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SAMC Announes their 30 million Dollar Cost Cutting Plan

Matt Boster

Viewed: 2819

Posted by: Matt Boster
Date: May 24 2017 5:23 PM

DOTHAN: Southeast Alabama Medical Center (SAMC) announced today a $30 million strategic cost reduction plan that includes reducing its labor force by 80 employees.

Displaced employees will be given the opportunity to apply for any vacant hospital position. Those who do not find another position in the organization will be given a severance package. SAMC is also adjusting duties of some current employees and restructuring its organizational chart.

Job cuts were made across the hospital but I am told, the number of nurses at the bedside will not decrease. Any nurse whose indirect patient care role is being eliminated will be given the opportunity to accept a bedside nursing position.  This process could ultimately result in an increase of bedside nurses and a reduction in nurse to patient ratios.

In addition to labor force, a majority of the $30 million is being realized from a reduction in purchased services and supplies.

“SAMC aspires to consistently perform at the highest level of clinical quality and patient satisfaction for our Alabama, Georgia and Florida patients and their families,” SAMC CEO Rick Sutton said in a statement released today. “To accomplish this, we must be sound financially and at the same time be the healthcare organization of choice for employees and physicians. Unfortunately, an organizational restructuring was required to reposition SAMC for future success.” 

The strategic cost reduction plan will allow SAMC to position itself to continue providing quality healthcare to the region and be financially strong for the long term. To continue achieving that goal, SAMC must realize a 3-5 percent operating profit margin annually. While SAMC is a not-for-profit hospital; it must earn a profit annually to continue investing in technology, facilities and people.

For the past five years, SAMC has seen a downward trend in its operating margin. The hospital received a financial wake-up call in fiscal year 2016 when it lost about $2 million in operating revenue. This is the first time SAMC reported a loss in operating income in almost a decade. To continue to provide quality healthcare, SAMC’s core service has to remain financially healthy.

“Hospitals nationwide, including many in Alabama, are struggling with reimbursement reductions, new regulations and reform uncertainties. We believe it was the right time to re-position ourselves to ensure that we’re building a sustainable future,” said Sutton.

The strategic cost reduction process was not a knee jerk reaction on the part of SAMC and the labor decisions were not arbitrarily made.  It was the result of a four month grassroots process that included an opportunity for all employees to provide input.

Approximately 80 employees, who have control over operating budgets, were divided up among nine task forces. Each task force met at least three times a week for a minimum total of six hours during a two month period to discuss ways to reduce operating spending. In all, more than 1,100 ideas were generated to reach the $30 million goal.

The one stipulation for the task forces was that the quality of patient care or safety could not be sacrificed to save money.  

“In making decisions on organizational changes, we considered the importance of maintaining facilities, safety and quality of care priorities,” Sutton stated.


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