(Editor’s Note: Jim Weinstein, CEO of Dartmouth-Hitchcock, sent the following email to employees on Sept. 9, 2016, at 2:43 p.m. Read more about the layoffs here.)
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Subject: D-H Performance Improvement: Implementing our Plan
To the members of the Dartmouth-Hitchcock community:
I have written to you many times over the last five years. Most of the time, I am privileged to be conveying good news and celebrating the achievements of the wonderful, talented people — you — who are Dartmouth-Hitchcock. Today, my communication is more difficult.
As you know, we are in a period of financial challenge. At the end of FY 16, we learned that rather than achieving the positive margin we had been expecting, we would in fact end the year with a deficit of $12 million.
The reasons have been discussed in my recent system-wide Q&As, but very briefly, complexities related to the implementation of our new billing system and the transition of our revenue management contracts resulted in an overestimation of revenues by some $40 million or about 1 percent of our annual billings. On top of that, we experienced unsustainable increases in expenses, more than $115 million higher than FY 15, related to our new business systems, revenue management services and the associated labor, and travelers, supplies, and pharmaceutical cost, to name a few.
We are not alone in navigating the significant challenges faced by health care organizations across our country. Though of little consolation, as recent news articles have reported, other great organizations are experiencing similar downturns with the implementation of new systems and rising expenses:
— MD Anderson points to Epic implementation for 77% drop in adjusted income (click here)
— Sutter operating income falls 31% as EMR costs drive up expenses (click here)
— Brigham reports $53M shortfall after Epic transition (click here)
— Cleveland Clinic’s operating margin slips in first half of 2016 (click here)
We are confident we have corrected the problems that led to the revenue overestimates and continue to work on maximizing the effectiveness of our systems. Now we must take on the expense issues.
During the past several weeks, a team from across the organization has worked diligently to develop an organization-wide performance improvement plan that focuses on optimizing revenues and cutting expenses. We now know that to achieve financial stability, we need to identify $100 million in improvements, and we need to do this rapidly.
There are a number of elements in the plan, but the most important and most difficult is the need to reduce our workforce by 3-5 percent. Personnel costs account for 64 percent of our overall expenses. With the magnitude of savings we must achieve, it is inescapable that we must find reductions in this area.
We are working with service line leaders and managers across the organization to identify where those reductions can be made without being detrimental to the clinical operation, or having any adverse impact on the quality and safety of our patient care, while we preserve our research and educational missions. Reductions at all levels of the organization will be considered. We expect we will have more specificity by mid-October. Layoffs would be effective toward the end of the calendar year.
In addition to the employee reductions, we are undertaking a thorough review of our clinical programs. We cannot be all things to all people. These extremely difficult decisions will be made in concert with our service line leaders and others. Services will be evaluated, not just through the lens of whether they are financially beneficial, but also in terms of how they contribute to our patient care, research, and education missions. This review will be done very carefully, very thoughtfully, with input from a wide range of colleagues. Our decisions will be made in the context of our population health and value-based care mission, with the needs of our patients always being top of mind.
I also want to share that implementing the $15 million wage package to take effect this fiscal year will not be delayed. In the coming days, we will share more detail about the process and other elements of the performance improvement plan as it continues to take shape.
I want to stress that as we undertake this performance improvement process, our patients, patient safety, and a safe working environment for our staff will continue to be our top priorities at all times. To that end, I have asked Drs. George Blike, Maria Padin and Ed Merrens, and Interim Chief Nursing Officer Karen Clements to work with all of us to ensure patient safety and quality is never compromised. Thank you George, Maria, Ed, and Karen.
Our mission and core strategies are not changing. Despite the challenges we face, we remain as firmly committed as ever to creating a sustainable health system to improve the lives of the people and communities we serve for generations to come. This is not simply altruistic; it is critical for the sustainability of this organization in the new health care environment in which we operate.
I write this letter with deep personal sadness that these steps are necessary. Having been through our prior workforce changes in 2011, I am confident we can make the changes necessary to get us back on track. My faith is in all of you who work throughout the D-H system to make us one of the best health care systems in the country. We have challenges and tough choices to make, yes, but I would rather make them with this team than with any other. Together, I know we can do the work that is needed and come out the other side as a stronger, more efficient and effective, united organization. I truly believe that.
Sincerely,
Jim
Dr. James N. Weinstein
CEO and President, Dartmouth-Hitchcock