Part 1: Critical Analysis of the Law

1. Evaluate and discuss the requirements ofoneof the following laws and how it applies in terminating employees. What does a manager need to do or not do to comply with it?

• Age Discrimination in Employment Act (ADEA) and Older Worker Benefit Protection Act (OWBPA)
• Health Care Quality Improvement Act ( HCQIA) and medical staff termination requirements
• Union contracts or provider contracts with "just cause termination" provisions vs employment at will
• Bostock vs. Clayton Supreme Court Case and Title VII rights

1. Evaluateoneof the following tools for compliance in hiring and indicate how it would help limit risk. Discuss the pros and cons of it.
   • Employee termination checklist
   • Employee termination policies and procedures
   • Evaluation of whether there is an employment contract with a termination clause or whether this is an employment-at-will employee.
   • OWBPA Waiver and severance in exchange for the right to sue

Part 2: Strategic Compliance with the Law

Evaluate the scenario in Ch. 7 Workforce Reduction: Hillside County Medical Center.

1. What are the legal risks? What are risks specific to employee termination in a reduction in force (RIF)? How will the union contract impact a RIF? How will the WARN law impact a RIF of over 100 employees?
2. What management compliance tools (one) and processes (one) could be incorporated in the organization to prevent the need for a RIF?
3. Assume there is a RIF that involves employees with a union contract with seniority provisions. What employee termination tools (one) and processes (one) would you incorporate to minimize the likelihood of a wrongful termination lawsuit?

Please refer to the reference below for the scenario questions: Cited from:

Showalter, S. (2020).The law of healthcare administration. (9th ed.).Health Administration Press.

Chapter 7

Workforce Reduction: Hillside County Medical Center

Glenn A. Fosdick

Hillside County Medical Center was a 475-bed public teaching hospital located in an urban setting in the Midwest. It served a city of approximately 250,000 people in a county whose total population was 500,000. Its primary local competition consisted of two regional hospital systems, both not-for-profit. Because of its urban location and its historical status as the county hospital, Hillside provided a signifi- cant portion (approximately 70 percent) of the uncompensated care for the com- munity. Nevertheless, it received no financial subsidies from the city or the county.

For many years, Hillside had been the main tertiary center providing specialized care in high-risk obstetrics, Level III neonatal intensive care, and pediatric intensive and specialized care including pediatric oncology. In addition, Hillside was the regional provider for kidney transplants, burn services, and emergency medicine,

experiencing close to 80,000 emergency department (ED) visits per year. Hillside's services had been augmented over the previous four years by the development of the region's first American College of Surgeons-verified trauma program. Hillside was affiliated with a major university medical school, with residencies in internal medicine, pediatrics, med/peds, and obstetrics, and had a shared program with other hospitals in radiology and orthopedics. Furthermore, it had recently added an emergency medicine residency program.

Because Hillside was a public hospital, its board was strongly committed to the community and the hospital's mission. A number of programs had been devel- oped that increased patient access and the hospital's ability to meet its community health needs, including a large clinic providing primary and urgent care services in the community's most underserved area. Unfortunately, because of the low reim- bursement from outpatient Medicaid and the high percentage of uninsured who were served, the clinic experienced significant financial losses.

Like most hospitals, Hillside had prospered until about 2010, when changes in reimbursement and increasing competition began to affect it. Hillside was also heavily unionized; nine unions represented 86 percent of its employees, resulting in higher-than-average benefit and pension costs. After multiple strikes and work actions, Hillside had lost market share to its competitors. As its competitors grew stronger, Hillside started to face significant financial challenges, which culminated in 2015 in a financial loss of close to $7 million. Through the recruitment of new leadership, enhanced strategic planning, and marketing, the organization had been able to correct itself and make significant progress. However, over the past several years, it had again faced increasing financial concerns. The dilemma Hillside now faced reflected the variety of problems that were common to most hospitals. These problems resulted from a number of specific issues, including decreasing reim- bursement, uncompensated care, increasing competition, rising personnel costs, and a depressed economy.

