Southeast Alabama Medical Center, Dothan’s largest employer, announced Wednesday that the hospital has cut 80 of the facility’s 2,800 jobs after a lengthy process of considering various cost-savings measures.
Mark Stewart, director of community relations at SAMC, said revenue at the hospital has been trending downward for the past four or five years. In 2016, the hospital operated in the red, recording a loss of $2 million in the operations portion of the budget.
Though SAMC is considered a not-for-profit hospital, it still needs a three to five percent profit margin each year to keep the facility operating. SAMC’s revenue is around $305 million a year.
In February, SAMC began looking at where they were financially. They decided to make a grassroots effort with nine task force groups. They got together, went through budgets, and looked for what could be cut and reduced. The end goal was to cut $30 million in expenses.
SAMC personnel did not indicate specific positions eliminated, but cuts were expected to affect managers and employees.
Despite the financial reductions, SAMC also wanted to make sure growth continued, so they turned to SAMC employees for ideas. They ended up generating 1,100 ideas for cost savings measures.
“It had to be cost reduction and growth at the same time,” Stewart said. “Every employee had an opportunity to put their idea before us.”
Stewart said SAMC wants to remain on the cutting edge of technology, but it also won’t be adding things that don’t make sense.
“We want to be the healthcare leader to the area,” Stewart said. “We feel like when we come out of this, we’ll be stronger in a lot of ways.”
Claudia Hall, vice president of marketing at SAMC, said the hospital focused on three primary cost-reduction areas: purchase services, supplies, and labor. Employees from different departments were able to point out some substantial cost savings, such as a lab worker who suggested eliminating the use of a specific type of test tube that wasn’t necessary, but cost the hospital an extra $75,000 a year.
“Some of our best ideas came from the front line staff,” Hall said.
Since the cost-cutting project began earlier this year, Hall said SAMC has communicated with its own employees through every phase of the project.
Though SAMC was not in immediate trouble financially, Hall said the cuts will prepare SAMC for future changes in the healthcare industry.
“If you take a look at healthcare as a whole throughout the country, everybody is trying to reinvent themselves,” Stewart said. “The important thing is we are not in crisis mode doing this … we don’t want to get to that point. This is more like a life change for the hospital.”
While planning the cost savings measures, SAMC has been in touch with other medical facilities and Stewart said everything was up for discussion.
All of the cost savings will come from changes at SAMC. The Alabama College of Osteopathic Medicine was not part of the plan. Stewart said ACOM pays for itself and is not part of SAMC’s budget.
One revenue generating option SAMC does have is an increase in Houston County’s millage rate. In 1947, four mills were levied through the Houston County Health Care Authority to build the hospital. It opened in 1957 as General Hospital. In the 1980s the millage rate was dropped to 1 mill. The rate was increased by an additional 1.5 mills in March 2011 by the healthcare authority to help pay back a $20 million loan needed for an escrow account to fund ACOM. SAMC does have the option of increasing the millage rate again, but Stewart said that was never considered.
Flowers Hospital, a Community Health Systems facility which employs around 1,300 people in west Dothan, announced the reduction of at least 15 positions in April.