Hospital wants to cut $17M over two years

CRMC CEO says fewer patients and less financial support from the government means cuts are needed.

CHEYENNE – Cheyenne Regional Medical Center will start a cost-cutting program in September that hospital leaders hope will save $17 million over two years.

The goal of the Strategic Cost Improvement effort is to reduce costs hospital-wide by 6 percent.

A 3 percent drop would occur in fiscal year 2015 and another 3 percent reduction in fiscal year 2016, Kerry Warburton, CRMC’s chief financial officer, said Tuesday.

“That translates into $8.5 million for each of those two years. We have a need to maintain our spending within revenue projections,” he said.

“What we decided to do was use a strategic approach and avoid any kind of slash-and-burn kind of activity,” he said.

The approach means avoiding more radical options like employee layoffs and hiring freezes.

Layoffs and hiring freezes are national trends in health care now, Warburton said. But CRMC leaders want to avoid those options.

The hospital’s cost improvement program will last six months.

“It’s generally designed to create quick types of savings and cost reductions,” Warburton said. Savings will be realized over a two-year period.

The effort could put hospital officials in the position to provide lower pricing for patients, he added.

The program will divide CRMC into five teams, all geared to improve efficiencies and cut costs.

Possible areas of cuts include purchased services, supplies and labor costs through attrition.

CRMC’s cost-cutting project came about for several reasons.

For one thing, the volume of inpatient revenue at the hospital was down 10 percent at the end of June compared to the same time in 2013.

Hospital officials expected some inpatient drop, but not that much. “We expected revenue to be slow growth or flat,” Warburton said.

“The health-care reform environment is shifting services to a lower-cost setting,” Warburton said.

The national Medicare program for older Americans wants some former inpatient medical procedures done on an outpatient basis.

Hospitals won’t receive Medicare reimbursements unless they follow those changes.

A general uncertainty with the economy and the Affordable Care Act also highlights the need to watch costs, according to Warburton.

Some patients have delayed medical procedures until they see how the Affordable Care Act works, he said.

Another reason for the program is related to a change in how Medicare pays hospitals. The change will cost CRMC about $3 million in 2014-15.

Hospital employees can help develop cost-cutting measures.

A new employee, for example, recently suggested the hospital stop using individual pulse oximeters for each patient, said Jason Shenefield, CRMC’s vice president of strategy and chief operating officer.

The employee suggested that the same piece of equipment – which measures a person’s oxygen saturation – could be used on different patients.

The suggestion can save the hospital about $20,000 a month, Shenefield said.

CRMC recently launched a Bright Ideas program, where employees can earn up to $5,000 for effective cost-shaving ideas.

In addition to cost-cutting, CRMC has started a separate program to find ways to increase revenues, Warburton said.

One method is to get area residents who go elsewhere for care – like to hospitals in northern Colorado – to use the Cheyenne hospital.

The effort involves raising awareness about the quality of programs at CRMC and that the care is very comparable with what people sometimes leave the community for, Shenefield said.

Where will cuts be?

Possible ares of cuts/savings include:

-Purchased services


-Labor costs

-Reuse of some medical equipment

Published on: Tuesday, Jul 01, 2014 – 11:11:26 pm MDT


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Josh Sandberg

Josh Sandberg is the President and CEO of Ortho Spine Partners and sits on several company and industry related Boards. He also is the Creator and Editor of OrthoSpineNews.

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