The largest unknown facing Hillside was the exact impact that ongoing health- care reform would have on the hospital. Like other healthcare providers, Hillside was experiencing decreased reimbursement and increased vulnerability to financial penalties for quality, satisfaction, and performance issues. In addition, the replace- ment of inpatient care with ambulatory services seemed to be escalating.

Reform was also affecting Hillside's reimbursement from Medicaid, which represented approximately 25 percent of the hospital's business. Because Hillside served a high percentage of uninsured and Medicaid patients, it was eligible for Disproportionate Share Hospital (DSH) payments. The Affordable Care Act (ACA) had placed an increasingly high percentage of Medicaid care into competitive regional and statewide Medicaid contracts because the state had decided to expand Medicaid eligibility. DSH payments to Hillside were decreasing accordingly.

All healthcare providers faced unique challenges, unknown in other industries, that were further complicated by insurance exchanges and other adaptations asso- ciated with healthcare reform. Although the ACA decreased the number of unin- sured, the amount of uncompensated care that Hillside provided had increased over the previous three years. Strategic analysis by the hospital suggested that, at least locally, this was partly the result of the US economy: The instability of the job market had resulted in a higher percentage of jobs that did not provide health insurance benefits.

Hillside also faced the difficulty, common to all healthcare providers, of actually collecting the payment due for services provided. The financial pressures that insur- ers faced appeared to encourage them to find ways to make billing more difficult, to find justification for denying claims, and in many circumstances to engineer significant delays in providing reimbursement for services that were properly billed. Furthermore, Hillside faced increasing challenges from nonhospital competi- tors in diagnostic and treatment areas that historically had been financially advan- tageous to the hospital. These areas included ambulatory, surgical, and diagnostic centers, such as MRI facilities and dialysis centers owned and operated on a pro- prietary basis. Like most hospitals, Hillside faced the challenge of keeping its patient census

as high as it had been in the past. Reductions in reimbursement for patients who stayed longer than the appropriate time, expanded competition both regionally and nationally, and increasing use of ambulatory services to treat patients in such areas as chemotherapy, surgery, and diagnostic scenarios all complicated Hillside's abil- ity to maintain its average daily census.

At the same time, hospitals and other healthcare providers were experiencing dramatic increases in the costs associated with providing care. Drug expenditures continued to rise, and the prices of medical, surgical, and other supplies continued to experience inflationary increases that exceeded annual reimbursement adjustments.

Further concerns were government mandates and accreditation standards that required additional staff for non-patient care activities. For example, the imple- mentation of the federal APC (ambulatory patient classification) outpatient billing system had necessitated the hiring of additional coders to comply with increased mandates for medical record requirements.

Hospitals also faced an intensely competitive environment for the recruitment and retention of healthcare personnel. Perhaps the most significant concern was the future availability of registered professional nurses. The average age of nurses nation- ally was 50 years. Although the American Association of Colleges of Nursing had reported an increase in enrollment in baccalaureate programs in recent years, this increase might not be sufficient to meet the projected demand for nursing services.

This nursing crisis had been neutralized somewhat by the lethargic economy, which had temporarily discouraged employees from retiring. However, when the economy improved, the turnover rate would surely be higher than average and nursing resources would be depleted. As pressure for financial control and clini- cal improvement mounted, fewer qualified personnel would be interested in tak- ing on these issues. Other shortages could occur among ultrasound technicians, pharmacists, and radiation therapy personnel. These shortages required Hillside to regularly reexamine its pay and benefits package to ensure that it was competitive and capable of attracting the right kind of personnel.

Another concern was the increasing number of professional nursing staff who worked for nurse staffing agencies. These agencies allowed nurses more inde- pendence and control over when and how many hours they worked, including on weekends and holidays, usually at the expense of benefits and pension plans. This situation contributed to a shortage of staff available to work unattractive hours, and the agency nurses' higher hourly rates resulted in additional costs to the hospital.

These difficulties in recruiting nurses and the financial requirements of tight staffing had increased the need for overtime and mandatory overtime. Not only did overtime mean higher costs, but concerns about the strain on staff and the effect of excessive overtime on the quality of clinical care had also prompted the state legislature to develop controls regarding the use of overtime. Increased overtime also stimulated reaction from unions, resulting in strikes and other work actions.

