WellStar Health System - Opportunities 2010 A Unique Approach to Margin Improvement, Leadership Development and Cultural Change FROM SURVIVING TO THRIVING

WellStar Health System - Opportunities 2010

A Unique Approach to Margin Improvement, Leadership

Development and Cultural Change

FROM SURVIVING TO THRIVING


A Case Study of how one health system’s senior leaders came together and made strategic decisions based on values, with

Safety First and Work Life as a cornerstone to a business strategy.


FACTS AND STATS:•Not-for-profit.•Integrated health system.•Employer of Choice.•$1.4 billion in net revenue.•11,000 employees.•Five hospitals, 1311 beds.•400 physicians/providers.•Serve 1 million people.•1.1 million office visits.•273,000 emergency visits.•64,000 discharges.•Over 75 locations.


Stephen Shortell, Ph.d.; Dean-School of Public Health, University of California-Berkley

“An organization that provides a coordinated continuum of services to a defined population and is willing to be held clinically and fiscally accountable for the outcomes and health status of the population it serves.”


• Creating an effective workplace where every team member is valued and given the opportunity and support to succeed at work and at home

• An organization that provides a coordinated continuum of work life programs, family friendly benefits and workplace options and is willing to be held accountable for the outcomes and health status of it’s greatest asset – their people

• Benchmarking ourselves against the best

WellStar’s Journey to Employer of Choice


6

VISION: To Deliver World-Class Health CareVISION: To Deliver World-Class Health Care

MISSION: To create and deliver high quality hospital, physician, and other healthcare related services that improve the health and well-being of the individuals and communities we serve.

MISSION: To create and deliver high quality hospital, physician, and other healthcare related services that improve the health and well-being of the individuals and communities we serve.

GROWTHGROWTH

FINANCIAL PERSPECTIVE

Income From Operations Philanthropy

FINANCIAL PERSPECTIVE

Income From Operations Philanthropy

PRODUCTIVITYPRODUCTIVITY

CostCost Asset UtilizationAsset Utilization

Employee ValueEmployee Value

CompensationCompensation RelationshipsRelationships ImageImage

SalarySalary IncentiveIncentive BenefitsBenefits Brand EquityBrand EquityServiceService PartnershipPartnership

Market ShareMarket Share Revenue OpportunitiesRevenue Opportunities

Customer ValueCustomer Value

ProductProduct RelationshipsRelationships ImageImage

QualityQuality AccessAccess SelectionSelection ServiceService PartnershipPartnership BrandEquityBrandEquity

OPERATIONS PROCESSESOPERATIONS PROCESSES

INFORMATION KNOWLEDGE TRAININGINFORMATION KNOWLEDGE TRAINING

PEOPLE CULTUREPEOPLE CULTURE

InvestmentsStrategic Focus Return on Investment (ROI)

04-2009


“You only learn who has been swimming naked when the tide goes out...”

Warren E. BuffettChairman, Berkshire Hathaway Inc.

Letter to shareholders, February 2008


Primary reasons for the negative sector outlook are:

•The tightening of credit markets, •Expected broad based weakening in hospital operating performance,•Declining liquidity, •Softer volumes; and, •More uninsured patients.


What hospitals are doingto meet this challenge:

•Hiring freezes•Reductions in force•Eliminating incentive pay•Reducing management ranks•Suspending merit increases•Salary cuts•Reducing 403b match•Ending defined benefit plans•Renegotiating with supply vendors


54%

80%

52%

62%

36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

All >500beds

300-500beds

100-300beds

0-100beds

Hospitals Losing Money

April 2009 SurveyHealthcare Financial

Management Association


WellStar’s financial condition was strong (top 15% of all health systems in the

country).

However, to meet the challenges of the economic environment, our community needs and to continue to invest in our strategic plan, we needed to not only

survive the current environment,

but to thrive in it.


