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Hospitals are reevaluating the number of administrators they need to be successful—and some organizations are finding that smaller is better.
For many hospitals, layoffs are an inevitable part of life. As market dynamics change and budgets tighten, most organizations eventually will find themselves restructuring their work force one way or another to better meet the needs of their community while remaining financially viable. Such restructuring can take many forms—shifting payroll dollars from a bloated department to a growing one, consolidating duties into a new position, outsourcing certain functions to improve efficiency. But in recent months, downsizing has hit some hospitals and health systems in a not-so-typical department: the administrative team.
Why would a hospital eliminate a senior leadership position? Organizations are cutting administrative positions for four main reasons, says Susie Krentz, senior principal and practice director of the strategy practice at Noblis' Center for Health Innovation:
- The economic crisis is forcing many hospitals to focus on cost containment.
- Hospitals want to reduce bureaucracy. "There is this effort to increase the nimbleness of the organization and decrease some of the layers."
- Leadership downsizing helps better align increasingly scarce resources around the hospital's priorities.
- Some multihospital systems are looking to better leverage the benefits of being in a larger organization.
Factors can converge to spark leadership restructuring at organizations fitting any number of profiles—downsizing is not unique to any one type of facility or region of the country. So how do hospitals know when the administrative team needs an adjustment?
Leaner executive team
Bob Hawley, the CEO of Slidell (LA) Memorial Hospital, made the decision to lay off about 18 employees—including four senior executive team members—this past May. Slidell Memorial, a 160-staffed-bed community hospital located about 30 miles northeast of New Orleans, competes with a full-service, for-profit hospital in town as well as a physician-owned heart hospital, surgical hospital, and orthopedic hospital. That competitive atmosphere combined with a tough economy and the post-Katrina environment is chipping away at Slidell's patient volumes and profits, says Hawley.
So he downsized his senior management team from nine members to five and switched from a service-line management structure to a more traditional model. His new team includes a CEO, chief financial officer, chief medical officer, chief nursing officer, and a chief of ancillary services. Positions that didn't make the cut were the associate administrator of cardiology, the associate administrator of surgery, the chief information officer, and the director of nursing.
Hawley also wanted to streamline the hospital's ability to make decisions. "I wanted to eliminate layers. We had two or three people between the CNO and unit director," he says. So rather than having nurse unit managers report to a director of nursing who then reported to the CNO, Slidell eliminated the director of nursing position. All six nurse managers now report directly to the CNO, Hawley explains. Overall, Slidell reduced department heads by 33%.
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