All of these pressures combined to create the difficulties that Hillside now faced. The CEO and management staff had examined their situation and realized that unless significant changes were made quickly, Hillside would cease to be financially viable. The CEO also recognized that these issues were more important now than in the past. His board, like many, had increasingly identified the hospi- tal's operating margin and financial performance as the primary indicators of the management team's effectiveness.

Recognizing the critical importance of swiftly and properly addressing these financial concerns, the CEO called his senior management team together. He had decided that, to ensure the best results, the issue needed to be addressed from a corporate-wide standpoint and all senior management personnel had to be involved.

Because of the matter's financial significance, the chief financial officer (CFO) took the initiative. She noted that, as in most healthcare organizations, the highest portion of expense was associated with staff. For example, under the current salary and benefits package, the average employee cost Hillside approximately $75,000 per year. Even with the costs of unemployment liabilities and potential severance programs, she argued, reductions in the workforce were the safest and best-known method of reducing financial deficiencies.

The vice president for human resources reminded the group that in most union contracts and many state labor codes, seniority was a key determinant in workforce reductions. At Hillside, for example, the contracts with key unions, such as nursing, stipulated that seniority be determined on a hospital-wide basis. She noted that some of the least senior nursing staff were located in critical areas, such as the ED and operating rooms, where their services were essential for continuing financial productivity. She also pointed out that many unions closely monitored the compar- ative numbers affected from each union and the ratios of reduction to management personnel, which could have implications for labor stability.

The vice president for nursing and the vice president for medical affairs col- lectively announced that patient care could not be compromised and that inappro- priate reductions in these areas would have a critical effect on the organization's clinical capability and reputation. The vice president for operations questioned the effect on community projects, such as the clinic, and asked whether other approaches could be taken. The CEO pondered these questions as he contem- plated the right approach to address Hillside's situation successfully.

The CEO tried to identify the dynamics of healthcare that distinguished it from other industries. Although other industries also faced the need for employee reduc- tions, those environments did not incorporate the multifaceted responsibilities of the healthcare institution. Certainly financial performance, while important, was not the only criterion that must be measured. The CEO knew that Hillside needed to ensure that proper care was provided and available to those who sought it. In no other business did a person receive a service before identifying how payment for that service would be provided. In fact, mandates from the federal government pro- hibited assessment of financial status prior to providing emergency medical care.

Hillside's mission statement clearly defined its responsibilities to improve the health of the community. Because the vast majority of hospitals in the United States, like Hillside, had either not-for-profit or public tax status, they were required to provide services in some cases that did not conform to the usual business stan- dards. Unfortunately, all too often the public perception was that this requirement was not being met.

The CEO reminded himself that most people did not believe that the quality of care had improved. In fact, one recent study had found that 40 percent of Ameri- cans thought the quality of care had declined over the past five years. The CEO felt strongly that Hillside needed to live up to its mission, and he knew that as a public hospital Hillside would be under close scrutiny to see that it did.

ethiCs issues

Organizational implications:What is the most appropriate and ethical method of addressing the organization's potential financial shortcomings? To whom should the CEO listen as he determines the appropriate course of action? Should he include others beyond senior management? If so, whom?

Adherence to the organization's mission statement, ethical standards, and values statement:Does the best approach reflect and adhere to the responsibilities of the organization's mission? How does the CEO prioritize financial viability as com- pared with clinical quality, organizational mission, and community responsibilities?

Management's role and responsibility:Is rightsizing the only answer or even the best answer to addressing financial difficulties? Does rightsizing ensure that all levels and groups in the organization share the effect of and exposure to these difficulties? Can rightsizing successfully address financial deficiencies without compromising clinical needs? Should the CEO examine other options to address the organization's financial concerns? Does the approach ensure that the effect of the decision does not create even bigger difficulties in the long run?

Clinical quality:Should the decision to cut back be determined from a clinical viewpoint or a business viewpoint?

disCussion Participation in Problem Resolution

A fundamental question is: Who should participate in the resolution of this prob- lem? Is it enough that the CEO has sought input from the key members of his senior management staff?

