Wake County's largest hospital system plans to slash annual operating costs by as much as $87 million as it makes changes recommended by an outside consulting firm.
WakeMed's efforts likely will include eliminating jobs in some departments, CEO Bill Atkinson said. The hospital also may phase out some services where it's not the market leader, such as providing chemotherapy and other cancer treatment.
"I don't want to pull any punches; there will be changes," Atkinson said in an interview at WakeMed's Raleigh campus. "We don't want to make anyone's lives miserable, but we're making the moves we need to make to control costs. If I were rank and file, I'd be scared if we weren't doing this."
The changes, which will happen over the next year, are based on recommendations by Wellspring+Stockamp Consulting. Wake Med hired the Chicago firm in March to locate and eliminate inefficiencies. While details are still being worked out, plans call for improving operating income by $60 million to $87 million a year.
Atkinson outlined the "Road to Excellence" plan in a memo to employees this week. WakeMed has nearly 7,000 full-time workers, making it one of Wake County's largest private employers. Its facilities, including Wake Med Cary and WakeMed North in North Raleigh, saw more than 1 million patients in the past year.
Some of the promise of the federal health overhaul, in the long term, was to control medical costs by forcing providers to cut expenses, said Adam Linker, a policy analyst with the N.C. Justice Center's Health Access Coalition in Raleigh. Hospitals, for example, face lower payments from Medicare and other government programs.
Blue Cross and Blue Shield, the state's largest health insurer, also plans to reduce its administrative costs by 20 percent over the next few years.
"We are going to be cutting out waste from the health system," Linker said.
WakeMed had already been cutting costs during the recession, including freezing salaries and reducing benefits. But with health reform looming, officials wanted to take a tougher look at streamlining.
The goal is to improve WakeMed's operating margin, now 2 percent, to 4 percent or higher within a year. "The hospital systems that will be in the best position to address health care reform will have 4-5 percent or more," Atkinson said.
He expects any job cuts will come through attrition. But some departments could see layoffs or reassignments.
"It won't be radically different than what we've always done," Atkinson said.
Other efforts to improve the hospital's financial health will involve improving payment collections from insurers and other providers. WakeMed will spend about $2.5 million on new software to coordinate collections. It's adding six full-time employees next week to help process collections.
Even as WakeMed plans changes and cost reductions, it's moving ahead with expansion plans. The system is building a $25 million medical center and office building at Brier Creek. And it plans a $60.7 million outpatient facility near its New Bern Avenue campus.
Atkinson is planning to hire another outside consultant to review WakeMed's expansion plans. "I'd like to know if we've missed anything," he said.
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