January 21, 2000

Financial pressures force staff reduction; programs in place to help those affected

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Newly named IGP director James G. Patton, Ph.D. (second from right), discusses data with students (from left) Christian Goche, Daron Barnard and Billy Dye. (photo by Dana Johnson)

Financial pressures force staff reduction; programs in place to help those affected

As part of ongoing financial improvement efforts, Vanderbilt University Medical Center officials last week announced the elimination of several jobs, resulting in the lay-off of 40 employees. This round of cuts will likely not be the last, as another reduction in force is expected to be announced next month.

"These cuts are extremely difficult and painful, but without them we cannot remain competitive," said Dr. Harry R. Jacobson, vice chancellor for Health Affairs. "I am confident, though, that we are taking the necessary actions to put the medical center on the strongest possible footing."

"We have been and will continue to press government, both state and federal, to improve payment under TennCare and Medicare. And we have and will continue to aggressively negotiate contracts with our managed care customers," said Norman B. Urmy, executive vice president for clinical affairs.

"But a simple fact remains — our costs of providing care are too high. Using reasonable benchmarks for comparison, there is no question we must become more efficient," Urmy said.

In the last 18 months, the hospital and clinic have added almost 700 new employees, but growth in hospital admissions and patient visits have not increased correspondingly.

"The medical center must reduce its costs to better reflect its real patient volume, and we must increase efficiency," Urmy said.

Last October it was announced that intensive planning was under way for financial improvement across the medical center. Hospital and clinic expenses this fiscal year were budgeted at $483 million and net revenue was budgeted at $497 million.

To get the financials back on track, the Clinical Enterprise Group (CEG) determined that by the end of March Vanderbilt needed to identify and begin implementing financial improvements totaling $52 million per year.

Approximately $20 million will come from increased revenue and $32 million will come from expense reduction.

The CEG, which includes academic department chairs and other clinical leaders, is working closely with patient care centers, “to ensure that patient care quality is given every protection, and that reductions are made in a reflective, measured way,” said Mark Penkhus, CEO of the hospital.

Penkhus said the $52 million goal is driven by more than the need to correct current financial performance.

“We don’t want to find ourselves among those academic centers that have suffered drastic cuts due to poor financial performance. This improvement is needed to ensure the continued quality of patient care at Vanderbilt, and the continued development of new programs, new technology, new clinical information capabilities."

In an e-mail memo widely distributed throughout the medical center, Urmy asked staff and faculty for suggestions and questions concerning the financial situation and VUMC's reaction to it. Here are answers to some of the most commonly asked questions:

Q: What is being done for the people who were affected by the elimination of positions?

A: Regular employees in good standing whose job is eliminated will be offered any medical center job for which they are qualified, ahead of all other candidates, internal or external. Each person is also assigned a transition coordinator from Human Resource Services, who is to help with the transition process. Vanderbilt is committed to helping keep good people who are affected by this situation through no fault of their own.

Q: How were physicians involved in the decision to eliminate positions?

A: Physicians were involved in several ways. Through their roles as medical directors of services, units and patient care centers, many were involved at every level in the decisions about where jobs could be eliminated.

All of the proposed cuts were reviewed by physician leadership in the Clincal Enterprise Group. In some cases, the ideas for specific cuts originated with physicians.

Q: How were decisions made for specific actions?

A: Department heads and patient care center leaders were given targets for budget reductions, and were asked to come up with ideas to save money, improve performance or increase efficiency. All ideas were reviewed carefully to assess their impact on patient care and service.

Q: Why didn't the medical center simply cut salaries across the board to save money instead of eliminating jobs?

A: Vanderbilt is committed to paying people salaries that are competitive in the marketplace. We also know that, in total,

Vanderbilt has more employees than it should have based on the number of patients we see. Cutting salaries is not the solution, becoming more efficient is.