Beaumont Hospitals Announces Cost Reduction and Restructuring Plans

9/29/2009

Beaumont Hospitals is implementing plans to cut costs by $10 million to offset a revenue shortfall in order to maintain the progress it has made since announcing a financial turnaround plan last November.

"Through outstanding expense management and better revenue management, we had gone from a $30 million loss last year to a positive $13.8 million net operating income through the end of June this year," says Kenneth J. Matzick, Beaumont Hospitals president and CEO.  "But our progress has been eroded by market conditions - such as continued job and insurance loss, below-budget patient volumes and a continued shift to government insurers that pay us less. We were at risk of losing money for a second year and can't let that happen."

Cost reduction steps announced to employees today include:

  • Eliminating 353 FTE's, effective immediately. The cuts affect 425 of Beaumont's 17,000 full or part-time employees. Position cuts are selective, not across-the-board, and focused in areas where volume is down or where benchmark comparative data shows staffing levels are higher than other hospitals.
  • Reducing combined time off (vacation and sick time) for full-time, non-exempt employees from 33 to 30 days off a year. This will save 130 jobs.
  • Pay reductions affecting executives, physicians and managers, who were exempt from wage cuts put in place last year.

"I want to reassure our patients that we have focused position cuts on areas that are not essential to patient care or areas where patient volume has declined so fewer staff are needed," says Matzick. "These actions are necessary to maintain our financial health so we can continue to provide the quality, safety and service that has allowed us to earn the trust of patients and the community."

Beaumont also announced longer term steps it is taking to position the organization for future success and to prepare for the uncertainties of health care reform.  These include restructuring the organization based on service lines and involving physicians more directly in decision-making.

"This new approach will help us to improve quality and value by standardizing patient care based on best medical practices and to better coordinate a patient's care across all of our facilities, including our hospitals, ambulatory centers, home care and physician offices," says Matzick. "As we stand on the brink of health care reform, we want to show that we deliver the best quality, patient experience and outcomes at a reasonable cost."