It's been a financially challenging last few years for Burlington, Mass.-based Tufts Medicine, but the health system remains dedicated to providing strong patient care and is working diligently to get back to a healthier place.
In 2023, Tufts trimmed its operating loss to $171 million, a 57% improvement compared with 2022's $399 million loss.
Becker's connected with Tufts Medicine CEO Michael Dandorph and CFO Andrew DeVoe to discuss the health system's ramped-up turnaround plan and less reliance on contract labor in its bid to reduce losses to around $65 million in 2025.
Editor's note: Responses have been lightly edited for clarity and length.
Question: What strategies has Tufts Medicine implemented to improve fiscal health?
Michael Dandorph: One of the strategies was for me to recruit Andrew. Andrew joined us in February of this year. We had the fortune of working together about 20 years ago, going through a major turnaround at the University of Penn Health System in Philadelphia.
[He has] extraordinary experience in turnarounds and extraordinary experience in revenue-cycle management, which we have a lot of work to do there. We're making good progress now under his leadership. He's also very passionate about population health and value-based care. A perfect fit for where we're heading as a system.
Before Andrew got here, our focus was really on how do we grow and try to hold expenses down. We were trying to get our revenue cycle systems in place, and we implemented Epic in 2022 during the height of the staffing challenge. A lot of our focus was, how do we get Epic working for us. We don't have a demand problem; we've got to figure out how to efficiently get patients in.
Andrew has been leading us through the ramped up turnaround plan, making real progress.
Andrew DeVoe: We've changed the way we look at our financials. We're looking at them more from a quality-of-earnings perspective, meaning we try to take out any one-time events. We received over half a billion dollars during the COVID era, that kind of masked some of the financial, operational challenges that we've had.
This year, we're projected to lose about $245 million, and next year's business plan projects a loss of about $65 million. We have the right trajectory going, but it is focusing on getting detailed business plans for each initiative.
We are very confident that we will meet or exceed that budget next year.
Q: What is Tufts doing to reduce its labor costs? Does it still rely on a significant percent of contract labor?
AD: From a contract labor perspective, that's probably the first thing we tackled. We put our foot on the brakes about renewing any of these contract laborers, even if it means that we possibly reduce some services we're providing. By working with operators at each of the institutions to say, "Develop a plan to make this happen," we challenged the organization to cut contract labor in half by June of this year, and we did that.
The additional challenge was to be below pre-COVID levels by the end of the fiscal year in September. We peaked our contract labor in April, May 2022, at around $22 million per month. We just closed the June books and we were at $3.7 million. Most of that reduction has happened since the calendar began in January.
Q: Steward is working to offload its 31 hospitals and physician group, Stewardship Health. Are there opportunities for Tufts to acquire any Steward hospitals in its market?
MD: We did take a look at some things, but we're not interested in acquiring the assets. We're really focused on how we optimize our health system and the communities that we're in. We've committed to the state that if there's any way that we can help the communities that Steward's in, we're committed to do that. It falls short of us acquiring those assets.
In terms of growth, we continue to open ourselves up to other communities and other community partners. We have a number of affiliations in other markets with other hospitals that are not part of Tufts Medicine, but we bring care into that community and make sure they're meeting the needs of the patients in that community.
We are looking at ambulatory growth strategies. A lot of that has been focused on how we get through the turnaround, how we meet the demand that we have, and how we continue to grow that demand in key services.
We've done probably more on the physician side than we have on acquiring or merging with other hospitals. The future is how do we create a great and extraordinary environment for our physicians and our care teams.
Q: For health systems looking to improve their margins, what advice would you share?
AD: I often refer to contract labor, the travelers, as a cancer to the organization. The sooner you can eliminate contract labor, the better you're going to improve quality, reduce cost and improve morale. That's probably the single biggest thing that you can do.
You also need to make sure that you're minimizing the amount of overhead that you're burdening the entities [with]. You need to be as efficient as possible in delivering supply chain, revenue cycle, and IT. When you put a system together, one of the primary benefits of that is you gain some scale. If you're not achieving that scale, you're probably defeating the goals of coming together as a system.
MD: Our greatest assets are our people. How do we position them for success? How do we let them give us the ideas of where they see inefficiencies, where they see opportunities? Really create that environment, but continue to try to make it easier for our workforce. That retains people, keeps them more engaged, allows them to be successful in their careers and what their ambitions are, and allows us to continue to make progress in the turnaround. That 'people first' mentality is incredibly important.