WellStar Health System 2009 Strategic Goals

Achieve the following Patient Satisfaction percentile targets:

Inpatient – 65th

Outpatient – 80th

Amb Surg – 90th

Emergency – 55th

WS Phy Group – 80th

Achieve the 65th percentile on Employee Engagement

Reduce system-wide turnover rate for FT/PT staff to 12%

Realize an Operating Margin of 4.0%

Achieve Foundation Philanthropy Goal of $5.0 million.

Avoid layoffs and enhance benefits.

Achieve projected volume growth in

Inpatient - 4%

Amb surgery - 3%

Emergency - 2%

Imaging - 5%

Cardiac - 7%

Quality & Patient Safety

Achieve CORE measure top performer status for 70 of 97 measures

Identify and implement strategic performance-improvement initiatives to realize $34 million in improvement and an operating margin run rate of 6% by the 4th quarter FY09

Reduce Healthcare Associated Infections to 47 or fewer total CLI’s and VAP’s

People x

Financial x

Customer Service

Successful Growth

Exceed State & National benchmarks on percentages of 9’s and 10’s on the “Overall Rating” HCAHPS question


Supply: Other, $3,000,000

Supply: TOG, $2,000,000

Benefits, $3,500,000

Purchased Services / Other, $2,500,000

Non-Patient Revenue, $2,000,000

Revenue Cycle, $2,000,000

Utilization Management,

$4,000,000 Salary, $15,000,000


“Great things are not done by impulse, but by a series of small things brought together.”

Vincent van Gogh (1853-1890)Dutch painter


Top Opportunities Group

Cobb Douglas Kennestone Paulding Windy Hill Enterprise Support

Supply Expense

Benefits Purchased Services / Other

Non-Patient Revenue

Opportunity

Teams

Business Unit Teams

Labor Utilization

Expense Reduction

Revenue Cycle

Utilization Mgmt

Physician Group (WPG)


8

TOG Responsibilities: Prioritization & Oversight

• Develop strategy for accomplishing Opportunities 2010 goals

• Identify potential performance improvement initiatives & opportunity • Prioritize and determine targets for each initiative

• Communicate strategy to organization

• Identify Project Opportunity Teams (Define Expectations)

• Weekly feedback on progress with supporting leadership decisions

• Allocate of resources to assist teams


Opportunity Teams Responsibilities: Planning / Execution / Implementation

• Develop project plans to accomplish Goals & present to TOG

• Collect Data, perform analysis, and develop recommendations • Communicate targets to Business Units Teams

• Maintain a system approach across business units • Secure resources needed for Implementation • Develop & initiate measurement / feedback mechanism


Business Unit Teams Responsibilities : Planning / Execution / Implementation

• Develop project plans to accomplish Opportunities 2010 Goals

• Collect Data, perform analysis, and develop proposed tactics & submit to Opportunity Teams

• Assist with communication to staff regarding purpose and process for Opportunities 2010

• Secure resources needed and implement tactics within Business Unit • Develop & initiate measurement / feedback mechanism


Recommendation Development: Opportunity Teams identify strategic performance improvement

initiatives that assist in achieving the team goals for improving operating margin. Develop recommendation

through analysis and quantify by business unit, if applicable.

Pass I Approval:Opportunity Team presents recommendation to TOG for Pass I

approval. Pass I approval indicates that the TOG believes that the recommendation is feasible and additional

analysis should be completed to validate opportunity at the business unit level.

Pass II Approval:Business Unit Teams will evaluate recommendations with Pass

I approval for implementation feasibility, and make adjustments to recommendation. Business Units will work

in partnership with Opportunity Teams to take revised recommendation back to TOG for Pass II approval.

Implementation Planning and Execution:Recommendations that receive Pass II approval are

ready for implementation planning. Opportunity Teamswill support Business Unit Teams in the development of

implementation plans and execution.

Measurement / Validation:Opportunity Teams will determine metrics to measure and

sustain success of implementation. Metrics will be reported to TOG..


Our CredoI believe every person and every job is important and I am accountable for achieving my goals.

I believe in compassion and understanding.

I believe in innovation and creative thinking.

I believe in our WellStar Team and we are making a difference in people’s lives.

