by Andrew Walden

Operating income at Queens Medical Center “has fallen significantly short of budget” and nonessential management employees are being furloughed three days per month for the next six months as part of a cost-cutting drive.  Medical departments are being asked to “decrease sitter usage” – that is reduce personnel assigned to directly observe mentally ill or drug-addicted patients.  Sitter reduction often correlates with increase in the use of restraints on patients in order to prevent falls and self-inflicted injuries.  Mental illness is the leading cause of hospital admissions in Hawaii. Hawaii drug overdose deaths are soaring and now kill more than auto accidents.

In an email to Queens employees and physicians, Chief Operating Officer Mark Yamakawa cites “3 major drivers that impact our revenue; increase in length of stay, shortfall in volume, and decline in Case Mix Index (CMI).”  According to the Center for Medicare and Medicaid Services, “CMI represents the average diagnosis-related group (DRG) relative weight for that hospital.”  The American Health Lawyers Association explains: “A Diagnosis-Related Group (DRG) is a statistical system of classifying any inpatient stay into groups for the purposes of payment.”

With ACA rules coming into effect January 1 for the second half of Queens’ fiscal year, this may be in part a preemptive move to prepare for the impact of Obamacare.

Here is the full text of the memo:

To: Our employees and physicians

From : Mark Yamakawa, EVP/COO

Date:  December 9, 2013

Aloha everyone,

Through November, QMC’s year to date operating income has fallen significantly short of budget.  This is attributable to 3 major drivers that impact our revenue; increase in length of stay, shortfall in volume, and decline in Case Mix Index (CMI).  We are nearly at the mid-point of the fiscal year so we must act swiftly to reverse this trend to meet our budgeted targets.

We earlier implemented initiatives to increase our capacity and throughput and have seen good results in ED volume; however, we have not seen corresponding results in other areas of the hospital.  We will continue our efforts on capacity and throughput and will need to additionally target revenue enhancement, labor and benefits expenses, and non-labor and supplies expenses.  Our initial focus will be:

• decreasing overtime/double time
• decreasing sitter usage
• decreasing discretionary spending such as catering, food and travel
• managing staffing by flexing to workload
• deferring or eliminating purchases of goods and services

We are also asking Staff, Managers, Directors, and Vice Presidents take 3 additional PTO days per month for the remainder of the fiscal year for those who are not replaced to maintain operations.   Exceptions to this request will be made on a case by case basis by your Vice President to assure consistency.

We welcome your thoughts on specific or additional cost savings/revenue enhancement initiatives and ask you to contact your Vice President directly to share your ideas.

Thank you for your support and commitment to address this significant financial challenge.