Facing a financial squeeze, hospitals nationwide are cutting jobs

Hospitals nationwide are cutting jobs amid a whirlwind of financial pressures — and sharp fears about the direction Republicans will steer health care policy.

Just in the past month, hospitals in 10 states, from Kentucky to Minnesota to New Mexico, have made public plans for staff reductions. In the largest such announcement, a prominent Boston hospital — Brigham and Women’s, which is affiliated with Harvard — last week said it will offer voluntary buyouts to 1,600 workers and may lay off staff later in the year.

Many other providers are eyeing cuts to clinical services, including labor and delivery, substance abuse counseling, and psychiatric care. Children’s Hospital Colorado, for instance, is weighing cuts to preteen psychiatric programs and telehealth services in the face of state budget reductions.  Methodist Hospital in Henderson, Ky., announced 61 layoffs earlier this month and closed a pediatric inpatient unit. Other hospitals have warned they may shut down entirely as revenue shrinks and costs rise.

So far, many “hospitals have been able to make cuts using a scalpel instead of an ax,” said John Palmer, spokesman for the Ohio Hospital Association. “But they’re running out of options.”

The personnel cuts represent just a sliver of the nation’s $3.4 trillion health care industry. But the financial problems they reflect —  flat reimbursements and escalating costs for salaries, medicines, and supplies — are affecting all kinds of organizations, from public hospitals serving poor urban populations to tiny rural providers to major academic medical centers.

Among recent job reductions:

•  In Silver City, N.M., the small Gila Regional Medical Center sliced more than a dozen jobs from the payroll, including several nursing administrators. The hospital no longer employs a chief operating officer.
• Hennepin County Medical Center, a public hospital in Minneapolis, is cutting about 130 jobs, or 2 percent its full-time staff. And that’s just the start: Administrators have said they may need to double the job reductions by the end the year. The hospital lost about $11 million in 2016, in part because it serves a large number of uninsured and low-income patients.
• MemorialCare Health System in Long Beach, Calif., laid off 131 employees earlier this year, citing an increase in Medicare and Medicaid patients and declining reimbursements from those programs.

At Brigham and Women’s Hospital, officials said those same forces have whittled away at its margins over time, leaving its budget out of balance.  “We are at a point where we also need to right-size our workforce,” the hospital said in a statement. “… We owe it to our current patients — and those who will need our care in the future— to tackle the unprecedented financial challenges we are facing.”

Those challenges are intensifying amid the debate over health care reform in Washington.

Republicans are working off a draft bill that could cause 24 million people to lose insurance coverage over the next decade, according to the Congressional Budget Office. More recent amendments could let states opt out of federal mandates that insurers cover a defined package of benefits, including many services delivered by hospitals.

That could saddle hospitals with millions more patients who cannot afford to pay their bills. The industry’s major lobbying arms, the American Hospital Association and the American Medical Association, are speaking out against the proposal.

Meanwhile, hospitals are taking stock, and they do not like what they see.

Catholic Health Initiatives, one of the nation’s largest nonprofit providers, has said it will cut nearly 900 jobs through layoffs and buyouts. The cuts include 620 jobs at its hospitals in Texas and another 250 in Kentucky.

Another large hospital in Texas, MD Anderson Cancer Center, laid off about 800 employees in January after losing $267 million in its last fiscal year.

The cutbacks at those and other hospitals result from a variety of pressures. Some have contributed to their own problems with bad business decisions. Catholic Health Initiatives, for instance, has lost money on its in-house insurance business. MD Anderson cited the high cost of rolling out a new electronic health records system, among other factors. (Its chief executive, Ronald DePinho, stepped down earlier this year.)

The problems also vary by state, depending on funding for public programs and other factors. In Ohio, no layoffs have been announced this year, but nearly a quarter of the state’s hospitals are operating in the red or on a margin of less than 2 percent, according the Ohio Hospital Association.

Despite regional differences, hospitals do face some common challenges.

A rapidly aging population means more demand for their services. But older patients often get coverage through Medicare, which generally pays hospitals less than private insurers. So the rapid increase in those patients — an estimated 10,000 baby boomers turn 65 every day — means that hospitals are making less money on that population.

Fitch Ratings cited that problem in issuing a negative financial outlook for hospitals in 2017. The company said its pessimism was reinforced by the Republican plan to overhaul Obamacare, which includes a $880 billion cut in Medicaid funding.

“Hospitals would face considerable growth in uncompensated care, which would stress top-line revenue growth and bottom-line profitability,” Fitch wrote in a report published in March. “Furthermore, hospital providers in states that expanded Medicaid under the [Affordable Care Act] are at particular risk.”

In Minnesota, one of those expansion states, the chief executive of Mayo Clinic told employees late last year that the massive health system would try to relieve the financial squeeze by giving preference to privately insured patients over those with Medicare and Medicaid. That policy would only apply to patients seeking care for similar conditions at the same time, but it drew sharp criticism.

Nonetheless, Mayo chief executive John Noseworthy said the reimbursement problems facing hospitals must be openly discussed.

“Changing demographics, aging of Americans, and budgetary pressures at state and federal governments pose challenges to the fiscal sustainability in health care today,” he said in a statement. “While these discussions are uncomfortable, they are critical for us to be able to meet the needs of all of our patients.”

Clarification: This story has been updated from a prior version to reflect that MD announced plans to lay off about 800 employees in January.