Guiding Children's Hospital to a $60M budget cut
Its goal met, the hospital starts fiscal 2010 with a balanced budget.
With markets still down and government funding heading in the same direction, Children's Hospital of Philadelphia set out in October to trim $60 million from its $1.6 billion budget.
With that target met, Children's will open its fiscal 2010 July 1 with a balanced budget - a product of extensive staff input and a badge of fiscal discipline that could help the children's health heavyweight attract top medical recruits.
Madeline Bell, a mother of seven who started her career as a nurse on the hospital's night shift, is chief operating officer for Children's health system, which has 9,572 employees at its University City campus and affiliates across the region.
Getting to $60 million: "It's a very big number. And, frankly, when we set that goal," Bell said, "it seemed a bit insurmountable to us."
Executives were determined not to cut back "at the bench" - on the research side of things - or to reduce patient care. The only way around that, Bell said, "was really to decrease the administrative costs."
"We engaged front-line staff in helping us set targets and look at solutions."
An employee's suggestion to e-mail publications or put them on the Web saved an estimated $75,000 in printing and distribution costs. New supply-chain efficiencies, including a push to standardize operating-room supplies and renegotiate contracts with medical-equipment vendors, should save $10 million to $15 million. An energy-efficiency initiative called EcoCHOP will trim annual utility costs more than $1 million.
Children's also raised prices for staff parking and meals, and cut benefits and froze pay for executives.
Thanks, but we'll skip the balloons: Because administrators asked, they were told loud and clear that employees did not want their health-care benefits cut - so none were - and that merit raises and vacation-day allotments were critical to morale.
While appreciated, Employee Appreciation Day was deemed to be expendable, saving about $300,000.
Hard choices: "There are some really simple things to do - things that you take for granted in a situation where the economic times are good - and then there are some more difficult things," Bell said. In March, Children's laid off 49 employees not involved in patient care. This month, the hospital laid off an additional 33.
"We understand that in this economic crisis, not having a steady income is going to really impact someone's livelihood and their family. So we do take it very, very seriously," Bell said. "At the same time, we have a responsibility to keep CHOP going."
Her GPS for decision-making: Keeping the hospital at the vanguard of pediatric research and care is her guiding light "for any decision that I make," she said, "although many of them are hard.
"Our focus is to ensure that we are here and continue to operate from a position of strength to take care of sick children."
For transparency's sake, Bell and chief executive officer Steven Altschuler held about a dozen "town meetings" with staff to explain the cutbacks and why they were made.
Healing more with less: Paradoxically, Children's expects to treat more patients in the next couple of years while taking in less money - an emerging norm in the economics of health care.
The health system will look to expand in Philadelphia neighborhoods and the suburbs, rotating some of its doctors to regional specialty-care centers and partnering with community health providers, Bell said. Besides being convenient for patients, it is less expensive than erecting new buildings at the West Philadelphia campus.
One new endeavor is an alliance with the University Medical Center at Princeton, where Children's will run the pediatric and neonatal units.
The austerity advantage: "Organizations that expect to be strong should be looking to this [economic downturn] as an opportunity," Bell said.
In Children's case, managing hard times better than competitors can help attract marquee scientists and clinicians, "if they see that we're ahead of the game and that we're not reacting - we're proactive - and that we expect to maintain a position of strength," she said.
"We hope to have, and have had, the opportunity to attract some national talent."
Attracting dropped jaws: "When you say seven kids, people want to faint," Bell said. "If you sit next to somebody on an airplane and they ask, 'Oh, how many kids do you have?' you end up having to tell your whole life story."
The short version - Bell's husband is Louis Bell, the hospital's chief of general pediatrics. When they married in 2001, she had three boys from a previous marriage. Dr. Bell, a widower, had three girls and a boy of his own.
"It is so Brady Bunch - like it's not funny," she said.
Now ages 26 to 14, the Bell brood became a family when the youngest was just 6. "They were all at home - we had everything from the throes of adolescence to little school-age kids," Bell said. "It's a little less hectic on a daily-routine basis today than it used to be."