Health Care

December 14, 2012

Hospital layoffs blamed on health care reform

Several hospitals in the state have laid off staff recently, and some officials said new health care regulations and requirements played a role in their decision.

Editor's note: An earlier version of this story incorrectly described the wage situation at Via Christi Health. Officials at Via Christi say they don't have a wage freeze, but that they have not budgeted for any across-the-board wage increase for next year.

Several hospitals in the state have laid off staff recently, and some officials said new health care regulations and requirements played a role in their decision.

“We are facing reform at the federal level, and the new (state Medicaid) KanCare program,” said Steven Perkins, CEO of South Central Kansas Medical Center in Arkansas City, which announced last week that it would cut nine staff members: seven full-time, one part-time and one “as needed” employee.

“We’re experiencing a change in how health care is being delivered, and we’re trying to adapt our organization and trying to basically improve our outcomes.  It’s never easy to protract any type of reduction in force.”

Before the reduction, the 37-bed hospital had 158 full-time employees, 10 part-time employees and 47 as-needed employees. It does not yet have a projection for the amount of money the layoffs will save, Perkins said.

In 2011, the hospital had more than $1 million in losses, but it is on track for a $38,000 profit this year, without including the recent staff reductions, Perkins said. The hospital finished construction of a new $23 million facility in March 2011.

Health care changes, such as tying Medicare reimbursement to patient outcomes and quality measures, affected the decision, Perkins said. “As an industry, we’re going to have to become more efficient,” he said.

Medicaid changes

The Affordable Care Act directly affects hospital funding for Disproportionate Share Hospitals, which serve a greater number of low-income patients, said Cindy Samuelson, vice president of member services and public relations for the Kansas Hospital Association.

Those Kansas hospitals are expected to lose a total of about $42 million.

“Those funds are intended to help hospitals fund Medicaid and uninsured people,” Samuelson said.

The size of cuts to hospitals will vary by facility, depending on how many Medicaid patients are treated.

Kansas has more than 50 Disproportionate Share Hospitals, according to the KHA, including Newman Regional Health in Emporia, South Central Kansas Regional Medical Center in Arkansas City, and Via Christi Regional Medical Center and Wesley Medical Center in Wichita.

The KHA is asking state lawmakers and the governor to thoroughly evaluate the proposal by the federal government for the expansion of Medicaid in Kansas – politics aside.

“If it were expanded, more dollars would go to Kansas hospitals,” Samuelson said.

If the state were to expand Medicaid, the affected hospitals would be able to get funding to make up for what would be lost in the new formulas for Disproportionate Share Hospitals, Samuelson said.

The costs of expanding Medicaid, under the Affordable Care Act, would be fully covered by the federal government for a period of time, and then gradually decrease to 90 percent, with states picking up 10 percent by 2020.

However, critics say other provisions of the health care law mandate the expansion include more kinds of coverage, which would drive up costs for the state overall.

Changes in rules

The Affordable Care Act also directly affects Medicare reimbursement rates for hospitals that fail to meet national benchmarks for the treatment of such things as heart attacks and pneumonia.

Hospital surveys from patients, re-admission rates and numbers of hospital-acquired infections will also play into reimbursement rates.

Other changes in health care, not just the Affordable Care Act, also are affecting decisions about staffing. One example is the reimbursement funding cuts in Medicare that are part of the “fiscal cliff” package that Congress and the president have failed to address.

“A lot of folks are grouping or blaming or pointing fingers at health care reform, but not everything is necessarily related to it. It’s just first and foremost on most folks’ minds,” Samuelson said.

At the end of November, 76 KHA member hospitals responded to a survey about what strategies the hospitals would take if funding issues aren’t resolved by Congress, and they said they would likely consider hiring freezes, job eliminations, wage reductions and wage freezes for employees.

Other hospitals’ cuts

About two weeks ago, Newman Regional Health in Emporia reduced its staff by 18 in a combination of layoffs and early retirements.

There were seven layoffs: four registered nurses, one clerk and two part-time certified nurse assistants. The employees were offered severance packages.

“I think (health reform) plays into everybody’s decision making it’s a dramatic change in how organizations do things, how they’re paid, the number of people who now have some form of insurance that didn’t before,” said John Rossfeld, interim CEO.

Rossfeld said the decision was also in part due to hospital reorganization and consolidation of nursing services.

Now, the 59-bed, county-owned hospital has about 400 full-time employees.

Newman had an operating loss of $2,116,397 year to date, and Rossfeld said officials think the staff reductions will save about $1 million per year.

“Every hospital is working hard to be financially viable, and right now, our finances are not where we’d like them to be.”

The Greenwood County Hospital in Eureka laid off 16 people about two months ago, said CEO Ed Riley. After the layoffs, the 25-bed hospital had a total of 152 employees.

“Knowing that it looked like (reform would stay) had an impact,” Riley said.

The reductions are expected to save the hospital about $600,000 and were made across a number of departments. The last time the hospital experienced layoffs was about 10 years ago, Riley said.

Kevin Miller, president and CEO of Hutchinson Regional Medical Center, said the Hutchinson Regional Health Care Family laid off about 60 people system wide and eliminated another 40 positions from January to April of 2012.

The primary reason for those layoffs was finances, Miller said. As a new CEO, Miller found the center, which had lost more than $5 million in 2011, was overstaffed. This year, it’s projected to have an $8 million operating margin, he said.

“Would the Affordable Care Act have an impact on our workforce? I did take that into consideration, but it was not a primary element. I assumed one way or the other reimbursement was going to be reduced by government because it always is. Today, now that the election is past and it appears it’s still in place, other parts like Medicaid expansion are still going. We’re looking at costs and seeing what we can do to be more efficient.”

Kansas’ health care industry also experienced layoffs during the recession, Samuelson said, although it was less severe than in other industries.

Effect on pay

Judy Espinoza, Total Rewards director for Via Christi Health, said the health system does not anticipate any layoffs.

Via Christi leaders decided in September to forego across-the-board wage increases for 2013 to “develop a more financially sustainable structure,” Espinoza said. Administrators decided that approach was preferred to reducing staffing levels, according to an earlier statement from the organization.

While some employees were not happy about the decision, Espinoza said that most supported it.

Wesley Medical Center has no plans to freeze hiring or reduce the workforce at this time, according to Susan Burchill, Wesley marketing and media relations officer.

The hospital is currently evaluating whether it will be able to offer some pay increases in 2013, she said.

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