Back to Basics
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Few are in panic mode, and many even offer a faint hope—that the recipe for retreat and survival this year may lay the foundation for a leaner, more efficient collection of healthcare entities than we had before the fall.
Not selling cars
The auto industry in and around Detroit is in tatters. The Bureau of Labor Statistics estimates that the Detroit area lost almost 60,000 jobs in 2008. Nancy Schlichting, president and CEO of Henry Ford Health System, does not spend too much time pondering whether all three of the Big Three automakers will survive to form a new industry that creates more efficient vehicles. It's not that she doesn't care; after all, her health system was founded in 1915 by the auto pioneer himself. She witnessed a similar situation early in her career in Akron, OH, as she watched the death of the rubber industry there. It's just that she can't have her 21,500 employees distracted. "We're not selling cars," she says. "We are taking care of 2.5 million outpatients a year and almost 100,000 inpatients. We have a lot to do here."
Henry Ford Health System managed through 2007 with a net income of $105.8 million on total revenues of $3.47 billion. Operational levels in 2008 are expected to still be strong, but the system is not free of the factors dragging on all hospitals.
"It is quite possible our capital spending in 2009 will be very restricted, mainly because of pension funding," she says. "The stock market is killing us, because when you have no investment earnings and you have to put a ton of money in your pension fund just to keep it at appropriate funding levels. That is not easy." Henry Ford Health System has not been forced into layoffs or other cutbacks because it has been working on becoming leaner for the past two years. "We anticipated what was happening, so we were very careful. It is interesting right now because the two strongest operational performers in the market are us and Detroit Medical Center, which is also in the city where we have had the highest levels of uncompensated care," Schlichting says. "Some of our competitors are starting to see growth in uncompensated care, and they have never dealt with it before. We have been dealing with it forever."
The system's growth plans continue this spring with the opening of 300-bed Henry Ford West Bloomfield Hospital in the heart of Oakland County. Rather than being a bad time to open a hospital, Schlichting says the market has provided one positive.
"We have had 20,000 applications for 1,100 jobs. I was scared to death when opening this new hospital in a tough market that maybe we would not have enough people to staff it. Well, that doesn't seem to be the case."
No tricks, just plans
It's worth noting that for all the talk about what President Obama should do to fix the economy, more than 82% of the federal budget is committed to Medicare, Social Security, defense, and interest on the national debt. Likewise a hospital CEO's ability to influence investments on Wall Street (none), government reimbursement (ditto), and private payers (a little), limits the strategy book for operating through a downturn.
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