Skyrocket Your Career! Subscribe to John’s “Got A Minute” video newsletter: SUBSCRIBE

This article should serve as a clarion call for healthcare CEOs. 




Medicare Cuts will Cost Nearly 500,000 Healthcare Jobs 

09/25/2012 | by Hilary Lau | D Healthcare Magazine

Mandatory spending cuts to Medicare in 2013 will result in large-scale job losses in physician offices and throughout the healthcare system, according to an analysis on the impact of the scheduled federal budget sequester on the entitlement program by Pittsburg-based research firm Tripp Umbach.

As a result of a 2 percent cut to the Medicare program effective over the course of the next eight years (and a result of a lack of agreement between Congress and the Obama Administration regarding alternative spending reductions compliant with the Budget Control Act of 2011), between $10.7 and $16.4 billion will be made in annual cuts to the program, resulting in 496,000 jobs being eliminated in 2013 and a loss of 766,000 jobs by 2021, reports American Medical News.

The study was funded by the American Hospital Association. 

While it is likely that the deficit cliff and sequester will be avoided, ongoing reductions in federal spending for Medicare are a certainty, and as the broader economy is slowly recovering (and reports confirm that there are 3 million unfilled jobs in August), these healthcare reform and deficit reduction actions will spell tougher times for health systems, hospitals and physicians, along with other providers.

The smart CEOs know they will need to retool their delivery model while reducing costs and improving performance in quality of care.  Sadly, they are in the minority as far too many CEOs appear to be adopting a wait-and-see approach, hoping that somehow it will all work out.  It won’t.

Here are five issues healthcare leaders should consider in preparing for these turbulent times. 

  1. Most healthcare strategic plans do not factor in a radical overhaul of the delivery model.  It is time for a rewrite that incorporates scenarios for drastically lower payments, new relationship and revenue models with physicians, and ways to strengthen the workforce and enhance quality while reducing costs. 
  2. Redefine the relationship with the biggest expense item in the budget—the employees.  Investor-owned hospitals, which already operate with incredibly tight staffing models, will see this as a call to reduce salary costs.  The smart CEOs will see their employees as an untapped reservoir of new ideas and energy to deal with the transformation.  While some organizations may reduce their head count overall,  top performing healthcare organizations will see their employees as a valuable asset, not an expense.
  3. The war for talent will intensify.  The success of a healthcare organization’s transformation to a new business/delivery model will depend heavily on the quality of their employees. Healthcare, information systems and technology are among the notable categories of the 3 million unfilled jobs, job market reports show.  Organization’s who fail to strengthen recruiting and retention programs and do not invest in management development initiatives, cannot compete for, and retain, the best and brightest.  History shows, rather conclusively, that when this happens, the performance of these hospitals slips. 
  4. Make the organization’s culture a vibrant asset, not a neutral or a liability.  Quality of care and patient satisfaction will be key indicators in the reimbursement picture. Organizations whose cultures do not passionately embrace those goals will find themselves in a deep hole.
  5. Smart CEOs build strong teams, stand back and let them do their jobs. CEOs must focus on people, performance and relationships.  The CEO who is bogged down in daily operations will miss important opportunities and, eventually, the organization’s performance will suffer.  Succession planning —building a strong bench of quality leaders, managers and supervisors—will be a critical function.

© 2012 John Gregory Self