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THE TURNAROUND BEGINS
"Revitalizing" Northwest Hospital was a deliberate process that began with financial management. Some operations were "hemorrhaging" money, said Mr. Hart. 'We gave department heads an understanding of what we needed to accomplish. Some decided they didn't want to put forth that effort — about half, in fact, made that decision!" The new administrator began building his team.
During the summer, department heads were asked to reduce their expenses by 25 percent and employees were asked to voluntarily take days off without pay. (Other hospitals in Seattle, it should be noted, were laying off nurses at this time.)
Budgeting became both art and science as the board held managers accountable for their department's performance — and gave them the training and support they needed to meet their goals. Accounts receivable, a continuing problem for the hospital, were finally brought to acceptable levels.
Even a nurses' strike in 1976 turned out for the better. The 12-week strike left its share of bitterness, but in the long run it also left the hospital with one of the best nursing staffs in the city. "We had had some real personnel difficulties — a lot of power cliques and so on," explained Mr. Hart. "We couldn't retain the people we wanted. So after 12 weeks we brought people back to the job. We didn't put them in their old jobs, we put them where they ought to be. There was much travail over that one! It was a year or so before we recovered from the emotions of all that, but we committed ourselves to as good a nursing department as we were capable of [building]."
Within a few years, Northwest Hospital would be finding new ways to reduce expenses and increase revenue, beginning with an internal restructuring that simplified and strengthened reporting lines and accountability and brought related disciplines together under one manager.
"Cost containment," mandated by the new economics of health care and the consumer-oriented Washington Hospital Rate Commission, became a matter of management principle at Northwest, not just a "program." These newly reorganized managers knew that part of their job was to find better, more efficient and cost-effective ways of getting things done. At the same time, they were encouraged to market their services outside the hospital. In an article for Trustee magazine in 1979, Winnie Hageman and Jim Hart wrote: "Some departments which are not revenue centers are asked to develop marketing goals. ... [The] Personnel Division was encouraged to attempt to market some of their personnel programs as a method of reducing operating overhead by some 5%. As a result they secured contracts with physicians' clinics to manage their personnel functions, recruitments, screenings, reference checks, salary evaluations, etc. on a retainer basis."
It didn't take long for these programs to have their effect. "The very first year we were able to go into the black by almost a half a million dollars and started funding depreciation and ultimately built that tower and medical office building. We've never had a year that we weren't able to meet our financial needs," said Jim Hart.
One of the turning points, Mr. Hart said, was in the Speech and Hearing Center. Opened with such hopefulness in 1968, the clinic was seeing two or three patients a week and losing money. Mr. Hart was in favor of eliminating the service altogether, but his staff convinced him to hire a new manager and give it one more try.
The new manager "said something rather fascinating," recalled Mr. Hart. "You know, we do all these tests and then we say to somebody, "You have a hearing deficit. Go buy a hearing aid." They don't know where to go in the market, they pick the wrong instrument... . What's the difference between giving them a hearing aid and giving them a crutch?'
"I thought, 'Well, he's right, there isn't any difference.'"
What the Speech and Hearing Center did caused quite a stir in the marketplace. Instead of giving free examinations and charging for the hearing aid, Mr. Hart decided that "We will present ourselves to the community on the basis that everybody in our department has a minimum of a master's degree, and that we will charge for the hearing test — for the skills that we have assembled — and if you need the device, then we'll sell it to you on a cost-plus basis, and we'll build our profit into the professional service, not into the equipment.
"We wanted to take the incentive away from giving [people] a device unnecessarily — if I give you the test for free, I've got every incentive to sell you a device, even if you're marginally impaired."
The hospital had, with this one idea, managed to differentiate itself from its competitors. They were not pleased, of course, and hearing-aid dealers tried lawsuits and harassment to disrupt service. "We prevailed consistently until, over time," said Mr. Hart, "we built one of the largest speech and hearing programs in the United States.
"Now it's not a large part of the hospital — it's still excellent, but quiet — but its moment of notoriety was the first time we got a forum to say to the public, 'Hey, we've got something going.' Of all the areas I didn't expect it in, that was probably it!
By 1985, Northwest Hospital would begin to look different every-where, inside and out.
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