Presentation Objectives

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1 Dropping 5% to Your Bottom Line Through Strategic Cost Reduction Faye Deich, RN Chief Operating Officer, Sacred Heart Hospital (Eau Claire, WI) Becky Schultz, RN Director of Organizational Learning, Sacred Heart Hospital (Eau Claire, WI) Presentation Objectives Learn specific strategies used to proactively substantially reduce operating expenses while maintaining performance in other Pillar dimensions. Discuss and understand how leadership development accountability strategies created a mature leadership team contributing to a successful cost reduction project Studer Group

2 Overview of Hospital Sisters Health System U.S.A. (13 Hospitals) Germany (4 Hospitals) Poland (1 Mission) Korea (1 Mission) Netherlands (1 Mission) Japan (2 Hospitals) Czech Republic (1 Mission) India (1 Mission) Haiti (1 Mission) Tanzania (1 Mission) Overview of Sacred Heart Hospital Studer Group

3 Overview of Sacred Heart Hospital $162m Net Revenue 220 Staffed Beds 1350 Employees Medical Staff Marshfield Clinic (Large Multi-Specialty Clinic) OakLeaf/Independent Physicians Other Regional Healthcare Providers Mayo Health System Hospital and Clinic OakLeaf Surgical Hospital Majority ownership National Surgical Hospitals Competitive Market Attracting other Major Providers out of Twin Cities, from the North and from the South Studer Group

4 Overview of Sacred Heart Hospital Competitive Environment Losing Market Share Lost Key Service Lines Losing Competent Staff Community Perception Declining Overview of Sacred Heart Hospital 1998 Sacred Heart Hospital was department focused with inconsistency among Leaders causing a reactive environment Sacred Heart Hospital Leaders are aligned, structured and disciplined creating a flexible and agile team that is pro-active Studer Group

5 Overview of Sacred Heart Hospital Service Summit Award 5 Star PRC Award People Strong Employee Satisfaction Educated Employees Growth Gained and Held Market Share Tertiary Service Line Expansion Cost Strong Operating Margin Expense and FTE Management Quality Solid Performance CMS/TJC TJC Primary Stroke Center Certification Congruency Extensive Community Involvement Strong Community Benefit Status Leadership Team Patient Accountability & Alignment Engagement Experience Development Studer Group

6 Why for Sacred Heart? Key Factors: Marshfield Clinic opening their own Imaging and Surgery Center Anticipated loss of $7m (almost entire bottom line) Community Businesses Concerned about the Cost of Healthcare Growing Number of Indigent Patients Advancing Medical Technology and Patient Facilities Overall Goal Decrease costs without compromising quality of patient care and develop extraordinary relationships with physicians Studer Group

7 Advisor Michael Rindler was a catalyst in the achievements of Sacred Heart Hospital s Strategic Performance Improvement Initiative. Process Identified 7 Taskforces (Leadership Development) Level of Fiscal Responsibility Years in Management Personality Profile Solicited Frontline Employee Input (Team Engagement) Overall Financial Goal: $5 million of Controllable Costs (Accountability) No Negative Impact on Quality Patient Care (Patient Experience) Leadership Goal: Extraordinary Physician Relationships (Team Engagement) Preference to Not Layoff Employees (Team Engagement) Studer Group

8 Taskforce Work Met 2-3 times per week hours in duration Researched New Ideas Networked with Other Hospitals Present each Department Budget to the Taskforce Focused on own members only Green dollars only Weekly reports to Administrator Focus Areas System Improvement Supply Chain Contract Negotiation Equipment/Maintenance FTE Management Position Control Process Justification Studer Group

9 Communication Plan-Why and What Management Employees Physicians Board of Directors/Foundation/Advisory Council Community/Business Leaders Communication Plan-Why and What Management Kick-Off Speaking Points for Consistent Message Employees (Why and How to Help) Department Meetings Newsletter Rounding Bright Ideas Studer Group

10 Communication Plan-Why and What Physicians Steering Group of Leaders Service Meetings Medical Executive Committee Hospital Based Letters to All Doctors on Staff *Key Message: Give an example so they can see Decreased Cost does not equal Decreased Quality June 2007 Taskforce Report Out $2.4 million (Salaries = 56 FTEs) $3.3 million (Non-Salary) Studer Group

11 Key Savings Clinical Knees/Hip Implants $500,000 Blood $226,000 Thrombin Waste $120,000 PCA Syringe Preservative Change $ 60,000 Disposable to Reusable Pulse Ox Probes $ 30,000 Non-Clinical Renegotiated Phone Contracts $106,000 Journals to Online Subscriptions $ 46,000 Office Supplies $ 42,000 Move Dialysis Billing In-House $ 33,000 Key Savings Decrease of 3 FTEs in laboratory Morning Draw-Change to Sweep Housekeeping decrease of 3 FTEs Nurse Staffing - Adjusted Grids" Studer Group

12 January 2008 Audit Summary Projected Achieved Salary Cost $2,393,342 $2,168,940 Expenses 3,304,965 2,950,965 Total $5,698,307 $5,119,905 GOAL $5 Million 44 FTE s while adding positions for CV Surgery Extraordinary Physician Relationships Handheld Physician Portal to Access Patient Information Provide a Thorough Physician Orientation Focus on Leadership Development Critical Success Factor for Future Incorporating into Physician Alignment Strategy for New Strategic Plan Studer Group

13 Challenges Along the Way Joint Commission Preparations Rounding Mock Surveys with Consultants 3 Stand-up Meetings per week with Clinical Directors along with Internal Tracers Weekly Report Outs Joint Commission Stroke Survey Preparations Survey in June Employee Opinion Survey Patient Tower Construction Two Middle Floors with Subsequent Drop in Patient Satisfaction Change in Nursing Model To Be Announced at the Same Time as Cost Reductions Baldrige Application Preparation of Next Annual Budget Hardwired Leadership Strategies Measuring and Reporting Leaders comfortable with data System in place for weekly/quarterly/annual reporting Data sources readily available Expectations and Accountability Leaders comfortable with individual and team accountability Clearly defined expectations hardwired in SHH Culture Monitoring of Cost Pillar Performance previously hardwired Studer Group

14 Hardwired Leadership Strategies Results Driven Organization Leadership Development established a proactive mindset Organizational results are regularly shared with Employees Culture of High Performance established Employee Engagement Hardwired Employee Rounding Listening and Removing Barriers Connected with the Hospital s Mission Hardwired Leadership Strategies Consistent Communication Standardized methods of communication Leaders trained on how to effectively Connect-the- Dots System of Communication in place that utilizes multiple mediums *Rounding, Rounding, Rounding Studer Group

15 Lessons Learned Teambuilding through Constructive Challenging and Questioning Administrative Team meet with Taskforces Earlier Rather than Later Directors learned how to Scrutinize Expenses on an Ongoing Basis Position Control Education and Requirements to Sustain FTE Reductions Lessons Learned Communicate Communicate Communicate Studer Group

16 Looking Back Grateful We Did, What We Did. Projected Return with No Action: 1.7% Projected Return with SPI: 4.3% Actual Return: 11.2% (YTD-January) FTEs One Year Ago: 1130 FTEs Now: 1081 Reduction of 49 FTEs while Implementing CV Surgery Thank You! Faye Deich, RN Chief Operating Officer, Sacred Heart Hospital (Eau Claire, WI) Becky Schultz, RN Director of Organizational Learning, Sacred Heart Hospital (Eau Claire, WI) Studer Group