UPHS's Financial Recovery Project
The following message is the third in a series of e-mail communictions to the University of Pennsylvania Health System's administrative forum, which includes the leadership of the several hospitals and clinical practices of the System. It was sent Thursday, October 19, 1999, to the forum with a request to share this information with all staff of their units.
UPHS's Financial Recovery Project: The Difficult New Phase of Workforce Reduction
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Today, a broad financial-recovery strategy designed to preserve the UPHS mission of medical excellence is being presented to the University of Pennsylvania Trustees. The plan is the result of months of careful planning and difficult decision-making. Nothing about this effort was easy and nothing will be easy about the days ahead. This is a very difficult time for all of us at the University of Pennsylvania Health System.
But we must--and will--do everything necessary to bring UPHS back to firm financial footing. As you know, a number of financial pressures are squeezing hospitals and health systems nationwide. These include significant government cutbacks, reduced and delayed payments from insurers, and increased amounts of patient care for which we receive no compensation whatsoever. In addition, our costs for providing care are simply too high, given the level of reimbursement.
Despite treating record numbers of patients, the University of Pennsylvania Health System sustained a $166 million operating loss in FY '99, which includes the write-down of certain accounts receivable and severance costs from a workforce reduction in May of this year. After adjusting for reportable interest and dividend income, the total operating loss in FY '99 is $198 million.
To restore financial health, we must greatly reduce our expenses across the entire Health System. And we must do so without compromising the excellence of our patient care. Considering the magnitude of our challenge, it's a delicate balance. But I am confident that we have achieved that balance.
Last May, we reduced the UPHS health services workforce by 9 percent, or 1,100 positions, as part of the first phase of our financial-recovery plan. Today, in the next phase of our plan, we are announcing the elimination of approximately 1,700 additional positions throughout UPHS by June 30, 2000. These cuts do not represent an across-the-board percentage reduction, but are the result of an area-by-area analysis that compared our staffing levels to national benchmarks. Where jobs are being eliminated, we will redesign work or improve processes so that our organization can continue to operate effectively. Supervisors will notify affected staff members beginning November 1. Unfortunately, some reductions cannot be announced until later in the fiscal year.
You can be assured that we will treat everyone with dignity, compassion, and respect. As we did for May's workforce reduction, we will use a fair and consistent decision-making process, aligned directly with the UPHS Mission and our Core Values. We are committed to supporting the people whose positions will be eliminated and helping them through the transition process. We will provide pay and benefits continuation, as well as outplacement assistance, to eligible staff. I personally feel very badly for those staff members who will be leaving us. We are all affected by these losses.
We have a difficult road ahead of us. I would like to thank all of you for your hard work, particularly in these uncertain times. We are getting on top of our financial troubles and will emerge a stronger and more efficient organization. You have helped put UPHS into a position of incredible stature in American medicine. And you have done so by working together. At times like these we have to depend on that combined energy and dedication more than ever, as we look forward to creating the Future of Medicine in the next millennium.
Best regards.
--William N. Kelley, M.D., CEO,
University of Pennsylvania Health System Dean, School of Medicine
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Almanac, Vol. 46, No. 9, October 26, 1999