8) Ager, D., (1993) The new catastrophism: the importance of the rare even in geological history. Cambridge University Press, 231 pp.

(9) Gleick, J., (1987) Chaos: making a new science. Penguin Books, 352 pp.

(10) Bateson, G., (2002) Mind and nature: a necessary unity. Hampton Press, 220 pp.

(11) Drucker, P. F., (2006) Classic Drucker. Harvard Business School Press, pp 81 – 95.

(12) Johnson, H. T., and Kaplan, R. S., (1987) Relevance Lost: the rise and fall of management accounting. Harvard Business School Press, 269 pp.

(13) Kaplan, R. S., and Cooper, R., (1998) Cost and effect: using integrated cost systems to drive profitability and performance. Harvard School Press, 357 pp.

(14) Johnson, H. T., (1992) Relevance regained: from top-down control to bottom-up empowerment. Free Press, 228 pp.

(15) Caspari, J. A., and Caspari, P., (2004) Management Dynamics: merging constraints accounting to drive improvement. John Wiley & Sons Inc., pg xix.

(16) Corbett, T., (1998) Throughput Accounting: TOC’s management accounting system. North River Press, 174 pp.

(17) Caspari, J. A., and Caspari, P., (2004) Management Dynamics: merging constraints accounting to drive improvement. John Wiley & Sons Inc., 327 pp.

(18) Ricketts, J. A., (2008) Reaching the goal: how managers improve a services business using Goldratt’s Theory of Constraints. IBM Press, 369 pp.

(19) Goldratt, E. M., (1990) The haystack syndrome: sifting information out of the data ocean. North River Press, 262 pp.

(20) Deming, W. E., (1994) The new economics: for industry, government, education. Second edition, MIT Press, pg 92.

(21) Harvey, J. B., (1988) The Abilene paradox and other mediations on management. Lexington Books, pg 20.

(22) Reid, R, A., Black, J., and Coleman, S. A., (2005) Applying the TOC thinking processes in a healthcare organization: a case study. Theory of Constraints International Certification Organization, 3rd annual conference.

(23) Van Gelder, A., (1991) Outpatient blues. Theory of Constraints upgrade workshop.