Cash-strapped hospitals laying off record number of workers

Employed physicians could see job losses or salary cuts if the recession continues.

By Karen Caffarini — Posted Jan. 26, 2009

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Increasing numbers of hospitals nationwide are instituting mass layoffs as they try to stay solvent in what some administrators and consultants have called the most challenging time for the industry in at least 40 years.

Some smaller hospitals have even laid off employed doctors or slashed physician pay, and consultants warn that as the economy gets worse, more hospitals will likely follow.

The U.S. Dept. of Labor's Bureau of Labor Statistics reported that as of Nov. 30, 2008, 107 hospitals had reported mass layoffs, defined as 50 or more unemployment claims filed against one company at one time. That was the highest yearly number since the bureau began keeping these statistics in 1995, surpassing the previous high of 100 mass layoffs during 2003.

There were at least 10 incidents of mass layoffs every month for six months from June 2008 through November 2008. No previously recorded year had more than two straight months with 10 or more layoffs.

These statistics don't include incidents of layoffs of fewer than 50 people at a time. The American Hospital Assn. has no data on that, but a survey it conducted in October 2008 found that 53% of the 736 hospitals responding were considering staff cutbacks due to financial stress.

Hospital administrators say a combination of factors resulting from the recession have caused an economic meltdown unlike any they've seen.

Layoffs throughout the overall business community have swelled the number of uninsured patients at the same time that cash-strapped states have slashed Medicare and Medicaid reimbursements. A bear market has resulted in investment losses straining hospital endowments and reserves. Donations are down. And skittish banks have made it more difficult or more expensive to borrow or have frozen credit altogether.

Beyond layoffs, hospital administrators have instituted pay cuts, cut administrative personnel and costs, slowed construction and delayed new equipment purchases. Some have closed money-losing departments. Others have shut their doors.

Hospitals have said they are trying to avoid laying off doctors or other clinicians by trying to work more closely with physicians and boost traffic. But consultants and recruiters wonder how long this can last.

"As hospitals get less patients, they have less need for physician services. I don't see how hospitals in these cases cannot cut back on physicians," said Rick Langosch, senior vice president and chief financial officer of The Coker Group, a consulting firm for hospitals and medical practices.

Some hospitals have already begun looking at physicians as a way to cut costs.

Faced with a $40 million deficit, Long Island College Hospital in Brooklyn, N.Y., laid off 100 employees last fall. The state denied the hospital's request to close the obstetrics and pediatrics departments, which would have brought 75 more layoffs, including six doctors. Beaumont Hospitals in suburban Detroit said in November 2008 that it was asking its employed doctors to take a 10% pay cut.

Langosch said he worked with a hospital in Alabama, which he declined to name, that recently cut the number of its employed physicians from 17 to 12.

Physician recruiter Jon Soble, president of National Health Partners and Resources of Deerfield Beach, Fla., said physician work-force shortages still create a demand, but some hospitals are dropping out of the jobs pool. "There's a local hospital in Boca Raton that's in the red. We don't recruit for them anymore. [And] there are others."

Feeling the pain

Sunrise Hospital and Medical Center in Las Vegas laid off 57 employees, just less than 2% of the total staff, last fall, said Dan Davidson, vice president of strategic marketing.

The Archdiocese of Boston's Caritas Christi Health Care is laying off 160 workers, or 1.2% of its work force. In Minnesota's Twin Cities, four hospitals are laying off a total of about 1,160 workers, according to the Minnesota Hospital Assn. In Merrillville, Ind., the physician-owned Pinnacle Hospital is laying off 21 workers, 12% of its 140 employees. That hospital has only been open since mid-2007.

Boston Medical Center is cutting 130 full-time-equivalent workers -- 250 people -- with more cuts likely, as it looks to trim $61.5 million from its $1 billion budget, said spokeswoman Ellen Berlin. Berlin said there is no lack of patients at the main teaching hospital for Boston University School of Medicine. But as a public hospital that provides care to the poor and uninsured, drops in Medicaid and Medicare reimbursements have hurt.

