Category Archives: Employee Layoffs

Operating margins plummet at US hospitals, Kaufman Hall says

Posted on by • Posted in Cash, Cash Reserves, Cash-Flow Improvements, Coronavirus, Crisis, Crisis Management, Elective Procedures, Elective Surgery, Employee Benefits, Employee Furlough, Employee Layoffs, Employee Pay Cuts, Employer-Based Health Insurance, Health Insurance Coverage Adequacy, Health Policy, Health System, Infection Control, Infectious Virus, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Out of Pocket Expenses, Pandemic, Paycheck Protection Program, Personal Protective Equipment (PPE), Supply Chain, Underinsured, Unemployment, Unemployment Insurance, Uninsured • Leave a comment

https://www.healthcaredive.com/news/Kaufman-hospitals-operating-margin-decline/576491/

Third Quarter Investment Report: Moving Into Choppy Waters « CPEA ...

Dive Brief:

  • Operating margins at the nation’s hospitals have plummeted due to large-scale volume and revenue declines coupled with flat to rising expenses, according to a new report from Kaufman Hall.
  • Based on March data from more than 800 U.S. hospitals, average operating margins dropped 150% year over year, plunging non-profit hospitals, which historically operate on already thin margins, into troublesome territory.
  • The data paint a dire picture for U.S. hospitals. “These initial numbers only reflect the first two weeks of the COVID-19 response and likely indicate more negative results in the future,” Jim Blake, managing director at Kaufman Hall, said in a statement.

Dive Insight:

Hospitals depend heavily on elective surgeries for revenue, but had to cancel or postpone many of them starting last month in order to preserve coveted COVID-19 resources such as personal protective equipment, beds and staff.

Those measures have upended the financial health of the entire industry in a matter of just weeks, according to new data and analysis from Kaufman Hall.

“We anticipate April will be significantly worse, and at this point, no one knows how long hospitals will continue on their current path,” Blake said.

Despite the ongoing pandemic, patient volumes overall have plunged. During March, the median hospital occupancy rate was 53%, with operating room minutes down 20% year-over-year and emergency room visits down 15% year over year, according to the report.

At the same time, hospitals’ labor expenses were up 3% year over year, and non-labor expenses were up 1%. In order to rein in operating costs, some health systems have begun to furlough or lay off workers.

While non-profit systems are especially vulnerable given their razor-thin margins, major for-profit systems are also struggling financially.

HCA Healthcare, Community Health Systems and Tenet Healthcare have all pulled their 2020 guidance in response to the pandemic. In its first quarter report Tuesday, HCA attributed a steep decrease in volumes and 45% drop in profit to the pandemic.

And Jefferies analyst wrote in a note Tuesday they are reducing their volume and earnings expectations for those companies for this year and 2021 based on the pandemic. “Our belief is that high unemployment translates to reduced commercial insurance coverage and disposable income to fund co-pays/deductibles, which results in fewer physician visits and procedures,” they wrote.

Under these circumstances, the federal government has attempted to financially support struggling hospitals through ongoing coronavirus relief legislation.

First came accelerated Medicare payments based on reimbursement data, in the form of loans that providers will have to pay back.

Separately, the Coronavirus Aid, Relief, and Economic Security Act passed by Congress in March benchmarked $100 billion in funding to provide financial support to struggling hospitals.

A $30 billion first round was announced April 8 and given to providers based on historic Medicare payments. A second round of CARES act funding for systems in hot spots is next, although the timing is unclear.

On Tuesday the Senate approved a separate $484 billion aid package, the Paycheck Protection Program and Health Care Enhancement Act, that would send an additional $75 billion in emergency funds to hospitals. It also allocates $25 billion to expand testing for the virus across the country.

The White House expressed support for the package. It still needs House approval, which could happen as soon as this week.

The latest package comes in response to depleted funding for the Small Business Administration’s Paycheck Protection Program. Upon replenishing those funds, smaller health systems may be eligible for forgivable PPP loans used to meet payroll and other operating costs, but only if they have 500 or fewer employees.

 

 

 

 

Envision hires restructuring advisers, considers bankruptcy filing

Posted on by • Posted in Bankruptcy, Chapter 11, Coronavirus, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Employee Benefits, Employee Furlough, Employee Layoffs, Employee Pay Cuts, Employee Protections, Employee Retirement Contributions, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Physician, Physician Staffing, Private Equity, Restructure • Leave a comment

https://www.beckershospitalreview.com/finance/envision-hires-restructuring-advisers-considers-bankruptcy-filing.html?utm_medium=email

Envision Healthcare Said to Be Considering Bankruptcy, 2 Years ...