Our greatest asset is our people and we will

consider the human toll of our business decisions

and ensure we are valuing their input, ideas and

experience.


Provides an opportunity for all team members

and physicians to submit their ideas for

performance improvement.

The key is to draw upon the wisdom, insight and strength of our

team members.


Building Trust Through Transparency

•Opportunities 2010, e-newsletter sent as initiatives are approved. Messaging aligns with the Strategic Plan, including “Myth Busters” to dispel rumors. •Monthly Partners news brief

•eSource Spotlight

•Hospital & Medical Staff Newsletters •Director Meetings

•Manager Roundtables

•Town Halls Meetings

•WellStar Medical Staff Meetings


• Standardized custom packs

• Discontinued personal inkjet printers • Reduced outside catering

• Renegotiated spine implant pricing

• Restructured case management function

• Eliminated budgeted, but unfilled positions

• Renegotiated IT maintenance agreements

• Reduced insurance company payment denials

• Eliminated non-essential outside consultation

•Eliminated non-essential outside consultation

•Renegotiated cardiac implant pricing

•Renegotiated neuro stimulator pricing

•Implementing e-payables

•Restructured courier service and bid out services

•Performed a lighting retrofit of facilities

•Drilled a well for cooling tower and boiler

•Improving patient chart documentation

•Implemented new productivity monitoring system

•Consolidated janitorial services


• Implement in-house employee pharmacy

• Increase results of blood drives

• Implement blood conservation program

• Adjust certain pay practices to reflect local market conditions

• In source esoteric lab tests

• Renegotiate revenue contracts which were below current market conditions

• Implement in room patient massage and salon services

• Begin selling spa robes on a retail basis

• Restructure transcription services

• Implement UV window tinting

•In source self pay collection process

• Reduced distribution center inventory levels

• Terminate IT recovery center no longer needed

• Standardize formulary for office supplies

• Redesign laundry/line process at hospitals

• Redesign process and control utilization of scrubs

• Renegotiate vascular graph pricing

• Work closely with hospital GPO to enforce a “no price increase” policy


WellStar Health System: Total System Report

* Approxiamate annualized value of currently implemented improvements = $51,957,500 (Wave 1&2 completed Pass II initiatives)

Wave 1 & 2:Pass II Approved

Annualized

Wave I Goal

$34 Mil

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Mill

ion

s

YTD *

FY09 Operating Margin Percent (Budget vs Actual)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09

Budgeted Operating Margin Actual Operating Margin 4th Qtr Target Operating Margin

Pass II Projected Timing of Concluded PlansWave I & Wave II Initiatives

FY09 QuarterlyRun Rate Goal

$8,500,000

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

Imp

rove

men

t R

ealiz

atio

n

Utilization Mgmt $0 $0 $333,333 $1,000,000 $1,233,600 $1,233,600 $1,233,600 $1,232,000

Revenue Cycle $550,000 $887,500 $1,166,250 $1,566,250 $6,413,872 $6,413,872 $6,413,872 $6,413,872

Non-Patient Revenue $0 $39,000 $72,616 $82,205 $84,705 $94,720 $94,720 $94,720

Purchased Services $269,368 $236,250 $120,750 $157,226 $1,510,726 $1,510,726 $1,510,726 $1,510,726

Benefits $130,000 $230,000 $1,380,000 $1,380,000 $1,380,000 $1,380,000 $1,380,000 $1,380,000

Supplies: Value Analysis $1,904,526 $1,904,526 $1,904,526 $1,904,526 $1,904,526

Supplies: TOG $70,913 $70,913 $270,913 $270,913 $942,583 $942,583 $942,583 $942,583

Labor Utilization $2,821,330 $2,821,330 $2,821,330 $3,134,811 $3,134,811 $4,308,524 $5,482,237 $5,482,237

Quarterly Run Rate Goal $8,500,000 $8,500,000 $8,500,000 $8,500,000 $8,500,000 $8,500,000