A hospital is unique in that the stakeholders involved in and influenced by its actions are very important. With a problem of this magnitude, should the stakeholders be involved and, just as important, can they help? To determine the answer to this question, one must first identify who the stakeholders are, how they may be affected, and what the potential positive and negative ramifications of their involvement may be.

Medical Staff

Because the medical staff have a dominant role in the hospital as a customer, pro- vider of care, leader, and political force, the discussion should begin with them. Any change in clinical staffing or services will directly influence the care provided to their patients, so concerns regarding these issues are to be expected and under- stood. In addition, the medical staff have evolved as an informal (and sometimes formal) representative for hospital staff; they will likely hear all the rumors (accu- rate or not), know the staff's fears, and, in many cases, attempt to defend and protect the staff. Such attempts may include discussion with board members or use of the formal medical staff structure to react to any considered changes or reductions. Because rightsizing is difficult to do without affecting services, in some circumstances their concerns may be legitimate. More important, the medical staff can be valuable when determining how to address this problem.

The CEO must understand that the medical staff will be affected and should be a part of the process in some way. The medical staff can be defensive and disruptive, or they can be collaborative. Because financial problems are unfor- tunately common in healthcare, members of the medical staff no longer think of staff reductions as inconceivable. Accordingly, the CEO may identify this challenge as one that requires the combined efforts of both the medical staff and management. The CEO should start by educating and sharing his concerns with the medical staff in a variety of settings. Using the formal structure, beginning with the medical executive committee, is beneficial. However, informal discus- sions at departmental meetings or with key individual physicians are essential.

The medical staff can contribute greatly to the resolution of the problem. Reductions in length of stay, selection and use of medical and surgical supplies, and increases in admissions are possible and may be preferable alternatives to los- ing popular staff or important services. Finally, involvement in these tough deci- sions may enhance the medical staff's appreciation that, after thorough analysis, the chosen approach is the most feasible one.

Governing Board Members

The board will be involved in the formal approval stages of the process, but they may provide value in the decision phase as well. Because rightsizing is increasingly common in other industries, some board members may have experience in this area. The CEO must be willing to use all available expertise to accomplish staff reduc- tions with the least negative effect. The more involved the board is, the more sup- port this matter will receive and the better prepared board members will be when responding to any personal inquiries they may receive regarding actions taken.

Unions

Although unions have historically been more common in public hospitals, they are active throughout healthcare. The overall number of unionized workers increased from 2016 to 2017 (Chen 2018), and it is predicted that union membership will continue to grow because of uncertainties in the job market. The increasing involvement of unions has required senior managers to develop new skills to work successfully in a union environment.

Although the most common approach taken by US managers when planning rightsizing is to notify unions of the plan for reductions, the CEO should strongly consider involving union leadership at an earlier stage of the process. Sharing the problem and identifying it as an issue common to all parties may direct negative feelings away from the hospital and management and focus attention on the exter- nal forces that are causing the financial problems. In addition, union leadership may have valuable input.

The CEO of Hillside recalled hearing about one organization in similar cir- cumstances that spent more than 30 hours in one week with key union leaders examining the entire operating budget and seeking feedback on each line item. From this process, the organization was able to implement a number of sound ideas for reducing costs that it might not have conceived on its own. Just as important, involving union leadership in solving the problem demonstrated the difficulty that management was facing and its desire to reduce costs in the best and fairest manner possible.

Essential to the success of this approach with union leadership and employees are the following actions:

• The first cuts must be made at the level of vice president, associate administrator, or senior departmental director.
• No particular department or segment of the organization should be exempt from rightsizing, unless this exemption is completely justifiable.
• If possible, the same percentage of managers and employees should be dismissed.
• Managers should exhibit and communicate to their employees the sacrifices

that they, too, are making as a result of the rightsizing.

