Cost-cutting to trim jobs with no layoffs, hospital officials say

HOPKINS TO RE-ENGINEER ITSELF

November 01, 1994|By John Fairhall | John Fairhall,Sun Staff Writer

Under mounting pressure to cut costs, Johns Hopkins Hospital announced yesterday that it would "re-engineer" its operations, a mammoth undertaking that ultimately may result in fewer jobs -- but no layoffs -- hospital officials asserted.

Hopkins President and Chief Executive James A. Block did not spell out how much money would be saved by making the moves, although previous cost-cutting initiatives suggest that the goal over several years will be in the tens of millions of dollars. Hopkins, the largest hospital in the state, has an operating budget of $470 million.

While not specifying how Hopkins would cut costs, Dr. Block said the changes in the way the 954-bed hospital does business would be "significant."

Hospital staff selected from the 7,000 employees in every department will review hospital operations and develop

recommendations by next July. The recommendations will be carried out over a three- to five-year period, said Diane M. Iorfida, senior vice president.

All hospitals face pressure from health insurance companies, which are demanding lower prices for medical care, but as an academic medical center Hopkins has higher "built-in costs" for graduate teaching, research and providing care to the poor, its officials say.

Charging higher rates than suburban community hospitals, Hopkins is at a competitive disadvantage that has become more acute as the health insurance system has changed. The days when insurers simply paid ever-rising hospital rates -- and passed the charges on to employers and consumers -- are over. Health maintenance organizations and other "managed-care" plans that closely scrutinize patient care direct consumers to lower-cost hospitals and even less-expensive outpatient surgery centers.

"Insurers may be willing to pay some premium for Hopkins quality," said Chief Operating Officer Gennaro J. Vasile, "but we know we have to lower the differential. Re-engineering is an opportunity to improve our competitive positioning while enhancing quality and service."

Patients may not notice some changes, such as improved purchasing procedures. But the public may see a difference as Hopkins tries to develop more efficient ways of delivering care, by cutting the length of hospital stays, for example.

A patient who previously would have gone into the hospital the day before surgery might instead stay at less expensive Hopkins-run lodging and return to that residence prior to going home. More efficient diagnostic and treatment procedures will be developed, allowing patients to spend less time at the hospital or awaiting test results.

Dr. Block emphasized that Hopkins intends to maintain and improve high levels of quality and service. Hopkins has been listed in numerous surveys as one of the best hospitals in the United States.

Hospitals in Maryland and other states have been scrambling to cut costs, often by eliminating jobs or using lower-paid staff. Some nurses' organizations have expressed alarm at hospitals that are replacing some registered nurses with less-qualified staff who work under nurses' supervision.

Ms. Iorfida said "mini re-engineering initiatives" saved $23 million in the past two years -- a sign that Hopkins hopes to save far more than that after a top-to-bottom examination of its activities.

But she said Hopkins is in "very good financial health." Dr. Block said, "There is no need for a panic button here," citing increasing hospital admissions and an 86 percent occupancy rate as of Friday.

State regulators said that Hopkins' costs were higher than they should have been three years ago, and that Hopkins agreed to a spending reduction program that has helped lead to a surplus of $14 million in the past year.

Hopkins officials will be aided in what they call their "re-engineering process" by the consulting firm APM Inc. of New York, which already has assisted Maryland institutions such as Sinai Hospital and the University of Maryland Medical System in Baltimore.

At Sinai, Senior Vice President Neil Meltzer said the hospital has looked at everything from administration to patient care, with the goal of trimming $26 million a year from a budget that is now $250 million.

The University of Maryland Medical System has undergone "several cost-reduction phases," said Robert A. Chrencik, senior vice president for finance and systems. "We looked at how departments are organized, how they perform their tasks . . . and through that how costs could be reduced." The next objective is to trim, over three years, $30 million from a budget of $400 million a year. Staff will be reduced, Mr. Chrencik said, adding that he believes it will be very difficult for Hopkins to achieve significant savings without doing the same.

Labor costs account for 50 percent of Hopkins' budget, but Dr. Block insisted that no layoffs will be required. "We may over the years have fewer employees," but it will be accomplished through attrition, he said. Some employees will be retrained for other jobs.

Hopkins officials took great pains to allay employee concerns, repeatedly emphasizing that the changes will be made in consultation with workers in all departments. A steering committee headed by Mr. Vasile will oversee work groups examining clinical goals, customer service, care delivery and financial goals.

"There will be literally hundreds of employees involved in the design teams," Ms. Iorfida said. "This is not a zero-sum game, where one person's gain will be another's loss."

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