Envision Healthcare, a Nashville, Tenn.-based physician staffing company owned by private equity firm KKR, is struggling to manage its $7 billion debt load and recently hired lawyers and an investment bank to advise on its restructuring options, sources told Bloomberg.

The company is looking at restructuring options, including a potential Chapter 11 bankruptcy filing, as it faces financial pressure from the COVID-19 pandemic, according to Bloomberg. Envision has seen a significant decline in patient volume across its practices and specialties during the pandemic.  

No decision has been made on a course of action for Envision, and the company is still seeking to ease its debt burden by swapping $1.2 billion of unsecured notes for a new term loan. Creditors have until the end of the month to decide whether to participate in the deal.

The company is exploring its restructuring options after taking several steps to improve its financial position, including holding back pay for physicians, reducing salaries of senior leadership and furloughing nonclinical staff. The company said clinical pay will be reduced in services with low patient volumes, and performance-based bonuses and clinician profit-sharing will be delayed until the fall. Additionally, Envision temporarily suspended retirement contributions, merit increases and promotions for all employees.

About a week after Envision implemented many of the changes, U.S. Sen. Elizabeth Warren of Massachusetts and U.S. Rep. Katie Porter of California sent a letter to Envision and other healthcare staffing companies backed by private equity regarding pay and benefits.

The letter, which Ms. Porter posted on Twitter, said Envision is cutting its physicians’ pay and benefits, “all while our doctors face new financial strains of their own” amid the COVID-19 pandemic.

In response, Envision cited challenges healthcare organizations are facing.

“The nation’s healthcare system has experienced a drastic drop in patient volume since the beginning of the COVID-19 crisis,” wrote Envision, which has more than 40,000 team members, 27,000 of whom are physicians and clinicians. “Even as COVID-19 fills emergency departments in hot spots around the country, Envision’s overall emergency volume is actually down 45 percent.”

Hospital and physician groups are trying to secure funds from the Coronavirus Aid, Relief and Economic Security Act and get additional aid. Though the private equity industry is lobbying Washington to gain access to the funds, it remains unclear whether private equity-backed companies like Envision will receive the emergency government funds. 

 

 

 

 

Tower Health furloughs 1,000 workers amid dramatic revenue drop

Posted on by • Posted in Cash, Cash Reserves, Cash-Flow Improvements, Coronavirus, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Elective Procedures, Employee Furlough, Employee Layoffs, Health System, Hospital, Hospital Industry, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Pandemic • Leave a comment

https://www.beckershospitalreview.com/finance/tower-health-furloughs-1-000-workers-amid-dramatic-revenue-drop.html?utm_medium=email

Under financial pressure from the COVID-19 pandemic, Philadelphia-based Tower Health has furloughed at least 1,000 employees, according to The Philadelphia Inquirer. 

Tower Health implemented the furloughs, which affect roughly 7 percent of the system’s 14,000-person workforce, after suspending elective procedures and shutting down many of its outpatient clinics. The seven-hospital system said it has lost as much as half its revenue, according to the report. 

Tower Health received more than $23 million in grants made available under the Coronavirus Aid, Relief and Economic Security Act, but it’s still facing financial pressure.

“These funds, while helpful, do not come close to making up for the decline in revenue Tower Health has experienced in March and into April,” a spokesperson told The Philadelphia Inquirer.

Tower Health joins more than 150 other hospitals and health systems across the U.S. that have furloughed workers in recent months. 

 

 

Cartoon – Job Opportunity

Posted on by • Posted in Cartoon, Employee Benefits, Employee Furlough, Employee Layoffs, Employer-Based Health Insurance, Health Insurance Coverage Adequacy, Health Policy, Job Market, Job Search, Job Security, Out of Pocket Expenses, Political Lobbying, Underinsured, Unemployment, Unemployment Insurance, Uninsured • Leave a comment

Political Cartoon: “Overheard In The Unemployment Line” by Joel ...

What is work sharing and how can it help the labor market?

Posted on by • Posted in Coronavirus, Crisis, Crisis Management, Employee Benefits, Employee Furlough, Employee Layoffs, Employer-Based Health Insurance, Health System, Hospital, Hospital Industry, Talent Management, The CARES Act, Unemployment, Unemployment Insurance, Work Sharing • Leave a comment

https://www.brookings.edu/blog/up-front/2020/04/16/what-is-work-sharing-and-how-can-it-help-the-labor-market/?utm_campaign=Brookings%20Brief&utm_source=hs_email&utm_medium=email&utm_content=86505163

What is work sharing and how can it help the labor market?

