The United Health Fund recently reported that 13 of 35 non-profit, acute care hospitals in New York City are in such financial distress that their long-term viability is in doubt -- a warning for all health care institutions struggling to survive.

But the "traditional" cost-cutting and layoff prescriptions for health care providers in trouble are not sufficient to solve this growing problem. Hospitals cannot continue to slash their way to survival without sacrificing quality and patient services. Traditional cost reduction often leads to additional market share erosion and revenue loss. As the health care system moves into an environment focusing more on patient/customer satisfaction, the traditional management responses could result in even greater losses for the hospital. Patients may stop coming because of reduced or non-existent services, the fact that their doctors have gone elsewhere, or the perception that the hospital’s reputation is declining. Doctors may leave due to declining service quality, experiences with inadequate clinical and support staff, and frustration with outdated equipment and facilities.

Maverick Healthcare Consulting has found that financial difficulties can often be more effectively solved with growth strategies that expand and enhance existing revenue streams, create new sources of revenue and increase market share. These strategies include investments in enhanced quality to increase patient and physician satisfaction; investments in equipment and staffing that will speed the patient experience, improve convenience and increase patient volume and throughput; and investments in new services that enhance a hospital’s profile and make it much more competitive for market share.

Maverick Healthcare Consulting has had the opportunity to assist a number of Greater New York hospitals in designing and implementing creative approaches towards growing out of the financial doldrums. Following are some examples of these types of improvements. In addition to improving quality and service, such actions were instrumental in avoiding layoffs and other sacrifices for the communities they serve, and in creating new employment opportunities as projected revenue streams and services were successfully achieved. A New York City community hospital was losing hundreds of thousands of dollars each month and was about to close its doors. Although its cost structure was well below almost any of the other hospitals in the area, it was still suffering financially. In light of declining reimbursement and patient volume, and with a growing concern regarding continued liquidity, in order to preserve its vital core of services for the community, the hospital turned to the tactic that had helped it avoid past financial difficulties: cost reduction. However, this time the tactic worked against the hospital. Having eliminated virtually all of the "fat" from the organization, in desperation, the hospital was left with little to reduce other than the muscle. To better manage expenditures, the hospital reduced surgical hours of operation, postponed needed investments in the expansion of surgical services, and delayed replenishment of surgical equipment required by many of its surgeons. This resulted in surgeons beginning to take their patients elsewhere. Vital patient flow improvements to the emergency department (the major source of admissions for the hospital) were postponed, and increasing overcrowding resulted in more patient "walkouts" and more frequent diversion of ambulance traffic to other hospitals. Admissions declined, exacerbating the financial crisis. Vendor payables were stretched to the limit and the hospital began having difficulties receiving shipment of necessary supplies. The hospital was in a classic downward spiral.

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