Even the C-suite Isn't Safe

Carrie Vaughan, for HealthLeaders Media, November 14, 2008

Hospitals nationwide are looking at every way possible to keep their organizations financially stable. Unfortunately, for many health systems and hospitals, staying financially stable has meant laying off employees and cutting service lines.

"We have seen hospitals taking action like staff cuts and budget cuts to try to stay ahead of the game and to keep their organization viable, and this economic downturn certainly isn't helping," says Daria Niewenhous, an attorney with the law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC.

No kidding. In just the past three weeks, I have read about multiple hospitals that have eliminated positions and laid off staff members. For example, University of Pittsburgh Medical Center is laying off 500 employees, Baystate Health in Western Massachusetts cut 55 jobs and eliminated 120 vacant positions, Sumner Regional Health Systems in Gallatin, TN, laid off 90 employees, and Texas Health Resources is cutting 49 employees.

What's interesting is that these cuts aren't just happening in housekeeping or food service. Many hospitals are trimming staff from administrative levels—even as high up as the C-suite. In the November issue of HealthLeaders magazine (see "Leaner Leadership"), I spoke with the CEOs from two hospitals that recently cut staff members in an effort to reduce bureaucracy and make their facilities more efficient and cost effective. For Bob Hawley, CEO of Slidell (LA) Memorial Hospital, that meant cutting four members of his senior executive team. "We didn't want to just cut jobs on the frontline with those providing direct patient services; we wanted to make sure that we shared the pain at all levels of the organization," he says. He also wanted to streamline the decision-making process, so he eliminated bureaucratic layers in the facility. For example, his nurse mangers now report directly to the chief nursing officer rather than reporting to nursing directors who then reported to the CNO.

But paring executive-level leadership means frontline managers must be trained and prepared for additional responsibilities. Hospitals can run into trouble when they cut management positions that support frontline supervisors without properly training the frontline supervisor first, says Quint Studer, founder and CEO of the Studer Group. For instance, an organization could end up with higher turnover rates and lengths of stay that could end up costing more than the savings generated by the staff cuts. "We love to empower people, but you can't empower them unless you give them the skill set so that they can become successful," Studer says.

For some hospitals, layoffs and service reductions still haven't been enough to keep their doors open as the nation's economic woes deepen and credit remains extremely tight. Hospitals that have been in business for 100 years, like the Physicians Medical Center Carraway in Birmingham, AL, are closing their doors.

And unlike past years, health systems aren't swooping in to buy as many of these endangered hospitals, either. "Hospitals would rather put their managerial energy and financial resources into their own operations," says Niewenhous. "If there is a dog on the market, it is likely that the other providers will just let it go and take up the market share after it closes."

Carrie Vaughan is leadership editor with HealthLeaders magazine. She can be reached at cvaughan@healthleadersmedia.com.
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