### This post may look long, but I think you’ll be immersed in short order. It might even be beneficial to your psyche. ###
As many (or none) of you may know, Beth Israel Deaconess Medical Center in Boston is in the midst of budget troubles (there are few hospitals — or organizations for that matter — who are not). What makes the Beth Israel situation different is that the CEO, Paul Levy, blogs. His commitment to transparency transcends the quality environment.
Here is a quick rundown if you are unfamiliar. The problem the hospital faces:
For BIDMC, our hoped-for 2% FY09 operating margin (about $18 million) has disappeared. The state has reduced Medicaid payments by over $7 million, our major insurer is paying us less than we had hoped, and research funding has also fallen short by several million dollars. In addition, patient volumes are substantially lower than budgeted as people in the community defer or forego medical visits and treatments.
Right now, at best, we can break even for the year if patient volumes return to budgeted levels. However, if they stay at current levels, we will face an operating loss of up to $20 million. This is the contingency for which we must prepare, or else we will have insufficient funds to invest in the buildings, plant, and equipment needed.
With this knowledge in hand, Mr. Levy decided to ask the people of BIDMC for their ideas to help trim expenses during town hall gatherings. Kevin Cullen of The Boston Globe best describes the scene at one of those meetings:
He looked out into a sea of people and recognized faces: technicians, secretaries, administrators, therapists, nurses, the people who are the heart and soul of any hospital. People who knew that Beth Israel had hired about a quarter of its 8,000 staff over the last six years and that the chances that they could all keep their jobs and benefits in an economy in freefall ranged between slim and none.
“I want to run an idea by you that I think is important, and I’d like to get your reaction to it,” Levy began. “I’d like to do what we can to protect the lower-wage earners – the transporters, the housekeepers, the food service people. A lot of these people work really hard, and I don’t want to put an additional burden on them.
“Now, if we protect these workers, it means the rest of us will have to make a bigger sacrifice,” he continued. “It means that others will have to give up more of their salary or benefits.”
He had barely gotten the words out of his mouth when Sherman Auditorium erupted in applause. Thunderous, heartfelt, sustained applause.
Paul Levy stood there and felt the sheer power of it all rush over him, like a wave. His eyes welled and his throat tightened so much that he didn’t think he could go on.
Reducing personnel costs (layoffs) became the prime target (largest expense for a hospital) and to begin senior managers took a reduction in pay. Mr. Levy himself reduced his own pay by 10 percent while also foregoing his annual bonus (+ he and Mrs. Levy have committed to matching employee donations to the hospital at a rate of $1 for every $10 donated). Here he is on the response he received after his call for idea assistance:
As expected, the response from the staff has been spectacular. People have a terrific sense of community and are quite willing to make sacrifices for the good of their fellow workers. … Beyond the general feeling, I was very, very pleased when I asked people if they agreed with my predisposition to protect our lower wage earners (e.g., transporters, housekeepers, food service people) from measures we take, even if it means that other people have to give up more of their salary and benefits.
Mr. Levy has finalized his decisions after exploring all considerations; the proposal includes a number of efforts to reduce expenses. The best news is that projected layoffs were reduced from a high of 600 to the expected 150. I cannot do the letter Mr. Levy sent to the people of BIDMC explaining his decisions justice without reproducing it whole—so I urge to you read it in its entirety.
While I am impressed by the translucence Mr. Levy allows of his organization, I’m more taken by the way he has introduced, handled, and shared the hospital’s problems with the people of the organization. As a (hopeful) future health care leader, I’d like to thank Mr. Levy for providing an (almost) first-hand experience to an organization’s financial troubles.
At times, I’m unsure of how serious senior leaders are to exposing students and new graduates to difficult management situations (one piece of evidence: several conversations with student attendees at ACHE Congress on the general uselessness of the student program).
Granted, this educational opportunity is unlikely the motive for Mr. Levy revealing his organization’s struggles; although, as I’ve gotten to “know” Mr. Levy through his blog, he has a proven commitment to education. I’m confident that there are more health care leaders in this country working along the same path as he; but Mr. Levy is the first to provide unprecedented (real time) insight through a blog.
Anyway, Mr. Cullen sums up how I feel nicely in the The Globe:
Paul Levy is trying something revolutionary, radical, maybe even impossible: He is trying to convince the people who work for him that the E in CEO can sometimes stand for empathy.
Though you’re likely to shrug it off, I would like to express my appreciation for your courage, Mr. Levy, along with your fresh approach to health care administration.
Hi, I'm Drew Weilage. 