Employees as Cost-Cutters

"I was in a meeting with the 40-physician group, talking about the changes. You could feel the mistrust—they were very cautious—as we had underinvested in technology and facilities. But I told them at the beginning that as we make financial improvements, we would invest back into the facility." As a demonstration of TMC's commitment, within three months, the hospital spent approximately $400,000 on orthopedic power tools, which is what physicians told management was the greatest area of need. "They were amazed by that,"says Marini. "We didn't wait until we'd accrued ortho-specific savings. Those came later in the year."

As TMC rolled out the program hospitalwide and began a supply cost saving program through VHA Inc., it gained valuable advocates in the orthopedic surgeons, who testified that Marini had followed through on his promises. That allowed him to quickly ramp up similar initiatives with other groups.

"We came up with the 'good idea' program," he says. "If you're a staff member who thinks we could do better on waste, you submit the idea. When we implement it, the employees get to share in some of the savings."

With some of the rest, TMC invested in facilities, paint—the little things that have an effect on how the hospital looks, he says.

The initiative saved $2 million in costs in the last quarter of 2007, booked $10 million in savings through 2008, and is on track for a similar number in 2009, Marini says. The annual operating expense is "just over $400 million."

Carrots and sticks
Banner Health, the Phoenix-based giant with 22 hospitals and six long-term care centers across seven states, has 35,000 or so employees. Despite some 384 layoffs (122 of whom returned to the system in other positions) Banner has managed to bring employees into the cost-savings exercise and has been able to engender a sense of "we're all in this together," says president and CEO Peter Fine.

"We've gotten 1,750 recommendations. Some of that participation comes from building a culture that focuses on reducing the cost of operations and making employees understand that the more we can do to reduce costs, the less has to come out of labor."