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Times Are a-Changin’

December 1, 2008
by root
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Hard times on the horizon mean hospital executives must increase revenues, decrease costs and manage margins

RR: Go into our IT department, I want to put in a new financial system, or a new clinical system or a new lab system, or a new any system. I was planning to do it today, start it today and finish it a year and a day from now. Why do I really have to do it today? Can I wait a year and not spend those millions of dollars? The answer, more often than not, is going to be (that) you really can wait if you so choose. Now there are negative implications to that. You're going to upset people. You're going to upset your medical staff perhaps, or you've made some commitments that you're going to have to back off of. But by and large, you can defer. If you're building a new hospital and you've already started, it's a little more difficult, but you can stop that too, or at least slow it down. So that's on the capital side.

When you go back to the operating side, I don't believe layoffs are the right or logical thing to do, because of the reasons I stated earlier. But I think you look at the non-payroll costs. There is money in fixed costs, as opposed to labor, where you can have more or less, so it's more variable. So I would say you would focus on your fixed costs, which are basically things you write checks for, not payroll checks, but where you pay maintenance contracts — elevator maintenance contracts, IT maintenance contracts, etc. I think that on the health benefit side, there'll be changes there. Hospitals are employers too; so just like other employers, they're going to want to put less money into the cost of healthcare for their employees. So things like that, and supplies too.

I think it's those kinds of things that you can focus on, in a shorter term, as well as getting all that revenue, which is nothing new; it's just an increased focus. There are better places to look at on the operating side then on the layoffs.

DL”: Talk a little more about projects you think can be put on hold.

RR: We think there will be a slow down. When cash becomes this tight and you spend money, it's just like a hospital on the verge of bankruptcy. What do they do? They extend their creditors, their vendors as much as they can and they pay for the blood and the supplies that they need to run the hospital, and they don't pay their lawyer so fast. They obviously pay their consultants very fast. So they stretch out what they can stretch out, and in addition to stretching out payables, I do think that capital projects will be, at a minimum, delayed and in some cases abandoned.

DL: Let's say you're in the middle of a project and you have contractual obligations and now the money has run out, what happens then?

RR: It depends on the circumstances — in some cases you'll continue it and put off experimenting with anything new; in some cases you can delay it. I would think there would be fields that are impossible to abandon, so I would say delayed or closed down. But a new project, say you're putting in a billing system right now, and you were going to do that first and then you were secondly going to put in a clinical system, you might just delay that clinical system for a while.

Healthcare Informatics 2008 December;25(12):68A-72A


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