Survival of the Fittest

Survival of the Fittest | Human Resource Executive Online Struggling with rising costs and decreasing revenues, healthcare organizations are increasingly turning to their employees for solutions. HR should be the "conductor" of the streamlining operation, not assume it has to play every instrument.

Wednesday, April 1, 2009
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When President Barack Obama hit the road trying to sell the public on his $787 billion economic stimulus plan, he headed straight for the Sunshine State, to Ft. Myers, Fla., arguably one of the economically worst-hit locales in the country. The epicenter of the country's sub-prime mortgage crisis, Ft. Myers has seen its unemployment rate soar -- from 3.5 percent in the fall of 2005 to more than 9.5 percent by the end of 2008 -- while the number of citizens without health insurance grew to a staggering 32 percent, double the national average and 20 percent above the state average.

The fact that Obama chose Ft. Myers to promote a plan to revitalize the nation's economy came as no surprise to Jon Cecil, chief human resource officer for Lee Memorial Health System, Ft. Myers' largest employer and Lee County's key provider of healthcare, with 66 locations and 95 percent of the area's hospital beds. Faced with reductions in reimbursements from the state, no local tax support and a rapidly increasing uninsured population, the massive healthcare organization found itself literally at Ground Zero in the community's economic woes.

While not legally obligated to provide so-called "charity care," Lee Memorial serves as the region's "safety net healthcare organization," essentially responsible for the health of the citizens of Lee County, according to Cecil.

"It got to be that approximately one in three people under age 65 receiving services from us had no insurance," says Cecil. "How long would McDonald's stay in business if every third hamburger they made, they had to give away?"

By November 2007, the organization had fallen far short of its budgeted volumes and began experiencing significant losses. "Our backs were to the wall," says Cecil. "We were facing massive layoffs, as well as a significant reduction in the services we provided to the community."

Lee Memorial had long prided itself on its ability to reduce costs and waste while simultaneously improving its quality of service. This time, however, Cecil and the rest of the senior management team turned to the workforce, soliciting employees' suggestions for squeezing out costs and improving operational effectiveness -- a smart move, according to efficiency experts.

"Streamlining a healthcare organization should involve employees as much as possible, since they are closer to the inefficiencies than most supervisors," says Tom Harmening, vice president of F&H Solutions Group, an Atlanta-based consulting firm specializing in HR and labor relations and an affiliate of employment law firm Ford & Harrison. "By empowering employees to make changes, not only is the improvement process much more on the mark, but the changes are going to be seen as an actual improvement and not something imposed upon employees by HR."

These days, many healthcare organizations find themselves caught in a perfect storm of the lengthy recession, the growing number of Americans who lack health insurance and aging baby boomers who need ever-more services. To survive this storm, Harmening says, healthcare organizations are engaged in a "rush to restructure" and are actively calling upon employees to come up with solutions to specific challenges. Maggie Ozan, the Chicago-based global-practice leader for healthcare at the Gallup Organization, has been studying how healthcare organizations are responding to the economic crisis. She, too, has seen a significant increase in programs aimed at soliciting suggestions from the workforce.

"We're seeing hospitals do a much better job of communicating the reality of how important it is for everybody on the team to be thinking about ways to be more efficient," says Ozan. "It might be something really small or it might be big things, but healthcare providers are reaching out to the staff, who know the inner workings of the organizations, to say, 'Help us.' "

While there's no doubt that HR can play a significant role in driving such initiatives, Harmening says, the majority of approaches being adopted by many of today's organizations are a departure for the industry's HR professionals, who have traditionally tried to shoulder much of the burden themselves.

"In most organizations today, if I go to my boss with a problem, he's going to say, 'Solve it,' but in many healthcare institutions, HR wrongly believes it must solve it personally, when the person who brought the problem [in the first place] knows, for the most part, how to solve it," says Harmening. "HR needs to be the conductor of the orchestra. They don't need to run around to each station and play each instrument themselves."

Reality Check

At Lee Memorial, HR called upon middle managers to convey the urgency of the situation through "frank discussions" with their staff.

"We created a definite sense of urgency that something had to be done," says Cecil.

The organization "left all doors open," so that employees would feel comfortable coming forth with ideas. At times, that even meant sharing their ideas through casual conversations with CEO Jim Nathan, whom Cecil affectionately refers to as "the Obama of healthcare executives" because of his "tremendous confidence and the ability to communicate with employees." Nathan would then pass the employees' ideas along to their department directors for follow-up. 

Getting employees engaged in the process wasn't particularly difficult, according to Cecil, because of the economic crisis. What's more, virtually every employee had somehow been touched by the downturn.

"There was hardly an employee who didn't have a friend, neighbor or relative who wasn't facing the consequences of the housing crisis and foreclosures or the outmigration of a lot of businesses and people losing their jobs," says Cecil. "Our whole community was sharing in the pain."

Those employees who were "always looking to improve work processes and create more revenue" quickly rose to the occasion, coming forward with "meaningful suggestions." Even more remarkably, those who otherwise tended to "sit on the sidelines and say, 'This is just another job' " actually became engaged in the process because they realized their jobs were at stake, he says.

One of Lee Memorial's major initiatives involved employees and physicians in a Lean/Six Sigma project focused on identifying and addressing "high-cost, high-volume, high-risk areas." The Children's Hospital was of particular interest because, as Cecil explains, "we get very little reimbursement for a lot of the kids we take care of."

Through a series of formal meetings, employees worked with Lee Memorial's Lean/Six Sigma engineers to identify areas for improvement. The group quickly focused on "patient flow" -- the process of moving a patient from the emergency room through the organization until they are discharged.

