WHEN BAD THINGS HAPPEN TO GOOD HOSPITALS CASE STUDY Reduction in Force: COMMUNICATIONS STRATEGY. The overarching Health System management strategy is to convey the sense that today’s layoffs are integral to a plan to create a more “right - sized organization” that eliminates redundancy, and heightens efficiency and effectiveness. In other words, these layoffs were made in response to the changing reality that confronts today’s healthcare providers. While employees affected will be treated with the utmost of care and attention, System management has made these decisions purposely and in the best interests of the entire community. Specifically, management must treat these layo ffs as a “humanly painful” yet necessary action to ensure our capacity to continue to serve the community with high quality care for many years to come. Stated another way, for any hospital to survive and thrive in today’s environment of increased demands and declining reimbursement, it must be flexible enough to respond to the new healthcare reality.
Page 2 KEY MESSAGES/TALKING POINTS. Management’s overriding message to the community must be one of compassion for the individuals affected but commitment to the necessity of having to make these kinds of tough decisions in order to ensure the quality of care and financial health of the System. The general outline of an overall message regarding the RIF would be conveyed along the following lines: “These reductions -in-force, while painful to our colleagues affected and to all of us who have worked with them, are nonetheless necessary for the System to continue to deliver the high level of quality care that the community has come to expect. “The new healthcare environment of increased patient demands and diminished government reimbursement mandates that we continually enhance our technology, adjust our methodologies and processes, and more prudently husband scarce resources. “In this context, the installation of our new electronic record system, completed in February, that has necessitated the vast majority of these layoffs, will help facilitate improved outcomes for our patients. And the increased efficiencies and cost savings will enable us to add experienced clinical professionals, including surgical specialists to staff a new state-of-art surgery center. “We have enormous confide nce in the team we have assembled and the healthcare facility we have built over 145 years. As difficult as these personnel decisions were, they are critical to ensuring the future of the System as a regional healthcare center of the highest quality.”
Page 3 NEWS RELEASE. FOR IMMEDIATE RELEASE Contact: _________ Valley Health System Announces Staff, Expense Reduction Plan Reduction-in-Force, Retirement Program Changes Designed to Strengthen System for Long-Term Future (date) – The Valley Health System announced today that in an effort to more prudently manage expenses and increase efficiencies, it is reducing its staff by 184, or 2.4%, not filling another 100 positions through attrition, and refining its retirement program for employees. These decisions come in response to the new financial realities confronting healthcare, and is the result of the impact of multiple factors: Increased efficiencies and productivity improvement were accomplished by the completion in February of a $150-million electronic records system. It provides patients, physicians and medical staff with instant access to clinical information, enhances productivity, and eliminates the need for many staffers who previously had processed paperwork. Like other hospitals around the country, the System has experienced some declines in volumes as people defer elective medical procedures because of change in employment status and health insurance coverage. At the same time, the System has experienced increased demand for unreimbursed care. In 2012, we provided more than $170 million to the community in terms of unreimbursed Medicare and Medicaid care and uncompensated charity care. The cut in Medicare reimbursement to providers, mandated by the Federal sequester. Other cuts in reimbursement mandated by the Affordable Care Act. Mitchell Bradley, president and chief executive officer of the System, said, “These reductions-in-force, while painful to those affected and difficult for all of us who have worked side-by-side with these colleagues, are nonetheless necessary so that we might strategically reallocate resources into areas of greater growth and importance for the community. “Such strategic adjustments of our resources, including not replacing posi tions resulting from attrition and moving towards a defined contribution retirement savings plan, are necessary
Page 4 to enable our System to remain financially and operationally strong, and remain a regional healthcare leader for the long-term. “Specifically, the savings from these positions, the majority in support and non -clinical roles, will be redirected toward continuing to invest in sophisticated medical equipment and adding experienced clinical professionals, including surgical specialists for our new state-of-art surgery center,” Mr. Bradley said. Lisa Bronson, chief operating officer, said the reductions were determined by job classification and seniority, with the least senior employees impacted. She said that those affected would receive separation packages based on years of service and employment status. Transition assistance will also be provided. She said that in addition to the reduction-in-force, in recent months the System has reduced overtime costs, decreased the use of agency staff, and kept a number of support positions open. Ms. Bronson added, “These reductions will not affect patient services or patient care. Our patients and the community will see no change in the high quality healthcare they have come to expect.” The changes in the retirement program will include two components: First, effective July 1, 2013, new hires will be eligible for a defined contribution retirement savings plan, in which the System will annually contribute 2% of base salary in addition to ma tching 50 cents of every one dollar up to 4% of an employee’s contribution. Second, current employees will see no change in their defined benefit plan until July 1, 2016, at which time they will transition into a new defined contribution retirement savings plan, in which the System will annually contribute 2%-6% of base salary, based on years of service, in addition to matching 50 cents of every one dollar up to 4% of an employee’s contribution. The changes will have no impact either on current retirees receiving pensions or retirees who are not yet receiving pensions. CEO Bradley said, “These changes in our retirement program reflect not only what competitive healthcare systems are doing, but also the clear direction of business and industry in general. ” # # #
Page 5 LIST OF QUESTIONS. 1. How will the staff be affected? 2. Who is affected, and how was it decided who to let go? 3. Why was this decision made? 4. Was anything else done to try to avoid staff reductions? 5. Will there be more layoffs? 6. Are any services being closed as a result of these reductions? 7. What kind of financial shape are we in? 8. This is the first time in more than a decade that you’ve eliminated positions. Why is that? 9. Why have you decided to change the retirement plan? What are the changes in the retirement plan? # # #
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