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This Too Shall Pass

12/02/2008

Chairman's Message

Isn't it a blessing that financial forecasters aren't trying to predict the weather?  Or, we could all be shivering in the dark!  Anyway, as we begin preparing for the New Year, it's a good time to think positive and start forming those resolutions (I'm contemplating switching from the Ritz Hotel to Ritz crackers).

So, here is wishing everyone a tremendously enjoyable holiday season and much warmth in your personal life.

This Too Shall Pass

A perfect storm is brewing in the healthcare sector. The economic crisis, job cuts and the fact that many are deferring elective procedures all add to the decline in patient admissions many hospitals have seen in the last quarter. Our industry has traditionally been immune from economic woes, and is feeling the squeeze along with Wall Street, Detroit, retailers and the neighbors next door. For the first time in a long time, the outlook is bleak.

In a survey of 112 non-profit hospitals conducted by Citi Investment Research, inpatient admissions this year are down 2-3% compared to the same time last year. However, it seems that in just the last few weeks, the slowdown is becoming more noticeable.

Lisa Colombo, MHA, RN, Vice President of Patient Care Services and Chief Nursing Officer at Milton Hospital, has noticed a slight decline in inpatient volume, but says volume in outpatient services at her organization is being felt, due to changes in reimbursements and co-payments.  “People make a choice whether to have the MRI or not depending on what the co-pay will be,” said Colombo. 

For many hospitals across the country, the only increase in patient volume is happening in emergency rooms. Milton Hospital has seen a slight uptick in their newly renovated emergency department, but not to a great extent.

“Our biggest challenge these days,” explained Colombo, “is to plan for the average daily census.” Scheduling appropriate levels of patient care is a delicate balancing act – “too many nurses on duty means the cost per patient increases significantly.”

When asked about cutting costs at her hospital, Colombo stated, “There is no magic bullet. We look at product line management and ask if we are getting the best rates without sacrificing quality or safety.” She added that all non-salary expenses are under the microscope.

Some healthcare leaders are less composed than Colombo. In a recent article in The New York Times, Robert Shapiro, the Chief Financial Officer at North Shore-Long Island Jewish Health System said, “There’s a lot of CFO doom and gloom; the sky may be really falling this time.”

While the sky isn’t likely to fall completely (perhaps just a piece here and there), it’s wise to see the trend for what it is and prepare accordingly. As with any response to disaster, calm beats hysteria hands down. It’s worth noting here that as an industry, healthcare is still expected to grow in 2009, and is projected to account for the lion’s share of all temporary hiring. While the automakers and other institutions may not be able to maintain their economic footing, healthcare is here to stay.

Let’s take a deep breath (several, actually) and consider the following steps to ensure your organization will stand tall when the skies eventually clear.

Communicate honestly
Be as open and forthright as you can about your organization’s situation. If layoffs are necessary, make them sooner rather than later, and give departing staff as much outplacement support as possible. Offer to write letters of recommendation and encourage departing employees to stay in touch.  Once the economy rebounds, you’ll need them again.

Encourage discussion
In times like these, many people just want to be heard. Hold informal departmental meetings where people can speak openly about their feelings and concerns. Ask for help in ways to cut costs – some of the most effective ideas can come from those on the front lines who know where a little fat can be trimmed.

This isn’t to be a Chicken Little session, but rather an occasion for co-workers to come together and offer ideas that lead to solutions. Your employees will be far more willing to take time off without pay, use vacation days and make sacrifices if they know they are being listened to, cared about, and are involved in the process.

Take a second look at expenses
You’ve made obvious cuts, but look again. Staying in business will require the closest attention to the bottom line. Once your employees know what’s going on and what kinds of cuts are needed, full-time workers might be more amendable to part-time hours for a while, rather than being out of a job all together. Manage your inventory as if the life of your hospital depends upon it, because it does.

Examine your revenue cycle
Paying attention to the various components of the revenue cycle and making sure yours is as streamlined and healthy as possible will go a long way to closing the gap between increasing costs and declining reimbursement. Even if there are no obvious breakdowns in your system, there is always room for improvement.

Make a personal statement
Nothing is more powerful than when leadership makes personal sacrifices. Foregoing a year-end bonus or taking a cut in pay yourself will send a strong message to the entire team that you’re all working toward a common goal. 

Scale back
This is the time to decide what procedures no longer make sense at your hospital, such as elective treatments like bariatric and plastic surgeries. Perhaps certain departments need to be closed to keep the rest of the hospital afloat.

Without question the clouds are dark, the wind is blowing and we are in for quite an upheaval. The good news is that this too shall pass.  At the risk of sounding like Pollyanna, remember that every cloud has a silver lining. Running a lean organization is a good thing in both prosperous and challenging times. As a leader at your organization the onus is on you to find a safe harbor in which to ride out the storm.

Management Quote

The best time to save money is when you have some.  Anonymous

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