Working together, they identified opportunities to improve efficiency, such as eliminating duplicate reports and laminating patient-admission packets to decrease the amount of paper used. In the end, the team achieved more than $5 million in savings for the Children's Hospital alone.

Another significant cost savings came about as a result of an employee asking why she continued to accrue paid time-off while on vacation. Upon investigating the matter, management discovered that many other healthcare systems and area employers didn't provide continued accrual of PTO while on vacation. The decision was made to revise Lee Memorial's policy in kind, resulting in a $4 million savings. "When you are as complex an organization as we are, all of this adds up," says Cecil. "Before you blink your eyes, you've really got a lot of dollars put on the table."

All in all, the organization racked up $45 million in cost reductions and another $20 million to $25 million in revenue enhancements, in large part due to the input of its workforce. Most important to employees, Lee Memorial was able to avoid cutting approximately 200 positions that had been targeted for elimination. Of the 46 employees whose jobs were impacted, roughly half were able to acquire another position within the organization with comparable pay, says Cecil.

Tough All Over

Lee Memorial is hardly alone in its trials. Across the country, healthcare organizations are struggling just to stay in business, according to Tom Olivo, president of Success Profiles Inc., and founding partner of Healthcare Performance Solutions, a Bozeman, Mont.-based healthcare consulting firm.

Factors such as the aging of the baby boomers have created more demand for services, while the growing number of uninsured, not to mention patients who are simply unable to pay their bills, have all resulted in decreasing revenues for healthcare organizations already operating under what Olivo calls "an unsustainable business model."

"If they're not making a minimum 3 percent operating margin, then they don't get a healthy bond rating, which either limits their access to capital or makes it more expensive," says Olivo. "That prevents them from hiring better talent and pursuing expansions in their building projects or acquiring better equipment and technology. Everything gets compromised."

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It's critical, therefore, that healthcare organizations identify cost-cutting measures in order to stay afloat. In New Orleans, Ochsner Health System also took a page from the manufacturing arena, implementing Lean engineering strategies throughout its seven hospitals and 35 health centers. At Ochsner, this entails involving "all the stakeholders" in a five-day initiative during which they carefully scrutinize every step of the hospitals' processes and look for ways to make them more efficient, says Joan Mollohan, senior vice president of human resources.

One area that came under the microscope was the hospitals' process for storing operating-room supplies. "By making a few simple changes," says Mollohan, "[the employees] gained over 650 square feet of space in the OR area and eliminated miles of walking by restructuring and reordering the way they get ready for a surgery."

So far, these "short and quick wins" seem to be adding up. One year after implementing Lean, Ochsner has racked up $1.1 million in savings, primarily through streamlining processes and "opening additional beds in existing spaces," according to Mollohan.

In Freehold, N.J, CentraState Healthcare System is trying to avoid suffering the same fate as several of its nearby competitors who have closed their doors in recent years. Yet, "shrinking reimbursement" is plaguing the 35-year-old organization, which operates three senior living communities, a community health center and a 171,000-square-foot outpatient center, in addition to the 271-bed CentraState Medical Center.

"People may not be buying cars, but unfortunately, they still get sick and need care," says Fran Keane, CentraState's vice president of human resources. "As a healthcare organization, we are committed to provide quality care, regardless of [patients'] ability to pay. The question is: How do you make up for those losses?"

CentraState began soliciting suggestions from the workforce after respondents to the organization's 2007 employee-opinion survey indicated they had money-saving ideas they wanted to share. Keane and her team held more than 50 voluntary employee focus groups attended by more than 1,000 employees. What they heard surprised them.

"Our employees were really thinking about what they could do to make a difference," says Keane. "They had a lot of good ideas -- some as simple as turning off the lights or computers; some more complex."

Suggestions were also solicited via an online suggestion box on the organization's intranet, CentraNet. As with Lee Memorial, CentraState's CEO John Gribbin also asks employees what's on their minds as he makes his way down the halls. At the end of each month, the names of employees who've offered suggestions are placed in a drawing for a prize, such as a gift certificate or free meal pass.

CentraState employees have generated more than 450 cost savings opportunities so far, many of which are centered around energy and utility usage. In fact, the first wave of employee suggestions laid the foundation for CentraState's new "green initiative," designed to reduce the organization's environmental impact.

This pending expansion of its initiative will move CentraState into the next realm of process improvement, wherein healthcare institutions seek to involve employees in a truly transformational reinvention, according to Donald Lombardi, affiliate associate professor and director of healthcare leadership and management at Stevens Institute of Technology in Hoboken, N.J.

"They get people involved in strategic planning, asking what services they should go into and what they shouldn't be in," says Lombardi. "As elemental as it sounds, they really listen to what the employees have to say."

Ochsner is already engaged in such activities, bringing employees to the table when new service offerings, reconstructions or facilities are being planned. As a result, nurses, custodians and support staff may find themselves face-to-face not only with senior management, but with the architects and drafters charged with designing the new facility.

"They get to be involved at the very beginning in scoping out what is best for the employees and balancing that with what the best experience is for the patient and the physician," says Mollohan. "We involve them in every aspect of the process -- from where the reception desk will be positioned to where the doorway should be located."

Regardless of exactly how an organization chooses to involve them in the process, healthcare consultants say, there's little doubt employees will rise to the occasion, coming up with inventive ways to survive the difficult economy. After all, defusing crises is what they do every day.

"In healthcare, crisis often brings people together -- when a patient takes a turn for the worse, for example," says Ozan. "This is the same kind of thing, but now, they're doing it for their own organization's health."

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