by Tony Chen

Here's a few things I've been hearing from other hospitals on the impact of this recession.

"Bad debt is going through the roof."

"Even administrative employees are being asked to take unpaid time off, go on furloughs."

"Merit increases are frozen. So are open positions."

"Surprisingly, volumes are up 5 to 8 percent from last year. It's just that we're not getting paid for the services we provided."

"We are actually having one of the strongest years in the hospital's history."

"We're actually doing okay, though we are reconsidering a major capital project."

One thing to recognize is that while we like to look at national numbers, our hospital systems all operate in local environments. Yes, all of our investment incomes were smashed, but each market (some folks say it's probably 250 to 300 local markets around the country) will have unique dynamics to deal with.

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This morning, hospital CEO blogger Paul Levy wrote an open letter to his employees about the $20M hole they face--layoffs, furloughs, pay reductions, eliminating pay raises are all on the table. Paul continues to push the envelope with transparency, which I believe will help his team find the best solutions. He updated his post to say that he's received over 200 ideas from employees on what other expenses could be cut out.

"Now, sadly, we have to crank up the expense reduction," Levy said. "We began the year with a level of staffing that assumed a larger number of patients.

"Part of the solution to this problem will be to lay off people. I'm not sure how many yet, and I am hoping you can help me figure out how to minimize the number by using more creative and less disruptive ways to solve the problem."

If any organization can pull through something like this, it is Paul's, as they have created such an open, collaborative environment--for all the negative things to come, this may actually pull people even closer together. Keep up the good work, Paul--we're all in the same boat here.

Out of all the ideas I've heard for cost-cutting, the idea that I hear the most is employing a systematic process improvement methodology, such as lean management and/or six sigma. In this environment, lean management techniques, in particular, can yield results quickly (with six sigma, it takes time to get trained. And even if you are trained, it takes weeks/months to find the right metrics and measure them meaningfully).

If you're new to the lean concept, go check out what Virginia Mason and ThedaCare (PDF) are doing.