These actions will allow union leaders to return to their respective con- stituents with a strong appreciation of the challenge involved and the intent of management to address it fairly. This appreciation could also be important considering how union leadership may respond to the media. In many cases, a hospital's ability to provide adequate and safe care may be criticized after a reduc- tion in workforce. Such criticism may cause a further reduction in volume and the need for additional cost and staff reductions. However, if union leadership has participated in the process and is comfortable that the actions taken were required, that the actions were fair and consistently executed, and that the focus of the institution remains on the patient, a supportive response from union lead- ership is possible.

Employees

Progressive and beneficial feedback from employees is also desirable. Giving employees the opportunity to identify cost-saving opportunities, educating them about what will happen if costs cannot be reduced, and incorporating them in the process where possible all have the potential to identify new approaches and to avoid mistrust of management. Communication with employees is critical as the issue develops. Rumors, misinformation, and anger toward management are not beneficial and are typically disruptive and counterproductive.

The CEO is responsible for defining guidelines that ensure all staff resources are incorporated in the process, even over the recommendations of members of management who prefer to make these decisions the "easy way." Fear of politi- cally affecting the process and delaying needed reductions is common, and while such caution has merit, this is not the time for management to be autocratic. If the rationale for workforce reduction is not communicated well and honestly, the negative impact on employee morale and productivity can be devastating.

110 Part II: Case Studies and Moral Challenges

exploring other options

A critical aspect of rightsizing is determining that it is the right or only approach to address the organization's financial difficulties. A common premise is that the desired goal is reducing costs. That premise is not accurate. The primary goal is to improve overall financial viability. The organization is measured on its financial viability, which is essential to its long-term success. The CEO should remember that if cutting costs were the only goal, then closing all the nursing units would do the tricka large percentage of costs would be eliminated. However, the cor- responding loss of revenue obviously precludes that approach. Financial viability can be improved via two avenues: reducing costs and increasing revenues. All too frequently, the focus in healthcare has been on cost reduction.

Although the overall high costs of healthcare certainly support cost reduction, it is not always the best direction for the organization and the community it serves. The CFO often makes cost reduction a primary strategy for several good reasons:

• It is clearly the fastest method of addressing financial concerns.
• It is the most reliable and measurable method in the short run. As the

CFO at Hillside pointed out, even when the unemployment insurance and severance costs are incorporated, the savings from rightsizing are well defined and expedient.

• In healthcare today, the costs of care often exceed reimbursement.

However, the CEO's duty is to consider cost reduction as only one option and ensure that all possibilities are explored for the long-term success of the organization. In the case of Hillside, one such possibility may be a review of its public status. Although transforming a public hospital to a not-for-profit one may be difficult and expensive, the option is not uncommon. A move of this type has some distinct financial advantages and some potential disadvantages. For example, public hos- pitals in many states are constrained in their ability to invest cash reserves, which during a highly productive financial market can result in significant limitations on potential returns from investments. In addition, eliminating the public hospital status may increase the hospital's ability to refine its benefit or pension status to a more competitive one that is parallel to those of not-for-profit hospitals. On the negative side, losing its public status could reduce Hillside's access to certain DSH payments and other benefits that have been identified for public hospitals. In sum, Hillside should examine all aspects to determine the value and potential

impact of this transformation. The organization should also examine the potential for reducing or eliminating clinical programs in the hospital itself. Although historically the strategic approach has been to provide as many different services as possible, maintaining

programs with decreasing volume and expensive qualifications and support needs may not be beneficial. However, services can remain open, with no clinical loss to the community, through collaboration with other providers.

For example, a collaborative effort between two organizations may allow one service to be reduced at one facility in return for another service being dropped at the other. Both facilities may thereby expand their volume and potentially increase their profit margin. The CEO and senior management must not be limited by his- torical protocol. The fact that other hospitals have "always provided" certain ser- vices does not mean they cannot change. A progressive and well-planned effort to reduce duplication of services and commit to their delivery by one provider may be well received by insurers, local industry leaders, and the community. While the physicians and staff currently providing these services may voice some concerns, their concerns may be minimal compared with those caused by the continued reduction of an organization's overall capability.

Revenue enhancement

In today's competitive healthcare environment, identifying opportunities to expand revenue has become increasingly challenging. Efforts should revolve around several key areas:

1.

