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CEO Blog: NHRMC will respond to the market challenges - and succeed
05/05/2014

By NHRMC President and CEO Jack Barto

In our previous Insights entries, we discussed how government policy changes and market forces are impacting New Hanover Regional Medical Center, and how we are using Lean methodology and other innovations to respond to those changes. Today we will discuss how those two ideas come together.

Hospitals across the nation are figuring out what this challenging health care market means to them, and we are doing the same. Health care costs cannot continue to take a larger share of the overall economy without significant consequences. The market will force employers, insurers and consumers to become more diligent about finding the product they want at the best price, and that may include leaving traditional markets to find that value – especially in a global economy where other nations’ costs are so much lower than ours. At the same time, health care providers need to figure out how to serve an aging population in which 10,000 people every day turn 65.

We also expect policy changes by governments trying to balance budgets and reduce deficits will result in about $20 million less in revenue this year and in following years. The economy is still in recovery. All hospitals face scenarios comparable to this, and many have responded with layoffs, hiring freezes and pay cuts.

This is not our approach.

We fully understand that business as usual will no longer be good enough. We know we have to change the way we conduct business, while continuing to keep the patient at the center of everything we do. That part cannot and will not change.

In the last few days, we have shared a common message with our employee family, our physicians and our leadership: Our best estimate is we will need $80 million in additional operational improvements – either from cost reductions or revenue improvements – in the next four years, or gains of about 2.5% to 3% each year, a reality similar to what many of you in business face on an annual basis. Now we want to tell the community the same thing we told our hospital family: We have a chance to decide how we move forward, and if we stay together, put patients first, and apply our Lean methodology to every business operation, we can reach this goal by improving how we conduct our daily business.

We have shared with our staff that we don’t expect layoffs of fellow employees. It is a tribute to the work in recent years by our employees, physicians and volunteers that we can talk about this level of operational improvement strictly through better and more efficient management of our daily operations. It will not be easy, and it will take all of us to be engaged and contribute. All of our employees and partners, including our physicians, will have to step up, and we know they will. We also appreciate the support of our business community. We know how much you rely on us to provide high-quality patient care that your employees, both current and future, depend on, and we will continue to hold ourselves to that standard. The best way to find these improvements will be to improve patient care by adding value to patients and reducing waste and inefficiency through our Lean process. In the future of health care, healthier patients will cost less to the system, and this is how hospitals will be compensated. We are transforming the very model of care we use to take care of patients to ensure all members of our clinical staff work at the top of their skill level. This will ensure patients leave here more likely to stay healthy at home, and this is how hospitals will have to operate in the future. Hospitals such as ours constantly review basic business practices to determine if they are as efficient and effective as they need to be, and that they are changing with the current business climate. That’s what we’re continuing to do, albeit in the context of reduced funding paired with greater expectation of patient outcomes.

We have met these challenges before – our prior efforts at proactive business improvements netted $56 million over the last several years. We have succeeded before and we will this time. I know that because I have faith in our staff, our physicians, our volunteers and our community.

 
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