'Operational changes are required for us to survive,' insists New York health system CEO

Aaron Kramer joined Adirondack Health as assistant vice president of information systems in 2015 and climbed the executive ranks to become CEO of the Saranac Lake, N.Y.-based health system after his predecessor Sylvia Getman retired in July 2021. 

On the back of one of the worst financial years in decades for U.S. hospitals, many health systems aim to shore up finances by reducing contract labor, outsourcing certain operations and scaling back or closing service lines operating at negative margins, among other tactics.

Adirondack lost $14 million in fiscal year 2022, and, like many health systems, is implementing operational changes to ensure its long-term sustainability, according to Mr. Kramer. The health system has recently completed the sale of Mercy Living Center, a 60-bed nursing home in Tupper Lake, N.Y., and plans to close its emergency department in Lake Placid, N.Y., on Aug. 20 after receiving state approval. 

Mr. Kramer spoke to Becker's Hospital Review about Adirondack's operational changes, how it is keeping labor costs down and the biggest opportunities for the health system to improve revenue.

Question: Last year was one of the worst financial years in decades for hospitals, with Adirondack Health losing $14 million in the fiscal year. How is 2023 weighing up? What are your financial goals over the next year?

Aaron Kramer: This year is certainly looking better than 2022, but we have a lot of work to do to ensure our independent health system is still around 50 or 100 years from now. We've done a great deal of thinking, planning and executing to shore up Adirondack Health's sustainability, but operational changes are required for us to thrive. We need to generate enough revenue to facilitate continued investment in our equipment, our facilities, our employees and our medical staff.

As a nonprofit organization facing unprecedented financial challenges, we are very focused on honoring our mission through the lens of our margin. We want to help as many people as we can and provide as many services as we can. But if we bankrupt ourselves, how does that ultimately serve our mission and our communities? We need operational discipline.

I think our financial goals over the next year are to see through a couple of difficult decisions, identify opportunities for additional savings and invest where we need to, thereby preserving and ensuring access to high-quality care in the rural mountain communities we serve.

Q: What is Adirondack Health's game plan for marching down costs — particularly the cost of labor?

AK: We are already a low-cost, high-quality provider. To keep costs low, we need to limit the number of travelers working here by recruiting and retaining local staff. We are also working with regional community colleges to build academic programs that serve as pipelines for in-demand skill sets. For many years, we have benefitted from North Country Community College's nursing and radiology programs. We're now participating in a similar program for aspiring surgical technicians.

Cultivating and maintaining strong working relationships with unionized employees is also paramount. In the past six months, Adirondack Health renegotiated multi-year labor agreements with the New York State Nurses Association and the United Food and Commercial Workers, without any strikes or other operational disruptions. Thoughtful and mutually respectful collaboration is a key value for us.

Q: How is your organization addressing staffing shortages? Where are your biggest challenges? What success have you found in recruitment or retention efforts?

AK: Competently addressing staffing shortages is part and parcel to controlling labor costs, so we approach them largely the same way. On some level, we benefit from employee self-selection. If you’re willing to live in a place with six months of serious winter, a month of mud, and two months of incessant black flies, you're probably here for more than just a paycheck. Our unique setting and the vibrant communities we serve are strengths that we draw upon from a recruitment and retention standpoint.  

At Adirondack Health, there is potential for a work-life balance that is highly appealing to some people. As a physician, we can likely offer you more independence when it comes to your practice. You can take an active role in shaping your patients' experiences here — an area in which we excel. You can make an outsized impact on the health and happiness of the community in which you reside. And at the end of your workday, it's not hard to sneak in a quick hike, paddle or ski. Those differences can be strong motivators.

We also take employee engagement very seriously. Last year, Adirondack Health earned Pathway to Excellence redesignation from the American Nurses Credentialing Center. This required us to evaluate and submit 53 elements of performance, with direct input from our frontline nurses. Ninety-seven percent of Adirondack Health nurses responded that our chief nursing officer and nurse managers are open and available to them. More than 90 percent of nurses said Adirondack Health promotes a culture of interprofessional decisionmaking, a culture of staff recognition and a culture of professional development.

Q: Where are Adirondack Health's biggest opportunities to improve revenue as financial and challenges — such as inflation and the rising costs of drugs, labor and supplies — persist?

AK: I think one of our best opportunities to improve revenue is to focus on doing the things we do very well and collaborate, as appropriate, with other regional partners and entities on the things they do very well. We also need to redouble our recruitment and retention efforts to control labor costs and continue to make smart investments in a climate of economic uncertainty. With so much government involvement in the payer mix, we need to engage our federal, state and local elected officials and agencies to advocate for things like reimbursement rate increases, diversity in payment models, and predictable funding streams. Adirondack Health has evaluated a number of different payment models — the current options have the potential to solve our financial challenges but would sacrifice access to care.

Finally, we should take a closer look — as an industry — at the work being done by the Center for Healthcare Quality & Payment Reform around standby capacity payments, service-based fees for diagnostic and treatment services based on variable costs, accountability for quality and efficiency, and value-based cost-sharing for patients.

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