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Tenet Healthcare Plans to Outsource 1,000+ Positions to Cut Costs

Tenet Healthcare plans to “aggressively” offshore its healthcare workforce in the next 12 to 18 months in an effort to improve financial performance.

Healthcare workforce

Source: Thinkstock

By Jacqueline LaPointe

- The country’s largest for-profit hospital system is looking to significantly expand their offshore healthcare workforce in the next year or two.

Local news source Dallas News recently reported that the large hospital system is looking “at aggressively doing that across the whole enterprise.” Tenet Healthcare’s CEO Ronald Rittenmeyer made the announcement at an investor conference last week.

The Dallas, Texas-based hospital system has not settled on how many employees will be impacted by the offshoring strategy. However, Rittenmeyer estimated that more than 1,000 employees will be displaced within the next 12 to 18 months.

According to its website, Tenet currently employs approximately 115,000 individuals across 68 acute care and specialty hospitals and hundreds of other care sites, as well as its revenue cycle technology company Conifer Health Solutions and its ambulatory platform venture United Surgical Partners International.

Rittenmeyer told local news sources that the system will look to offshore across all three components of the system, focusing on employees who are responsible for corporate functions.

READ MORE: Optimizing Healthcare Workforce Management for High-Value Care

Physicians, nurses, and other providers who work directly with patients will not be affected.

The offshoring plan is part of the large hospital system’s turnaround strategy. Tenet’s financial performance has been on a downswing. The hospital system’s most recent results from the third quarter of 2018 showed a net loss from continuing operations attributable to Tenet common shareholders of $9 million.

“Our hospitals did not meet our expectations and we are focusing on specific areas to address those gaps,” Rittenmeyer said in the announcement. “Strengthening enterprise operations remains our primary focus – and we will continue moving with urgency to implement targeted growth initiatives, achieve operational efficiencies, make further enhancements to our facility portfolio and instill culture changes to drive accountability.”

Tenet leaders have committed to an enterprise-wide cost reduction goal of $150 million to improve financial performance.

To achieve significant cost reductions in by the end of 2018, the hospital system eliminated 1,300 jobs and renegotiated contracts with suppliers and vendors. The hospital system also planned to eliminate the regional management layer, streamline corporate overhead, and centralize support to decrease costs.

READ MORE: Gaining Visibility into Healthcare Workforce Management Cuts Costs

Officials anticipated about three-quarters of the savings to stem from hospital operations and other segments.

Tenet leaders also announced significant divestitures in major markets in 2017. By selling hospitals in certain domestic and international markets, the hospital system expected to see between $900 million and $1 billion in proceeds, including cash and the elimination of capital lease debt.

Through its turnaround strategy, Tenet reportedly reduced costs by $250 million in just over a year and turned over a large portion of its leadership team. Twenty percent of corporate executives changed, including the CEO, COO, and chiefs of technology and marketing, Dallas News reported.

Tenet also changed about 35 percent of its hospital leaders in accordance with its goal to eliminate the regional management layer, and replaced about one-half of the board of directors, the local news source found.

The latest offshoring news is another part of Tenet’s overall push to improve financial performance, Rittenmeyer explained to local news sources.

READ MORE: Addressing Productivity, Labor to Bend the Healthcare Cost Curve

Labor can account for up to 60 percent of the average hospital’s costs and it is the greatest driver of operating expenses. The head of Tenet anticipates the offshoring to lower costs and allow the hospital system to invest in other areas like surgery centers.

“We’re in the business to make a profit — Number 1,” Rittenmeyer said. “That's our job, so we’re always going to be looking to reduce our costs. That’s just the facts.”

Tenet Healthcare is not the only hospital system in the country offshoring their jobs. Partners Healthcare in Boston, Massachusetts announced in 2018 that it outsourced 100 medical coding positions to companies in India where coders are paid significantly less.

“We need to do things to improve productivity in healthcare,” said Partner’s President and CEO David Torchiana, MD. “I don’t know of another … sector that doesn't outsource call centers and back-office functions.”

The large hospital system also has a three-year plan to reduce costs by $500 to $800 million.

Outsourcing key administrative functions is on the rise among hospitals and health systems. A recent Black Book survey found that 18 percent of hospital leaders executed a full revenue cycle outsourcing project in 2018, up from just 11 percent three years prior. Approximately 80 percent of hospital leaders are also considering outsourcing their full revenue cycle by 2019.

“For hospitals in financial danger with margin pressures placing the entire hospital workforce at risk, attacking margin by outsourcing one or more areas can actually save jobs in other core departments,” stated Doug Brown, President of Black Book Research LLC.

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