Global message on financial improvement plan
The downturn in our economy, coupled with revenues that have fallen well below our projections for the first quarter of this fiscal year, has created a budget shortfall that demands deliberate action. While we are doing a better job controlling our expenses, our revenue is not keeping pace with our activity as we are experiencing less growth than expected.
We need to maintain a significantly positive operating margin to continue to invest in our future. When we fall below our targeted 3 percent operating margin, our ability to grow and be responsive to the needs of our patients and families – our reason for being here – is compromised. Every percent we fall short of our 3 percent target represents $19 million dollars – and fewer resources to re-invest in ourselves in ways we know we must to be successful in the future. It’s the operating margin that drives our ability to grow our business for patients who seek care from our excellent faculty and staff.
We have discussed with the Hospitals and Health Centers’ Executive Board and top HHC leadership a series of difficult – but necessary – steps that we believe will improve our financial performance and help position us well to respond to future financial challenges.
• Implement a selective hiring freeze, effective immediately, on all non-patient care positions in the Hospitals and Health Centers
• Manage personnel reductions by attrition as much as possible
• Prioritize supply chain opportunities to reduce expenses
• Review our FY09 capital plan and FY10 capital requests to preserve cash and delay new operating expenses
Our highest priority in this effort is to protect services that are the most essential: patient care quality and safety. Our key tasks are to improve our revenue to match the high patient demand and give greater attention to identifying effective cost-management strategies for the long term. I am asking all of us to become increasingly aware of how we are using our resources. Ask each other how we can improve our teamwork across the organization to manage expenses more effectively. Our ability to work as a cohesive team to identify new solutions and to take full advantage of existing good ideas will help us meet our operating margin – and help ensure our future success.
Let’s continue to improve our focus on adding value to our customers and reducing unnecessary steps in our processes. This should lead to improved service at reduced cost. Ask why we do certain tasks in a specific way, with the goal to complete the task more efficiently.
I know we will work together to meet our financial goals and, as always, provide the programs and services that are making the Michigan Difference for our patients. Thank you for your efforts to help us deliver the right care in the right place at the right time – in a cost-effective way.
I will update you on our progress.