In 2009, Methodist Hospitals, based in Gary, Ind., posted its first positive operating margin in seven years.

The success came after a year in which the two-hospital, 625-bed system experienced losses totaling $73 million, says Methodist CFO Loren Chandler. Leaving behind yearly multimillion dollar losses required an overhaul of just about every facet of the system.

The improvement plan targeted 28 specific items and yielded nearly $28 million in savings. Chandler says six areas drove the vast majority of these savings.

  • Contract labor
  • Productivity
  • Skilled nursing
  • Supply chain
  • Maintenance
  • Employee benefits

In addition, Chandler says the system brought the management of various services, including dietary and patient transportation, back in-house. Methodist Hospitals also renegotiated the contracts for two departments that continue to be outsourced-pharmacy and biomedical.

The result: a $3.3 million operating gain in 2009, a turnaround that wasn't expected to happen until the middle of this year, Chandler says. Forging ahead, Chandler expects Methodist Hospitals to realize additional savings in 2010 as the team charged with the turnaround ramps up cost reduction efforts in supply chain and revenue cycle.

For more how-to details about Methodist Hospitals' financial turnaround, access the June 2010 issue of HFMA's Healthcare Cost Containment newsletter, which is sponsored by Cardinal Health (subscription required).

Publication Date: Tuesday, June 15, 2010