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

FY 2009 FY 2010


4.8%

3.3%

4.6%4.7% 4.5%

3.5%3.7%3.5%

0.6%0.1%

4.8%

3.1%3.90%

2.8%

4.80%

3.1%

8.20%

5.3%

8.80%

2.9%

8.90%

2.8%

12.40%

2.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN

Actual Plan

Operating MarginFY 2009 Trend


Actual Plan Prior Year Amount Percent Amount Percent

36 System Operating Margin % 5.9% 3.2% 4.0% 2.7% 84.4% 1.9% 47.5%37 System Investment Return % (10.3%) 6.5% 2.7% (16.8%) (258.5%) (13.0%) (26.2%)38 Net Revenue per CMI Wt Adj Acute Discharge (Incl BD) 6,285 6,412 6,297 (127) (2.0%) (12) (0.2%)39 Expense per CMI Wt Adj Acute Discharge (Excl BD) 5,777 6,210 6,029 433 7.0% 251 4.2%40 Adult & Peds Acute ALOS 4.67 4.88 4.85 0.21 4.2% 0.18 3.7%41 Adult & Peds Acute ALOS CMI Wt 3.56 3.73 3.71 0.18 4.7% 0.16 4.2%42 Medicare Acute ALOS 6.12 6.53 6.53 0.41 6.3% 0.41 6.3%43 Medicare Acute ALOS CMI Wt 3.96 4.16 4.16 0.20 4.8% 0.20 4.8%44 Paid FTEs per CMI Wt Acute AOB 3.70 3.78 3.83 0.07 2.0% 0.13 3.3%45 Salary per Adj Acute Discharge 2,931 3,102 3,085 171 5.5% 154 5.0%46 Supply Expense per CMI Wt Adj Acute Patient Day 219 229 224 10 4.6% 5 2.2%47 Drug Expense per CMI Wt Adj Acute Patient Day 57 61 58 5 7.6% 1 2.2%48 Cash Collected as % of Net Revenue (Excl BD) 101.4% 100.0% 98.8% 1.4% 1.4% 2.6% 2.6%49 Net Days in Accounts Receivable 48.8 54.0 53.3 5.2 9.6% 4.5 8.4%

(5%) to < 0% Unfavorable < (5%) Unfavorable

0 % to < 5% Favorable Favorable >= 5%

Year to DatePlan Variance Prior Year Variance

Fina

ncia

l

WellStar Health System (Excluding Phy Div)


Fiscal Year Improvements

From 2008 to 2009

23% 25%

77%

6%

-4%

47%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

EmployeeEngagement

PatientSatisfaction

SafetyImprovement

Growth Expenses FinancialMargin


Gallup Engagement Scores in Top Quartile Medical Staff Satisfaction Scores in Top Quartile Turnover Rate significantly below national healthcare

benchmark Low vacancy rates in all positions – especially difficult to fill

roles National Recognition by Working Mother Magazine, AARP,

Fortune 100, Alfred P. Sloan

Employer of Choice Goals 2010


Employer of Choice Alignment

Work/Life BalanceWork/Life BalanceBenefits/CompBenefits/Comp

Work ForceWork ForceDevelopmentDevelopment

PerformancePerformanceManagementManagement

LeaderShip LeaderShip DevelopmentDevelopment& Learning& Learning

CulturalCulturalCompetencyCompetency


Happy endings and happy beginnings . . .

The Labor Utilization Team

Out of over 11,000 positions only 44 positions were

identified to eliminate all 44 were offered

reassignment with 1 being a promotion.

Only 3 chose to seek opportunity elsewhere.


WellStar has taken extraordinary effort to make my transition into my new role a wonderful experience. I now have a better job, a great manager and am working on my computer tech degree.

Thank you WellStar for considering me in your decisions! On left is Teresa Walker, Systems Analyst 1,

with Manager Pam Pfeifer


Thank you for this opportunity.

Questions?

Documents

WellStar Health System - Opportunities 2010 A Unique Approach to Margin Improvement, Leadership Development and Cultural Change FROM SURVIVING TO THRIVING