Shrinking Margins, Shrinking Options?

Bearable Pain:
1. Productivity improvements: When you examine productivity and use fewer labor resources, it's not always true that you're laying off people. Hours may be down and call-ins and overtime are reduced. Productivity is up and the cost position is shored up as well.

2. Program review: Take a hard look at the profitability of your outreach programs. (But why are we just limiting this to outreach programs? Yes, include outreach . . . maybe even start there first. But how about other services as well?) You can't be all things to all people and some of these things cost a lot more than just the people involved in them.

3. Focus on high-cost, poor-quality events: The federal government provides the means to measure inpatient events that "should-not-happen," such as deep vein thrombosis, failure to rescue, and hospital acquired infections. These events correlate very strongly with a hospital's ability to be cost effective. If you want to manage costs effectively, you have to manage these very specific quality issues first. It is entirely possible to compute what they cost and who/what is responsible. Sensitivities around these issues mean it's not pain-free, but a bonus is that it engages clinical staff around their core values and proves that good quality costs less.

Painful but useful: Sometimes a downturn and resulting reassessment provides the impetus to making needed decisions.
1. Span-of-control: A structure that's top-heavy hurts your organization's costs and its ability to make decisions. Your managerial ranks are your top performers at some level, so there is pain associated with reduction in managers and layers. It can be a time, though, to consolidate smaller departments; assess the worst performers and trim appropriately.

2. Corporate costs: Marketing, finance, accounting, telecommunications, and information systems are critical but also have not had the same level of cost scrutiny as facility-based costs. Over time, subsequent mergers mean services are duplicated at the corporate and facility levels. Sharing the margin pain can recalibrate priorities towards caregivers.

Painful and risky:
1. Caregiver layoffs: Enough said.

Closing the margin gap while being true to the priorities you've established is neither hopeless nor pain-free. But pairing your priorities with the levers under your control can get you a lot further along than most executives imagine.