VUMC experience with streamlining and cost cutting

Transcription

1 VUMC experience with streamlining and cost cutting Ed Marx Vanderbilt University Medical Center AMGA 2016 Annual Conference March 11, 2016

2 History of VUMC s streamlining and cost-cutting initiative It began in May 2013 as a cost savings initiative across non-labor and non-clinical labor areas We conducted both a top-down and bottom-up analysis of potential savings opportunities For the top-down analysis we did a spend analysis and compared to benchmarks of other AMCs For the bottom-up analysis we conducted interviews and focus groups across all our non-labor areas (80 total people) as well as surveys to identify all our shadow work (work conducted by departments that is duplicative to support services, e.g., IT, HR) Simultaneously to the savings opportunities, we were also calculating the decrease in expected revenue due to reimbursement cuts, movement to exchanges, sequestration The total decrease in expected revenue was $250M which would be realized in full across 2 years. Therefore we had our target for the entire medical center over the next 2 years Our analysis on savings from non-labor and non-clinical labor revealed that we would not be able to close the gap without adding in clinical labor As the non-labor piece was gaining traction, in late June we created a PMO (Project Management Office) to focus on achieving labor savings across the clinical and non-clinical areas of the medical center 1

3 The financial landscape for VUMC had shifted dramatically over time In the first half of 2013 there were a number of forces that contributed to a decline in revenue at VUMC: US Budget Deficit and Sequestration State decisions ACA Aging demographics Shift to exchanges The total run-rate revenue reduction for FY15 (July 2014 June 2015) was projected to be $ M Other institutions experienced these same pressures: Cleveland Clinic announced it was cutting $330M from $6B budget (~2,500 jobs) Indiana University Health announced it was cutting $1B from $5.7B budget In order to reduce our cost base to more appropriately match our reduced revenue, the Medical Center embarked on the Evolve 2 Excel (E2E) initiative which was comprised of cost savings in both non-labor and labor areas 2

4 VUMC set aggressive goal to address the financial gaps $ M target was established to match the reduction in revenue and align leadership across the medical center around the magnitude of the change Leadership determined a focused reduction period over 6 months in 2013 was preferable to an ongoing reduction process A focused effort would minimize continued uncertainty and have a lesser impact on the Vanderbilt culture Consulted external partners to initially assist in kicking-off the process and establishing meaningful benchmarks, before an internal VUMC team led the entire labor reduction effort 3

5 An internal, cross-functional team was created to leverage expertise across the medical center In under one week, a team was assembled to work full-time on the E2E project. The team was relocated from their every day areas and co-located in an area off the main medical center campus. The team consisted of: Medical Center Administration Strategy Equal Opportunity, Affirmative Action and Disability Services IT Quality Cross-functional team Nursing Administration (Adult and Children s) Informatics Academic Dept Administration Systems Engineering Human Resources Finance (academic and operational) Operations 4

6 Several guiding principles were reinforced for all VUMC leaders during E2E to ensure we preserved our culture At VUMC, Faculty are leaders in all that we do Mission Our commitment to education, research, and patients care is top priority Restructure work in a manner that improves our effectiveness, impact, quality & safety In service to patients, deliver on our Promise & do no harm Display enthusiasm, respect & empathy Work for good of the whole, versus ourselves or our own operating units Accept ownership & accountability in public dialogue Role Model Guiding Principles Trust Communicate effectively and frequently Be honest and transparent Maintain confidentiality Articulate decisions in a manner that displays integrity and fairness

7 E2E thoroughly and thoughtfully evaluated our operations to improve efficiency and effectiveness E2E labor reduction process Define units The Medical center was divided into a number of areas based on function. Each area was assigned a leader These leaders then determined how to divide their areas into units, based either on function or job code, resulting in 13,150 people mapped to ~450 units Map jobs to the Mission, Activities and End Products (MAE) for each unit Each unit created a robust catalog of the missions, activities, and end products that defined the work they do They then mapped each individuals time to each of the activities in the respective unit These were then summarized at the job code level for each unit Redesign work to create a new streamlined organization structure, carefully selecting roles for elimination More than a 100 leaders across the Medical Center used the MAEs to determine how work could be performed more effectively and efficiently These suggested position eliminations were documented, along with risk mitigation plans, and fully vetted with risk management, quality, other operators and medical center leadership Rank and select individuals in roles selected for elimination Unit leaders, in partnership with HR, assessed and ranked individuals in eliminated positions based on past performance evaluations, disciplinary records, special skills, and years of service 6

8 All proposed changes to workflow underwent extensive review and risk mitigation planning Operators partnered with quality and created risk mitigation plans for medium and low risk proposals. Changes to the work flow deemed high risk were not implemented Review day feedback by unit, Therapies example Stakeholders across the medical center met to discuss potential risks for an entire day, during an Opportunity Review session Equal Opportunity, Affirmative Action and Disability Services (EAD), Quality, Legal, and Risk Management reviewed all proposed work changes Each unit submitted an initial work re-design plan, which clinical chairs and other senior leaders commented on using post-it style feedback during Opportunity Review Day 7

9 Process strengthened VUMC capabilities E2E demonstrated the power of focused effort at the medical center the entire medical center was committed to obtaining results Engaging leadership in honest, direct communication created sense of trust The Project Management Office (PMO) structure used for E2E was new to the medical center, demonstrating the effectiveness of a dedicated, cross-functional project team Unparalleled decision rights given to the PMO to create and run the process. The PMO managed the traditional project management aspects of the project, and with cross-functional representation it ensured that the process would work for every area of the Medical Center The PMO did not make any operational decisions The Rank and Select process brought rigor and discipline to the downsizing process that will be incorporated by HR for future eliminations 8

10 Communication throughout Evolve 2 Excel was extensive 2013 March April May July August Sept Oct Nov December 9