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Employees as Cost-Cutters

Philip Betbeze, for HealthLeaders Magazine, July 10, 2009
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They know where the high-cost waste is, but could bringing them in on such initiatives backfire?

Under what conditions does a chief information officer suddenly become charged with hospitalwide cost-cutting? It may sound like the punchline to a bad corporate joke, but Frank Marini wasn't laughing. A 20-year veteran at 650-licensed-bed Tucson (AZ) Medical Center, Marini, the CIO, along with the chief legal officer and the vice president of the hospital's foundation were the only senior executives retained in a 2007 management change engineered by the board of directors.

In the second quarter of that year, "we were about $11 million in the red and picking up speed," he says. "The board had been concerned for some time about the lack of financial performance."

TMC, which Marini says is the largest hospital in southern Arizona, had a cost problem and no one to begin to implement changes. "We needed some strong supply leadership and didn't have it, because the department was gutted," Marini says. "I thought it was absurd because it's a legitimate discipline that requires expertise. I was very concerned, but supply had been a continuous drag on our financial situation. We were not going to be able to fund IT initiatives if we continued in that position."

Senior hospital leaders across the country have been dealing with such issues for years, but with the shocking economic decline, problems in hospitals' cost structures have never been more acute. Reforms and new supply initiatives have to be made swiftly to keep up. Many hospitals that are struggling to equalize their balance sheets are utilizing their employees as an effective tool to cut costs. A cynic might say that hospitals' main employee cost saving initiative is layoffs, and yes, hospitals have used that tool extensively recently. But many of the more enlightened organizations are finding ways to motivate their employees and affiliated clinicians to help cut costs—mainly in the supply and process arenas.

Not magic
Rather than engage in layoffs, TMC gave record increases in staff pay last year, says Marini, who adds that for many positions, increases in 2008 were as high as 8%. All were higher than historical increases of about 3%. That's largely because the hospital has made it clear in promise and in deed that employees and clinicians share in the financial success of the institution.

"A lot of what we did was not magic," says Marini. "We changed the atmosphere and the attitude. We didn't promise to fix things overnight, but we put a lot of effort into changing the attitude."

They also put a lot of effort into showing clinicians and employees that their efforts to save on costs paid off not only for TMC, but for employees personally and professionally.

In the beginning of the process, trust with the clinicians was one of the biggest hurdles Marini had to overcome. He started with the orthopedic surgeons, in an attempt to save on implants through standardization and contracting.

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