Rochester General Health System
Rochester General Health System Announces Plan to Address External Economic Pressures and Maintain Excellence in Service and Care
Officials from Rochester General Health System today announced plans that will enable the System to proactively respond to the deteriorating global economic climate which is impacting nearly every segment of society ﾖ including healthcare organizations ﾖ throughout the country. The primary focus of the plan is to achieve efficiencies and new revenue sources that will allow the organization to maintain its strong fiscal position while preserving its commitment to outstanding, nationally recognized patient care and service.
ﾓThe challenges facing Rochester General Health System today are the result of recessionary economic forces--growing unemployment, a staggering state budget deficit, and significant devaluation in stocks and equities-- we didnﾒt create but, nonetheless, forces which we must addressﾔ said Mark C. Clement, President and CEO of Rochester General Health System. ﾓOur system is fiscally strong, having ended 2008 with a positive 2% operating margin, and we remain committed to growth and investment in technology and clinical programs to better serve our patients and community. But we are in the midst of unprecedented times and we must act responsibly to keep our organization healthy and viable, and in position to deliver the high quality care our patients and our community deserve and have come to expect.ﾔ
Since October, physicians, leaders and staff at Rochester General Health System have been developing a proactive plan to prepare for an estimated $24 million reduction in its operating margin. That decrease is due to an anticipated $10 million reduction in Medicaid reimbursement from New York State, and a variety of increased expenses tied to the economic downturn. Those include increased pension funding and expense and decreased investment income because of the dramatic devaluation of stocks; and increased costs borne by the health system due to an expected increase in uninsured care and bad debt expense resulting from rising unemployment rates.
ﾓWith labor and staffing representing nearly 60% of our operating budget, unfortunately it is not possible to achieve the cost savings and revenue improvements necessary to mitigate a $24 million hit without impacting our staffing,ﾔ Clement said. Following a careful and thoughtful review of all positions, the difficult but necessary decision was made to eliminate 240 positions from the System, of which approximately 30 are in management roles. Because this work began in October, approximately 140 of these position reductions have already been achieved through turnover, attrition, and the elimination of temporary and agency staff. As a result, less than 1.5% of our nearly 7000 employees will be affected by the elimination of these positions and System leadership is committed to working with affected employees to find other employment opportunities in our System. Affected employees will also be provided career counseling, an HR coach to assist in identifying other positions within the System, and salary continuation should she/he not find another position in our System.
RGHS also expects to improve in its financial performance through a combination of other strategies targeted at both a reduction in supply and purchased services expenses and revenue enhancements - including an emphasis on growth in existing and new service lines. For example, aggressive measures have been put into place to significantly reduce discretionary or non-essential purchased services such as consulting, travel, catering, dues and subscriptions as well as to negotiate better pricing on supplies with vendors and shift to less expensive alternatives.
In making these important decisions, the Leadership team considered the impact on patients, the viability of Rochester General Health System and its staff. Importantly, great care was taken to avoid any adverse impact on patient care.
Clement and other members of the RGHS senior leadership team and Board will also be traveling to Albany next week to meet with state legislators and provide details of how the governorﾒs proposed budget cuts would negatively impact all healthcare providers.