Ensure that payment is received on a timely basis and at the highest amount for services rendered. Opportunities in this area include reviewing the present billing system to identify departmental performance. This assessment includes the following at minimum:

1. Days in receivables (compared with state and national averages). Changes in performance over the past 24 months may reflect problems that have grown or emerged in the recent past.
2. Charge rates. An external review of charge rates may identify possible areas of improvement, particularly in areas such as operating rooms and ambulatory facilities.
3. Analysis of individual insurance agreements. Analysis of insurance agree- ments may result in renegotiation of certain contracts or separation from others.
4. Internal analysis of charging programs. Analysis of charging programs will ensure that charges are developed on a timely basis for all services rendered.

Review patient volume to ensure that the highest volume of patients is obtained for each service rendered. a. An in-depth inspection of admission rates by physician and service, combined with a yearly analysis of market share data, will identify changes or opportunities in volume. It will also give the CEO information to discuss with the medical staff when identifying strategic priorities for the recruit- ment or placement of new physicians. The CEO should also examine the ages of the medical staff to identify needs for future recruitment.

1. An analysis of patient satisfaction scores is important because it may reveal factors affecting patient volume. Recognizing the competitive environment requires a clear assessment of the present facilities and a commitment on the part of staff to enhance customer service.
2. New or additional service opportunities should be explored in depth to identify all available revenue sources. The CEO should examine each of these areas in detail with the appropriate staff. Because of the competi- tive nature of healthcare, finding new revenue-producing programs is not easy. The proverbial low-hanging fruit has probably been picked, and new programs may require significant investment or a time delay before profits are realized. However, revenue generation is a key responsibility of the CEO to move the organization forward.

To make investments of this kind at this time requires the confidence of the board and medical staff and may be criticized by union leaders or other employees. The CEO is responsible for keeping these important stakeholders focused on the vision of the organization's long-term success and for ensuring that other stake- holders appreciate that the actions being taken do not reflect a short-range crisis but rather an industry direction.

Clinical Quality

One challenge facing Hillside's CEO is determining if any contemplated rightsiz- ing will affect the quality of the organization's clinical care. The board, CEO, and senior management must appreciate the need for high quality and understand that quality issues do not allow much room for flexibility.

The 1999 Institute of Medicine report To Err Is Humannoted that "at least 44,000 people, and perhaps as many as 98,000 people, die in hospitals each year as a result of medical errors" and that medication errors are costly: "2 of every 100 admissions experienced a preventable, adverse drug event resulting in increased hospital costs of $4,700 per admission" (Kohn, Corrigan, and Donaldson 1999). More recent studies have suggested that errors remain high and that many issues around substandard care persist (Leapfrog Group 2019; Sipherd 2018).

These efforts require the CEO to analyze every move in a rightsizing effort to ensure that the organization's clinical quality is not compromised. The chal- lenges associated with the expanding demands of clinical capability and decreasing

reimbursement do not excuse the organization from performing at a consistent and standard level of quality. A new level of understanding and use of informa- tion is required, along with a collaborative working relationship with the medical staff, nursing leadership, and senior management. A series of reactive decisions may compromise the organization's ability to maintain an acceptable level of care.

Community health

The organization's commitment to community health programs must be given priority. Assessments should take into account the potential for improved health and efficiencies, as well as the possibility of a reduction in programs. The CEO at Hillside must, for example, carefully examine the clinic providing care to the underserved population. At a time when the organization's overall future viabil- ity is at stake, programs of this type may be deemed unaffordable. On the other hand, such programs may incur front-end financial losses but also entail signifi- cant admissions and laboratory and diagnostic tests that add financial value to the organization. The entire financial contribution of this type of program must be examined to determine its true bottom-line impact on the organization. Identify- ing what will happen if this program is not in operation is also valuable. Eliminat- ing the program may have a real potential cost if, for example, patients use the ED instead, which would result in overcrowding and delays in admissions and care for more emergent patients.

