Johns Hopkins Gazette: March 3, 1997

Peterson Modifies
Earlier Predictions
on Budget Cuts

Randolph Fillmore
Contributing Writer

At a Feb. 24 "town meeting" for faculty and staff of the health system and School of Medicine, newly appointed hospital president Ronald R. Peterson optimistically modified his earlier predictions on proposed budget cuts.

"The cuts may not be as onerous as some may feel," said Peterson, who suggested that $40 to 45 million of the $55 million Johns Hopkins Medicine reductions would have to come from the Johns Hopkins Hospital's $600 million budget. Reductions will be necessary to offset predicted losses in revenue, and improve the competitive price position. With regard to potential layoffs, Peterson noted that in the health system there is a "natural attrition rate of about 100 positions per month" that may be harnessed to reduce the potential for lay-offs. "We need to look at paring down administrative structures, which have accumulated over the last 15 to 20 years," Peterson added. In developing specific implementation plans for cost reduction we will also look at what departments have done in controlling unit costs as well as examining their competitive position in the marketplace.

In January, Peterson announed that clinical departments would need to develop plans to trim 10 percent from their budgets while administrative departments would be asked to cut more than 15 percent. Five percent budget cuts were the order for medical school departments. Feb. 15 was the deadline for department chairs to send Peterson proposals for budget cutting.

Peterson also drew attention to hospital admissions, which he said were "holding steady" during the first two months of 1997, but running 7 percent below expected admissions on a year-to-date basis. "February has been rather busy," Peterson added.

Edward Miller Jr., CEO of Johns Hopkins Medicine, told the gathering that Hopkins is still first in the nation in receiving National Institutes of Health funding, procuring $204 million in 1996. But, according to Miller, this success also points to a "vulnerability" that could have serious consequences should NIH change its funding structure or programs.

"We have three battles to fight," Miller said, who joined Peterson in calling for "volume enhancement" as a way to raise revenues. "The battles are in cost, product and service." Miller pointed out how costs have risen over several decades. While noting that the "Hopkins product is still unique," he pointed to the "customer service battle" as a key to success. "We are in the middle of the pack when it comes to customer satisfaction," said Miller. "We are not up there with the premier institutions."

Miller added that "driving down barriers to access" for patients and making billing procedures more efficient were priorities. To help close the gap in customer satisfaction, Miller announced the formation of customer service action groups to oversee improvements. Elias Zerhouni, interim director of the Clinical Practice Association, which represents fulltime faculty physicians, and Judy Reitz, hospital senior vice president for operations, joined Miller in addressing the need for improving customer service.

Newly installed university president William R. Brody also drew attention to what he called the "challenging times" for the health system and urged those in attendance to take on customer service as a goal. "Patient care is local and highly personal," Brody said. "We can accomplish a lot by building loyalty to our patients and referring physicians."

John D. Stobo, chairman and CEO of Johns Hopkins HealthCare, announced several new collaborative projects with Suburban Hospital in Washington, D.C., with NIH and with the regional hospital serving Kent and Queen Anne's counties on Maryland's Eastern Shore. "Part of our survival is access to patients," Stobo said.

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