The University Record, April 30, 1996

Committee recommends 1,100+ employee reduction for U-M Health Systems

By Rebecca A. Doyle

"Over the last several months we have been imparting to our employees our growing recognition that we are going to have to have a smaller workforce in the future in order to meet the needs of today's marketplace," Lloyd A. Jacobs told reporters last Friday during a press conference held in University Hospital.

Jacobs, who is associate dean for clinical affairs, said that changes in the health care industry are forcing institutions to reduce costs to be competitive. Patient costs at the U-M, coupled with insurance carriers' unwillingness to authorize ca re at a facility that costs considerably more than the competition, have forced the University of Michigan Health System to look at massive cost reductions. The average cost per patient c ase is currently well above the cost at other southeastern Michigan health care facilities.

Maintaining the Hospitals' commitment to quality patient care is the primary mission of the Health System, Jacobs noted, and the commitment to that mission prompted the Redesign Coordinating Group, which he chairs, to spend nearly two months looking at other academic health care institutions with a similar commitment to quality, such as Massachusetts General Hospital, Brigham and Women's Hospital (Harvard Medical School) and Boston University Medical Center.

Comparing the U-M Health System to those institutions, not only across the board but department by department, led to the recommendations that the committee made to each department and unit head last Thursday afternoon for reductions in the number of employees they each maintain on the payroll.

During the coming fiscal year, the institution needs to trim nearly $60 million from its costs. Jacobs estimates that $35 million to $40 million of that will come in the form of employee reductions. Last Thursday's communications to unit and department heads asked each of them to begin the process of trimming their payrolls by a specific number of employees, which Jacobs says will not be released.

"All of the institutional leaders who have been asked to meet those targets have had emphasized to them that, first and foremost, we want to maintain our commitment to high-quality care," Jacobs stated. "We believe we can become mo re cost effective, more efficient."

Jacobs also said that the targets for reduction would not be the same percentage for each department. Some departments will show a greater loss of their workforce than others because the needs of high-quality patient care are more de pendent on some units than others.

"The target reductions have not been distributed across the board," Jacobs said. "They have been distributed according to specific comparisons with the missions and strengths of similar organizations in health care."

He responded to questions about which units would be hardest hit by saying that he did not have plans to release that information until department heads had had time to talk within each unit to their own employees and ready them for the upcoming changes.

Laurita Thomas, director of human resources for the Medical Center, noted that there are many services available not only for employees who will need to find placement either elsewhere in the University or outside it, but also to help those left deal with feelings of loss.

"We are prepared to offer planning services to all of our managers as they develop and plan. We're already offering a whole series of stress management courses," she said. The department also has available courses on transitioning from one career to another, starting your own business, courses for spouses of individuals affected by the budget reductions.

A series of "cascade" meetings has been held throughout the Medical Center over the past few months to help employees become prepared for the coming transition to a smaller workforce. "Cascade" meetings are those which begin d isseminating information from top management, which is then passed on to small groups of managers who, in turn, hold their own meetings to distribute the information.

Jacobs said the Health System needs to "accomplish some of these things by July 1." Employees being released who have been on board for 10 years or more would get three months notice that the institution can no longer employ them. Those with fewer than 10 years of service would be notified at least 30 days before an effective end date.

Over a three-year period, Jacobs said the Redesign Coordinating Group recommended a total reduction of between 1,000 and 2,000 employees of the 8,500 who are currently on the payroll if the budget target is to be met.