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November 28, 2012

Hospital Layoffs and Financial Viability: Do They Go Hand-in-Hand?

Layoffs have become common news in the hospital and healthcare industry, especially over the past couple years.  Becker’s Hospital Review and Soyring Consulting's Adam Higman explain when and why hospital layoff strategies are employed, how hospitals can find financially viability through means other than hospital layoffs, and what some unintended consequences of layoffs are.

Question: Why do hospitals resort to layoffs, especially in economic times like today when cutting jobs is such a sensitive issue?

Adam Higman: "Resort" is the functional word here, as layoffs are typically the last resort that hospitals look at because they are well aware it is a sensitive area.  Facilities will usually look at operational efficiencies, purchased services, materials costs and financial alternatives (debt and equity options, partnerships, etc.) prior to or in conjunction with any look at cutting jobs.  And when they do look at cutting jobs, it is for very clear financial issues either now or in the future.

Q: Can hospitals find financial viability without making layoffs during tough times?

AH: It depends on the hospital's financial situation.  Layoffs are usually not the first resort, but sometimes they are necessary to ensure the long-term viability of a facility.  It is also important to note that over-staffing is not a good operational reality.  We often find departments that are overstaffed have many of the same issues as departments that are understaffed.

Q: What are the best ways hospitals can reduce costs or improve revenue without taking it out on employees?

AH: An important way to keep things balanced is to look at reducing costs more holistically, meaning that if staffing is on the table, so are materials costs, purchased services, and financial alternatives.  Cost reduction and efficiency should be a facility-wide imperative — not something that comes up only when there are financial pressures.  Strategic planning also needs to be a part of any discussion related to the long-term financial well-being of an organization.

On the revenue growth side of the equation, putting a strong marketing operation in place is key in ensuring your facility is positioned to capture the market.  Senior administration should have a strong grasp of the opportunities in their market based on the demographics/disease states in their area, the competition, and the physician makeup.

Q: What are the most adverse effects of hospital layoffs?

AH: The greatest adverse effects from hospital layoffs are felt when they are poorly managed.  Unless you have someone doing the operational analysis to find out where the opportunities sit within your organization, the chances of creating serious operational problems increase.

The other adverse effect is your hospital's image and brand.  Without a clear message platform and communications plan in place to help clearly establish your hospital's position as to why it is moving toward layoffs, there is a greater chance of backlash from local media and the community itself.

For more information on each of these questions, read the full article from Becker’s Hospital Review.

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