When economic conditions worsen, as they did beginning in March 2020 because of the COVID-19 pandemic, employers often respond by laying off their employees. This can lead to very undesirable outcomes for society at large. Research shows that losing a job often causes decreased long-term earnings, health problems, and other adverse outcomes, the effects of which can last generations (Abraham and Houseman 2014). Layoffs create future costs for employers as well—once demand picks back up, firms will have to expend valuable resources on significant search, hiring, and training costs.

The U.S. unemployment insurance (UI) system can help. Its core function is to replace some of the earnings of workers who have lost their jobs, helping them to stay afloat during tough economic times. But the UI system can also support workers and employers as they reduce, rather than eliminate, employees’ work hours.

WHAT IS WORK SHARING?

A program called work sharing, or short-time compensation, encourages employers to temporarily reduce the hours of their employees rather than lay them off during an economic downturn. Work sharing allows employers to keep their skilled workforce and reestablish a full-time schedule when economic conditions improve. With this approach, employees continue to be paid for the hours they work, collecting pro-rated unemployment benefits that help cover the work hours they lose. For example, employers could reduce everyone’s hours by 20 percent and employees would qualify for 20 percent of the weekly unemployment benefit amount.

In a Hamilton Project proposal, economists Katharine Abraham and Susan Houseman described reforms that would facilitate the use of work sharing. The importance of these reforms for addressing the current economic downturn was discussed further in a recent webcast titled, “Unemployment Insurance during the COVID-19 Pandemic: Reducing the Impact of this Economic Downturn.”

WHAT IS THE RATIONALE FOR WORK SHARING? HOW MANY JOBS COULD IT SAVE?

Work sharing provides employers a way to respond to a decrease in demand by cutting back on hours rather than laying workers off. This approach maintains employer-employee connections, minimizing layoffs and supporting workers who have their hours reduced. Work sharing can be particularly helpful when the drop in demand is expected to be temporary, as many think likely for this pandemic-caused recession.

The value of preserving relationships between employers and employees is twofold. First, it can avoid huge spikes in permanent job losses that are financially ruinous for many families. Workers continue their employment, albeit with reduced hours, and avoid many of the damaging effects of losing a job (like loss of health insurance coverage). Second, both employers and workers will avoid costly search, hiring, and training once demand eventually picks back up.

Throughout the Great Recession, when only 17 states offered the option, use of work-sharing was very limited. Abraham and Houseman estimate that if work sharing had been available for the entire country during the Great Recession—and take-up rates had been similar to our European counterparts—work-sharing programs could have saved up to 1 million jobs, or 1 in 8 of the net jobs that were lost during the Great Recession.

HOW WIDESPREAD ARE WORK-SHARING PROGRAMS?

Today, 26 states, covering nearly 70 percent of the workforce, have operational work-sharing programs in place. But work sharing has been little used in the earliest days of this recession. As of the week ending in March 28, just 0.3 percent of the more than 8.2 million people claiming UI benefits received work-sharing benefits.

To expand coverage, Abraham and Houseman propose that Congress pass legislation that requires states to have a work-sharing program as a part of their UI system to participate in the federal–state UI system. Further, in order to encourage state take-up, they propose that the U.S. Department of Labor modify its funding formula to more accurately fund state administrative burdens associated with implementing and promoting work-sharing programs.

WHAT ELSE CAN BE DONE TO MAKE IT EASY FOR EMPLOYERS TO USE THE PROGRAM?

First, states could look for opportunities to expedite the process of starting up a work-sharing plan and paying benefits. Second, states could remove policies that tend to discourage the use of work sharing and push employers toward layoffs. For example, some states bar employers who have heavily used the UI system in the past from participating in work-sharing programs. Additionally, some states impose higher effective UI tax rates on employers who choose work-share programs than if they laid off their workers. Designed to prevent abuse of the UI system, these policies may discourage work sharing, especially during downturns. Abraham and Houseman recommend that Congress add a prohibition against the use of these policies to the existing criteria for state eligibility to participate in the federal–state UI system.

HOW CAN WORK-SHARING PROGRAMS BE FURTHER INCORPORATED INTO THE EXISTING UI SYSTEM?

Under current law, sharp increases in a state’s unemployment rate trigger extensions to the benefits available in that state; the federal government covers half the cost of those extensions. That same federal-state program could enhance the use of work sharing. Abraham and Houseman propose that the federal government cover half the cost of work-sharing programs when UI extended benefits are triggered in a state. As explained below, Congress has recently gone beyond this proposal, but only on a temporary basis.

HOW IS WORK SHARING ADDRESSED IN THE CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT (CARES ACT)?

