Becker's Hospital Review

17 THOUGHT LEADERSHIP 'We're going to come out of this winning:' Northwell CEO on labor challenges and the system's biggest growth area By Alan Condon N ew Hyde Park, N.Y.-based Northwell Health began 2023 with a low, but positive operating margin, but labor costs are expected to increase again in 2023 on the back of recent union activity in the state. To offset such increases that were not anticipated in the 2023 budget, Northwell is evaluating opportunities to reduce expenses and increase revenue across the health system, which includes 21 hospitals and about 83,000 employees. Michael Dowling, CEO of Northwell, spoke to Becker's Hospital Review about the health system's biggest challenge in 2023, how it approaches cost-cutting and why outpatient care is its biggest growth area. Editor's note: Responses are lightly edited for length and clarity. Question: Many health systems saw margins dip in 2022 amid rising inflation, increased labor costs and declining patient volumes. How have you led Northwell through the challenges of in 2022? Michael Dowling: We ended 2022 with a low, but positive margin. We've been coming back from COVID quite successfully, and we're back pretty much in all areas to where we were prior to the pandemic. Volumes have returned and we're very busy. We came into 2023 with a positive budget and a positive margin. We anticipate that you're always going to have challenges and disturbances, but it's important to stay focused and deal with it. We have a very detailed strategic plan, which outlines our various goals, and we stick to it. Q: What is your top priority today? MD: e biggest issue for us today is labor costs. We have lots of union activity in New York at the moment. ere were various nurse strikes in New York City at the beginning of the year. None of our hospitals were involved in those deliberations, but some of those hospitals agreed to contracts that have increases that were not anticipated in anybody's 2023 budget. at's going to have an effect on us. We have negotiations ongoing with the nurses' union, and have 10 unions overall. About 90 percent of Northwell's facilities have unions, so the bottom line is we are going to have expenses as a result of these contracts that were not anticipated in the budget. I don't know the final number on these contracts yet, but it's definitely going to be more than what we anticipated. e unions in New York get a lot of government support and have become very empowered and quite aggressive. e bottom line is there's more expense than we anticipated in our budget, so we need to figure out how to address that. We're looking at everything across our health system to find expense reductions or revenue enhancements to be able to make up for the increased labor costs and be optimistic about ending the year with a positive margin. But we're in a good place and are not like some other health systems that are struggling financially. Q: Where are the biggest opportunities to reduce expenses or increase revenue to offset the increased labor costs? MD: It's a combination of a lot of things. We have a detailed capital plan that we may slow down. We hire about 300 people a week, so maybe we'll target that hiring into specific areas and not be as broad based as we thought we could be. We will examine if we have specific programs or initiatives we can curtail without doing any damage to our core mission. It will end up being a portfolio of items; it won't be one big thing. On the revenue side, we're working very hard to increase our neurosurgery, cardiac, cancer and orthopedic businesses. Over the next couple of months, all of those things will be taken into consideration. e bottom line is we are going to come out of this winning. Q: Looking three or four years down the line, where do you see the biggest growth opportunities for Northwell? MD: Our biggest growth is in outpatient care. A lot of surgeries are moving outpatient, so we have to get ahead of that. Some think we are only a hospital system, but only about 46 percent of our business is from our hospital sector today. Home care is going to grow phenomenally, especially given the new technology that's available. Digital health will also dramatically expand. We're also looking at expanding into new geographic areas and markets. It's about positioning your offerings in places close to where people live, so you reduce the inconvenience of people having to travel long distances for care when it should be available to them closer to home. When you do that, you increase market share. We're constantly increasing our market share by being very aggressive about going to where the customer is and providing the highest quality care that we can. Part of that is also being able to recruit top-line, quality physicians. When you do that, you attract new business because you have competencies that you didn't have before. It's a combination of all of these things, but there's certainly no limit to the opportunities in front of us. We're not in a world of challenges; we're in a world of opportunity. e question is are we aggressive enough and do we have enough tolerance for some risk? We need to be as aggressive as we possibly can to take advantage of some of those opportunities. Image Credit: northwell.edu

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