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2011 Year in Review

HHC Board of Directors

Our multi-year cost-containment and restructuring plan includes more than 35 discrete initiatives that must be fully implemented by the end of FY 2014. The seven initiatives that were slated for completion in FY 2011 were executed and have yielded the projected savings, and we are presently on track to meet our FY 2012 fiscal objectives as well. Because some of the cost-containment initiatives slated for completion in FY 2013 and 2014 are complex and require significant lead time for execution, we have initiated the preliminary work on many of those already.

We are now tracking closely significant reductions in inpatient utilization that have appeared at most of our facilities over the last six months to assess whether, if sustained, they will require clinical staffing adjustments not now reflected in our financial plan.

Leveraging HHC's Size through E-Commerce

Last year, HHC, in partnership with Global Healthcare Exchange (GHX), developed and implemented a new online purchasing system. The new system standardizes the ordering process and consolidates purchasing across HHC, helping us to achieve significant cost savings through higher discounts based on our purchasing volume. Under our new e-commerce system it now takes two hours to complete a purchase order from beginning to end, versus an average of four days with the old paper system. GHX has put HHC on track to save approximately $14 million in the first full year of use. Over time, HHC will migrate to a just-in-time delivery system, which will further reduce costs and inefficiencies associated with keeping excessive inventory on hand.

Breakthrough Teams Continue to Make Operations More Efficient and Effective

As HHC's process improvement tool, Breakthrough empowers frontline staff – the people who do the work – to determine ways to improve processes, remove wasteful steps and activities, and increase efficiency. When new processes and procedures are implemented, Breakthrough teams evaluate and monitor them, creating opportunities for continuous improvement.

Breakthrough continues to contribute significantly to operational efficiency and has reduced our costs while optimizing our revenue collection. As the Board knows, a central tool of Breakthrough is the RIE, a week-long rapid improvement event. During an RIE a front-line team experiments with and then implements changes that streamline and make more efficient the part of our operations within which they work. This past year, our facilities conducted 254 RIEs across 15 facilities, bringing the total number of RIEs over the last 4 years to more than 850. During this time, the improvements devised by Breakthrough teams have resulted in more than $215 million in combined savings and new revenue.