Ron Walls, M.D., the chief operating officer of Brigham and Women's Hospital, was tasked with cutting $50 million from the hospital's annual $2.6 billion in spending, and to do so he looked at all facets of operations including labor costs and efficiency.
Brigham officials have said the hospital is still profitable, but it is under financial strain because of flatlining payments from the government and payers while labor costs continue to increase. Two major construction projects have also tightened the purse strings; the hospital opened a $510 million building last year and put a $335 million electronic health record system in place in 2015, FierceHealthcare reported in April.
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“We need to work differently in order to sustain our mission for the future,” Walls and Betsy Nabel, M.D., the hospital’s CEO, said in a memo to staff at the time.
Brigham executives knew labor costs would be a major factor, and so offered voluntary buyouts to 1,200 employees over age 60. About 800 accepted the offer.
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Two-thirds of those who received offers held non-nursing jobs, but the payroll costs for veteran nurses who did take the buyout far outstripped the pay of new nurses hired to replace them, according to STAT.
Veteran nurses at the hospital made as much as $180,000 a year, while newer nurses could be hired for $80,000, according to the article.
Walls and the executive team also looked at increasing efficiency in the hospital's 40 operating rooms to cut costs. They analyzed OR occupancy and adjusted the protocols for blocking rooms for procedures, an adjustment that was partially responsible for Brigham's recovery from a $27 million shortfall, according to STAT.