The CARES Act, signed into law on March 25, 2020, encourages states and employers to use work-sharing programs. The federal government will reimburse 100 percent of the cost of short-time compensation benefits paid in states that have work-sharing programs in place. For those states that do not have a work-sharing program, the CARES act includes funds to pay for short-time benefits at a 50 percent federal coverage rate. Finally, the CARES Act allocates grant funding for states to promote and improve the implementation and administration of work-sharing programs.

 

 

 

These Charts Put the Historic U.S. Job Losses in Perspective

Posted on by • Posted in Economic Crisis, Economy, Employee Furlough, Employee Layoffs, Job Growth, Job Market, Job Security, Unemployment, Unemployment Insurance • Leave a comment

These Charts Put the Historic U.S. Job Losses in Perspective

These Charts Put the Historic U.S. Job Losses in Perspective

These Charts Put the Historic U.S. Job Losses in Perspective

When recessions hit, it’s not unusual to see millions of jobs lost.

Such episodes are a regular part of the business cycle and when they occur, most businesses do their best to tough things out. Then, as time progresses, it gradually becomes clear that spending must be curtailed, budget cuts must be made, and workers must unfortunately be sent home.

This economic process normally takes months, or even years, to unwind.

But, the COVID-19 pandemic has thrown a wrench into the economic status quo, creating a situation that is incomparable to any previous downturn. Instead of a gradual economic transition to slower growth prospects, business operations have suddenly screeched to a halt with no clear window to resume.

Beyond Comparison

The Great Lockdown of the economy has been completely unprecedented, both in terms of the speed of the shutdown and its impact on jobs.

As a result, the statistics being released are completely surreal. Perhaps the best example of this is number for initial jobless claims in the U.S., which tops 22 million over the last four weeks.

Worst U.S. Job Losses on Record (Four Week Period)

Year Description Peak Jobless claims (4-wk total) % of U.S. Population
1975 Stagflation 2.24 million 1.0%
1980 Fed tightening (Volcker) 2.52 million 1.1%
1982 Double-dip recession 2.70 million 1.2%
1991 Early 1990s recession 2.00 million 0.8%
2001 Dotcom Bust 1.96 million 0.7%
2009 Great Recession 2.64 million 0.9%
2020 The Great Lockdown 22.03 million 6.7%

As you can see above, the number is 10x higher than many of the worst four-week job losses on record, so historical comparisons don’t come close.

In other words, if you were using recent recessions as a potential barometer of how bad things could get for jobless claims, the numbers coming from COVID-19 crisis just blew up your model.

The Recession Time Machine

To get further context on the numbers above, it’s worth jumping in a time machine to revisit what happened to job numbers in previous recessions:

  • Stagflation and Oil Shocks (1973-75)
    This recession put an end to the Post WWII global economic expansion, and was characterized by the 1973 oil embargo, the aftermath of the Nixon Shock, and the collapse of the Bretton Woods system of international finance. Unemployment and inflation were both high (stagflation), and the unemployment rate in the U.S. reached 9.0% in May 1975.
  • The Double-Dip Recession (1980, 1981-1982)
    This “W-shaped” recession saw economic contraction first in 1980, only to return again in 1981. This corresponded with the Iranian Revolution, as well as Fed chair Paul Volcker’s aggressive policy to rein in inflation with high interest rates. Unemployment peaked at 10.8% in 1982 — the highest rate seen since the Great Depression.
  • The Great Recession (2009)
    The most recent recession in memory peaked with 10.0% in unemployment in October 2009. It took until 2016 for unemployment to fall back to pre-recession levels.

Finally, it’s worth noting that during the Great Depression (1929-1933), unemployment reached a historic high of 24.9%. To get to a comparable equivalent in modern times, there would need to be 41 million Americans out of work permanently.

Room for Optimism

Although the initial jobless claims are staggering and clearly without modern precedent, there is a case to be made for cautious optimism.

Many of the aforementioned recessions took months or years to culminate, with peak job losses occurring at the tail end of each recession. The current crisis, now being called “The Great Lockdown”, caused many businesses to shut doors suddenly and against their will. It also corresponded with unexpected closures of national borders and the halting of regular trade activity around the world.

When and if normal economic activity resumes, it’ll be interesting to see how much of the damage is temporary.

 

 

 

Cartoon – Unemployment Today

Posted on by • Posted in Coronavirus, Employee Furlough, Employee Layoffs, Employer-Based Health Insurance, Health Insurance Coverage Adequacy, Health Policy, Infection Control, Infectious Virus, Out of Pocket Expenses, Pandemic, Public Health, Public Safety, Underinsured, Unemployment, Unemployment Insurance, Uninsured • Leave a comment

Social distancing in the unemployment line: Political Cartoons ...