Hospital Layoffs Point To Growing Problem For Health Care

June 15--ST. LOUIS --Even the mightiest health systems are starting to feel the pinch.

BJC Healthcare's decision to cut 160 employees last week is a tangible sign that hospitals in the St. Louis area and beyond are being increasingly squeezed by government cuts and reduced consumer spending.

Similar layoffs are occurring at hospitals in Indianapolis, northern Virginia and other parts of the country.

Health care experts attribute the job reductions to a raft of potential economic hardships that hospitals will face as the Affordable Care Act is implemented, along with other financial pressures on health systems nationwide.

"A lot of health care organizations are scrambling to cope with lower revenue. ... It's a time of enormous turmoil for hospitals," said Michael Abrams, a Creve Coeur-based strategic consultant.

"I think hospitals need to give more thought to how they reconfigure their business models to adjust to these changes, and if they're not willing to do anything different, than they are going to have to lay off more staff," he said. "They need to be thinking more comprehensively about their approach to care: how they can keep people out of hospitals and, when they are hospitalized, how to discharge patients so they remain out of the hospital."

Abrams, a co-founder of Numerof & Associates Inc. and co-author of the book "Healthcare at a Turning Point: A Roadmap for Change," said that hospitals also need to focus on "clinical decision-making" to ensure that physicians are practicing cost-efficient, evidence-based medicine.

"For many decades, physicians have been independent operators within the hospital environment -- largely free to do what they do best," Abrams said. "That's changing because more physicians are employed (by hospitals), and hospitals can't afford to have physicians do just what they want with their patients."

The federal Centers for Medicare & Medicaid Services has begun to implement new rules for Medicare reimbursement that focus on quality of care, such as punishing hospitals that have poor readmission rates as well as capping reimbursement rates for specific diagnoses. Hospitals also will be increasingly expected to pay to fix medical errors such as hospital-acquired infections.

June Fowler, a BJC spokeswoman, said it was the first time in the nonprofit organization's 20-year history that the St. Louis-based health system, which operates 13 hospitals in Missouri and Illinois including Barnes-Jewish Hospital, has resorted to layoffs.

She said those layoffs -- which include 24 employees at Missouri Baptist Medical Center, 22 employees at St. Louis Children's Hospital, and 20 employees at Barnes-Jewish -- include managers, nurses and patient care technicians.

BJC is not alone.

Also last week, St. Anthony's Medical Center -- an independent hospital in south St. Louis County -- laid off 23 employees in its health information management unit.

Steven Lipstein, the chief executive of BJC, attributed his organization's layoffs to a confluence of several factors involving government cuts and reduced hospital utilization rates.

Since the beginning of the year, health systems have been hit with reductions in Medicare reimbursement rates as well as the sequester cuts of the Budget Control Act of 2011.

Lipstein said that BJC and many health systems across the nation experienced a 2 to 3 percent downturn in Medicare revenue in the first quarter of 2013 and a lower operating margin because of government budget cuts. He also said that BJC's hospital patient admissions and emergency room services have declined.

Meanwhile, the St. Louis area's birth rate has declined since the recession, and most patients are experiencing shorter hospital stays.

Lipstein said that BJC has attempted to boost its revenue through more efficient billing and collections as well as to lower its costs through employee attrition, better management of medical supplies, more efficient use of information technologies and streamlining its administrative expenses.

"We are working continuously to make health care better," he said. "We want our health care system to be more patient-centric, where people have the knowledge and information to participate in their own health care decisions as a partner in their health care.

"We will always consider layoffs a last resort," he said, adding that any future BJC layoffs will depend largely on actions by state and federal government. "For us, these are our colleagues, our employees, our friends. This is very unusual for us."

Chris Howard, president and chief executive of SSM Health Care-St. Louis, attributed a slowdown in the first quarter of 2013 to a decline in elective surgeries -- such as cosmetic procedures and knee replacements -- as well as the increasing number of patients whose health insurance plans require higher deductibles.

With high deductibles of $2,500 or even greater, he said, some consumers are tempted to defer major medical expenses and even preventive care, especially at the beginning of the year.

Government cuts and reduced consumer spending is only part of the story. Hospitals are still coping with legions of uninsured patients.

"We are receiving reduced payments from Medicare for the care we provide, while at the same time we are treating an increasing number of uninsured and underinsured patients," said Karen Rewerts, chief financial officer for SSM Health Care-St. Louis. "These individuals often cannot afford their co-pays and deductibles so they are not seeking care until it is absolutely necessary, causing lower-than-expected volumes through the first quarter of this year."

Nonetheless, SSM has avoided layoffs.

"We're always looking for ways to eliminate waste," said SSM spokeswoman Kristen Johnson. "We are managing vacancies, and when they occur, we may not rehire for every position. Our priority is to ensure that our staffing is optimum to provide exceptional care to every patient."

, president of Verite Health Care Consulting in Alexandria, Va., said that delays in Missouri and other states in expanding their Medicaid rolls has resulted in a vexing revenue gap for hospitals.

Hospitals are facing Medicare and Medicaid reimbursement cuts before receiving any new revenue that is expected once a greater portion of the uninsured population is converted to Medicaid coverage.

"That ramp-up for Medicaid in a number of states is going to be slower than originally envisioned," he said. "The timing isn't favorable for a number of health systems."

Jackie Ferman-Grothe, a spokeswoman for St. Louis Children's Hospital, said that in addition to the 22 employees laid off at the nationally acclaimed medical center, the hours of several additional employees also have been reduced.

"The market is soft: lower inpatient volumes, increased charity care, reduced reimbursement from government payers," Ferman-Grothe said. "We are hiring, but only very critical positions ...

"We did a lot of work in the last few months to flex with patient volume and eliminate the need for (job) reductions," she said. "We're a very close-knit family, so this hurts."

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