Finally, other options for retaining a valuable program should be examined. Is it possible, for example, to share the costs of the program with other healthcare providers? Are grants or governmental funds available that may provide support for a program that contributes to the overall health of the community? Could an existing, federally funded health clinic in the community take over the operation of the Hillside clinic and make it eligible for financial support?

Closing a program of this type may also have a political cost. Underserved communities have become extremely sensitized through ongoing experiences of having services reduced or eliminated, and they may criticize the closure in the media, to community leaders, or in other ways, such as picketing. These concerns must be considered when measuring the true cost of reducing such services.

Collaboration

Financial challenges provide an opportunity for organizations like Hillside to examine the possibility of increased collaboration with competitors. Because the financial difficulties experienced by healthcare organizations are almost uni- versal, competing hospitals are likely facing these challenges as well. In these circumstances, opportunities may exist for the organizations to work collectively and merge certain services to avoid duplication, reduce costs, and enhance the overall quality of programs provided. Opportunities may include programs such as jointly run MRI or other radiological test centers, centralized laboratory sys- tems, and support services such as laundry, freestanding security, and ambulance services. In addition, a strategic assessment may be made of programs that are offered at multiple hospitals and possible collaborations explored.

A joint operating agreement, which allows both institutions to work together and share the savings achieved by avoiding duplication, could formalize this col- laboration. For example, an agreement between Hillside and Behavioral Medicine Services resulted in the closure of a freestanding outpatient behavioral center at one facility and the closure of the inpatient pediatric adolescent unit at the other. The end result was significant savings and improved utilization by both parties.

Leadership

The financial problems experienced by Hillside are common in healthcare. Decreases in revenue, increases in costs, and reductions in inpatient volume have required institutions such as Hillside to deal with significant threats to their finan- cial viability, in many cases necessitating immediate action and tough decisions. To some degree, the climate has moved the healthcare industry closer in parallel to other industries in the United States. No longer is the healthcare system a stable industry that does not experience layoffs and workforce reductions. Rather, the dramatic pressures coming from the government, insurance companies, and industry have made it one of the most complicated and uncertain industries in our society.

These challenges require healthcare executives to become better leaders and more sophisticated managers capable of making tough decisions. Financial chal- lenges combined with the expansion of healthcare unions, managed care, and increasing pressure on and from physicians now demand that healthcare execu- tives develop the skills necessary to work collaboratively with medical staff, union leaders, and employees. Healthcare managers must enhance their ability to lead the institution in the strategic planning process, take the strategic vision that evolves, sell it to the primary stakeholders, and make it work. Once key services are defined, executives must be able to monitor and measure these programs to determine if and when they need enhancements or reductions. Recognizing their obligation to community service, leaders must ensure that financially successful programs can pay for those that are not self-sustaining.

As changes take place and outside influences affect the industry, healthcare executives must lead their institutions in the right direction. Too often, actions of external decision-makers have had an unforeseen effect on organizations. For example, as the government has encouraged the closure of hospital beds and services, it has ignored the impact on the hospital's ED services. Because of the reduction of reimbursement for home and long-term healthcare, more than 25 percent of the home health agencies in the United States have closed over the past several years, and many long-term care providers are facing significant financial problems. These fiscal challenges are magnified as states prolong the approval process for qualifying Medicaid applicants for nursing home services, delaying the discharge process and lengthening hospital lengths of stay. The CEO is responsible for addressing these challenges successfully and ethically without compromising the clinical care the institution provides.

Although many parallels to other industries can be made, the expectations for providers of healthcare are significantly different. Moving a hospital to another community to reduce costs is not an option. Turning away patients who require emergency care because of their financial status is unethical, ill advised, and illegal. Healthcare executives must deal with these challenges in a more compassionate way than leaders in other industries would. The willingness of large corporations to cut tens of thousands of jobs to enhance the profit margins of their stockhold- ers is only too well known. To deal with financial concerns, healthcare executives must start by asking themselves whether they have done everything possible to effectively reduce costs, improve financial performance, and enhance their services to make them more attractive to consumers. If they cannot convince themselves of this, they must not take the easy way out and cut staff. The ability to deal with these issues well will separate the successful and ethical executive from the rest of the pack.