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Call it what you want: downsizing, rightsizing, reorganizing, organizational reengineering. These words can create much anxiety among health care leaders and staff. For a working definition, let’s just define rightsizing as adjusting the operations of an organization or department to a new level of efficiency. This almost always includes some employees losing their jobs. Change is inevitable, and the current forces in health care are creating the need for managers to respond. In rehabilitation, gone are the matrix organizational structures, uni-discipline managers, and techs for each therapist or each discipline for that matter. Quoting Bill Lowderman, an outplacement specialist for Bill Haney and Associates: “Like it or not, your current job probably won’t be your last.” Even though health care clinicians are in great demand, this supply and demand force has not protected managers and directors.
The Forces at Play
Many factors are causing organizations to look for efficiencies: managed care limitations; regulatory updates, such as the therapy caps; the 75% Rule; prospective payment systems across the health care continuum; and local coverage decisions published by your fiscal intermediaries. These changes are dictating which patients and visits qualify for payment. In addition, reimbursement is decreasing relative to inflation, and this trend will most likely continue. The 2007 health care budget proposed by President Bush has no increases for any venue of health care.
To make matters worse, the cost of providing care is on the rise. The need for therapists as well as nurses and other ancillary providers is increasing as the Baby Boomer generation ages. Unfortunately, the number of students entering these professional schools is not keeping pace with the need. The economics of supply and demand is causing salaries to escalate, and since this shortage is affecting multiple professions at the same time, the pressure for health care organizations to look for efficiencies increases exponentially. These realities make it practically inevitable that responsible administrators are looking for ways to cut expenses. Organizational reengineering can focus on more than just people, but the biggest expense in our industry is staff, salaries, and wages.
Most Vulnerable
It is my belief that postacute services owned and operated by acute care systems are particularly vulnerable unless the system values and understands its nonacute services. This can occur even if the services are profitable! An organization may be expecting a higher level of return or may not see some services as core and desire to minimize the investment in the service’s success. Any service consumes a certain amount of organizational energy and carries its own level of liability (both legally and politically), and as a scarce resource, each organization has to review how it uses its energy and limits its liability.
Minimizing Exposure
There are two critical components to rightsizing: What services do we need to provide, and how many staff do we need to provide these services? The first question leads one to ask, “What are the core services we need to provide to meet our mission?” Some services may be nice to provide but lose money and are not considered critical to an organization’s mission. An example may be the provision of a pediatric rehabilitation program by a general acute care hospital when there is a children’s hospital down the road. Such services, especially if the revenue does not cover expenses, deserve a critical review.
The second question should lead savvy managers to review their productivity compared to external benchmarks. Therapists have many rules to follow that influence how they spend their time with patients: “The Three-Hour Rule,” minutes of therapy targets for resource utilization group (RUG) categories in long-term care, the 10-visit rule in home health, as well as time-based and procedure-based definitions in the physician fee schedule. All of these create challenges to productivity and make it more critical that your therapists understand the rules so they can ethically and legally maximize their reimbursable time with patients and be compliant. Therapists have to understand the concept of “no margin no mission.”
In addition, managers should review the structure of their departments. How does your structure compare to others within your organization? Compare your percent of management and support position to other similar-size departments. Make adjustments, and then share your findings and results with your supervisor.
Protecting Oneself
As an individual, it may not be best to ask yourself what have you done for your employer, but rather what have you done for your employer lately! Unfortunately, some organizations feel forced to cut staff without regard to tenure, performance, or contribution to the bottom line. Why? Because a seemingly blind reduction in force (RIF) that randomly cuts across race, gender, performance levels, and age categories supposedly protects an organization from discrimination lawsuits. My mother would call that “throwing the baby out with the bathwater.” Such an approach makes it hard to protect yourself and often leads to continued loss of the brightest minds and fractured morale. Nevertheless, downsizings at times are necessary to prevent an organization from closing.
There are things you can do. Make sure you “toot your own horn,” as all too often no one else will. Provide documentation to your supervisor of how your efforts have benefited the organization (directly and indirectly)—especially those efforts that have resulted in financial gains or expense reductions. Through part of an annual review, it can be helpful to point out how your direct efforts more than paid for the cost of your position.
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If you are an employed manager, make sure you understand the financial operations of your department. Large facilities—especially hospitals—are notorious for having very low expectations of their managers regarding financial matters … until you are under focused review or the department’s financial viability comes under scrutiny. Determine to be the most knowledgeable person about your coding, billing, collections, denials, and insurance contractuals in your organization. You can bet those in private practice have a handle on each of these. Determine the expectations of your supervisor, CFO, or controller, and solicit their help to improve your department’s performance. Often, hospitals do a very poor job of coding, billing, and collecting noninpatient revenue because it is not their expertise. Nor do they typically have good communication channels or feedback loops to ancillary service personnel. Keep in mind an outpatient bill may often total less than $1,000, whereas in comparison an inpatient bill may exceed $100,000. Which would you go after first? Nevertheless, if you point out the potential gains, often you can solicit the attention you need. Many have found it beneficial to set up regular meetings with finance representatives to review collections and denials. This way, your department can respond and make timely changes to improve reimbursement and decrease denials.
For managers who are contracted to a provider, your job is a little more difficult. Keep in mind that usually an organization can do a service cheaper itself if it has the capability and “organizational energy.” The contract cost is typically significant so it will show up on the host’s radar of potential expense reductions, especially if the department is losing money. Obviously, the contract’s cost does not always mean it will be dropped. Some organizations do not have the capacity to take on providing a specialty service or the in-house expertise to attract and retain hard-to-find professionals. Having said that, as the contract manager, I would still want to make sure both parties—your employer and the host organization—see the relationship as beneficial and profitable.
If you suspect the relationship is not mutually beneficial, you have several options: 1) determine what changes would satisfy the host organization and implement those you can; 2) discuss rectifying the situation with your contract company; or 3) if you do not have a noncompete agreement, consider approaching your contract company and your host facility about transitioning the relationship to an in-house service. In this situation, you could offer to become an employee of the host facility and manage the department internally. Several companies have expertise in untangling these relationships, and it may be beneficial to solicit their input.
The Likability Factor
I recently heard on a radio station that the majority of promotions are not based on performance but on relationships and Likability. All of us would like to think our ability is the valuable characteristic and not the politics that create our opportunities. But relationships are important. Think about it. Do you like to work with someone who irritates you, is always complaining, or is negative? It’s difficult, but try to be a positive force for change. Keep in mind the old adage, “You attract more bees with honey than with vinegar.” Doing the right thing the wrong way may not get you the results you want.
What If?
I believe rightsizing in health care is inevitable. It happens, and you may not be able to answer the question “why.” When mergers and acquisitions occur, or with new leadership, there will be a resultant quest for efficiencies, and this will put many positions in question. Most likely, duplicated positions will be eliminated; outlier positions and those considered “middle management” will be scrutinized. Often, very good people lose their jobs. It is hard to prepare for it, but it does help to have friends in your field who know of your accomplishments. Try to look at it as a new adventure. Do not let those clinical licenses lapse; remember they are in short supply! Being a clinician again may make you a better manager when that right job presents itself. Lastly, remember you are not alone; others have gone before you, survived, and have done very well.
I have chosen to write on this topic because I believe our industry is facing this reality and also because of a more personal reason. I was part of a RIF where I had worked for 17 years. Sometimes, it just happens and we move on.
Andy Whitener, PT, MBA, LNHA, is the administrator of Carolinas Rehabilitation Hospital and Post Acute Services for Carolinas Hospital System in Florence, SC. He is also a freelance post-acute care consultant. For more information, please contact .
