Baxter Health Utilizing Attrition to Reduce Labor Costs

The health system has reduced its number of full-time equivalents (FTEs) by not filling vacant positions, its CEO shared.

Baxter Health CEO Ron Peterson revealed that the Mountain Home, Arkansas-based health system is leaning into employee attrition to mitigate costs related to workforce.

There are advantages and disadvantages to utilizing attrition, which is why hospital CEOs must be careful how they do it, be transparent with their approach, and have a keen understanding of their employees to forecast how it will affect their workforce.

In an interview with local radio station KTLO, Peterson dispelled rumors of massive layoffs at Baxter Health and shared how it is using attrition to its advantage to remain financially viable as a rural system.

"We have been working very hard on trying to reduce our costs," Peterson said. "We've been looking since about July to try to reduce the number of FTEs, or the number of people working at the hospital. We've been able to eliminate through attrition, which means basically as somebody quits their employment at the hospital for whatever reason, if they retire, if they get a new job, then we don't refill those positions."

According to Peterson, Baxter Health has been able to not refill 155 of those vacant positions, contributing to less reliance on FTEs.

However, that strategy has created a need for Baxter Health to shift some employees around into new roles.

"Now what we're getting into is we need to restructure and reorganize, so we're asking some employees to not continue in their current position but to look at the positions that are open in the hospital and take something that they're qualified for in a different department or different area of the hospital," he said. 

"It causes a little tension because employees are saying 'Oh, I don't have my job.' Really, we've notified those people and it's affected about nine people in the organization."

This approach to workforce challenges requires a buy-in and willingness from employees to not only fill different roles as needed, but potentially pick up additional responsibilities that would usually be reserved for those positions that are going unfilled. With burnout already being rampant in healthcare, putting more on the plate of your employees can quickly backfire.

Peterson said that the employees that have transfered to new roles have kept their seniority and benefits though, which could help Baxter Health retain those workers beyond the immediate future.

"We just find that our strength is in our people," he said. "We don't want to just lay people off, that's not our goal. We want to try to keep as many people as we can. That's why we're going through the process that we're going through the process we're going through versus a massive layoff."

Despite facing financial difficulties, Peterson stated Baxter Health has no interest in selling the hospital and wants to remain independent.

Making attrition work in its favor may allow Baxter Health to keep its doors open for now, but CEOs should be careful of delving into 'quiet cutting' territory. This is where transparency is vital and will be beneficial long term, even if making employees aware of your intentions means you will lose some in the process.