"It's a hard time for safety-net hospitals in Massachusetts. Budget cuts and Medicaid reimbursement drops affect us more," Berlin said.

Those who have been in the hospital industry for decades say while there have been layoffs in the past, nothing compares with the money problems hospitals face today.

"I've been at Beaumont since 1981 and in health care since the mid-1970s, and I have never seen this type of challenge before. This is the first time in 40 years the hospital has lost money for the year," said Mike Killian, vice president, marketing and public affairs, for Beaumont Hospitals in suburban Detroit.

Killian said in the past, when the auto industry laid off workers, they were expected to be called back, and their health insurance was continued during the interim. "Now when they're laid off, there's no expectation that they'll be called back," he said. "They lose their insurance."

More people today are going on Medicaid when they lose their jobs, Langosch said, "but the Medicaid dollars are not growing as quickly as the number of Medicaid patients."

Hospitals also carry a lot of floating debt. They are discovering, as they try to restructure that debt, that their bond rating is going down, making interest rates climb higher, if refinancing is even available.

Berlin and other health industry leaders are hoping to snare some of the government's economic stimulus money. "Some of that money is supposed to go to the states, which have some leeway in deciding how it is spent. Our state Legislature knows how important health care reform is in Massachusetts," Berlin said.

Meanwhile, layoffs are expected to continue through this year as the nation's economy and hospitals continue to struggle.

"Frankly, I don't see a light at the end of the tunnel," Killian said.

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Radical staffectomies

More hospitals had mass layoffs in 2008 than in any year since the U.S. Dept. of Labor's Bureau of Labor Statistics started keeping track in 1995. As of Nov. 30, 2008, 107 hospitals had layoffs of more than 50 employees; December 2008 numbers are not yet available.

Jan. May Aug. Dec. Annual
1995 NA 11 6 10 69
1996 8 14 13 3 95
1997 9 10 4 * 75
1998 15 6 9 * 90
1999 11 4 8 6 83
2000 12 4 3 4 94
2001 5 4 7 5 53
2002 7 6 9 5 90
2003 4 13 6 7 100
2004 16 4 9 5 90
2005 11 6 5 5 97
2006 7 4 4 * 57
2007 5 4 6 * 67
2008 9 7 13 NA 107

* data did not meet bureau or state agency disclosure standards

Source: U.S. Dept. of Labor Bureau of Labor Statistics (link)

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Sampling of hospital layoffs

Hospitals across the country are laying off employees as they face deficits due to declining reimbursement, fewer paying patients, investment losses and an inability to borrow.

Hospital Total workforce Layoffs or positions cut Reason for layoffs
Beaumont Hospitals Royal Oak, Mich. 18,000 500 (2.7%) Decline in reimbursements, fewer paying patients, inability to borrow
North Memorial Health Care Robbinsdale, Minn. 5,000 380 (7.6%) Rising bad debt, lower reimbursement
Park Nicollet Health Services St. Louis Park, Minn. 8,100 233 (2.9%) Rising bad debt, lower reimbursement
Boston Medical Center Boston 6,000 250 (1.2%) Lower Medicaid reimbursement
Caritas Christi Health Care Boston 13,000 160 (1.2%) Financing put on hold
Carle Foundation Hospital Urbana, Ill. 3,060 72 (2.4%) Lower reimbursements
Mercy Medical Center Nampa, Idaho 800 70 (8.8%) High levels of uninsured, charity cases and bad debt
Sunrise Hospital and Medical Center Las Vegas 3,000 57 (1.9%) Increase in uninsured payments, cut in Medicaid payments
Kona Community Hospital Kona, Hawaii 500 55 (11.0%) Operating with a deficit
Kearney's Good Samaritan Hospital Kearney, Neb 1,600 50-100 (3.1%-6.1%) Fewer patients
King's Daughter Medical Center Jackson, Miss. 3,900 40 (1.0%) Rise in bad debt

Source: News articles, hospital Web sites

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