Summa Health to cut 300 positions, scale back services in face of $60M operating loss

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Dive Brief:

  • Facing steep operating losses, Summa Health will shed 300 positions and rein in its services, reported. Half of the eliminated positions are currently empty.
  • The Akron-based health system recorded $30 million in profits in 2016, but expects $60 million in operating losses this year brought on by low inpatient and outpatient numbers.
  • “This year, inpatient and outpatient volumes are dramatically down and, as a result, we are facing staggering operating losses, interim President and CEO Cliff Deveny said in an internal memo to staff on Monday. “While we have considerable cash in reserve to protect us for the short term, this trend must stop immediately.”

Dive Insight:

Summa’s future has been uncertain since CEO Thomas Malone resigned in January. His departure followed a letter signed by 240 Summa physicians giving him a vote of no confidence and urging him to leave. The physicians complained of not being consulted on major changes that would affect patient care at Summa and questioned the nonprofit health system’s decision to sever a contract with emergency physicians.

As patient care shifts from inpatient to outpatient/virtual settings and hospitals face reimbursement cuts, nonprofit and for-profit hospitals alike are struggling to keep operating losses under control. In March, for example, Cleveland Clinic reported a 71% drop in operating income from $480.2 million in 2015 to $139.9 million last year — despite a 12% jump in revenues to $8 billion. Among expenses weighing the system down were pharmaceuticals (up 23%), labor (up 19%) and supplies (up 13%).

More than half of hospitals in the U.S. suffered operating losses in 2016, Cleveland Clinic CEO Toby Cosgrove said earlier this year during a panel to discuss changing demands on healthcare systems. While healthcare reforms are forcing hospitals to transform care delivery, they aren’t being funded adequately to do so, he said.

NYC Health + Hospitals suffered a $76 million operating loss in the first half of fiscal 2017, softened slightly by about $78 million in capital contributions from the city. The health system blamed the loss in part on timing of government payments and the need to count costs like depreciation. The health system has experienced several years of operating losses and had hoped to flip their luck with implementation of a $764 million Epic EHR. However, implementation fell far behind H+H’s original spring 2016 systemwide go-live deadline.

And Boston-based Partners HealthCare suffered $108 million in operating losses for fiscal 2016. The health system has struggled financially since purchasing Neighborhood Health Plan, Medicaid managed care subsidiary in 2012. Partners was hit with a nursing strike and expenses related to implementation of a new EHR system.

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