Fairfield, Calif.-based NorthBay Health announced July 11 that it will cut 7 percent of its workforce following continued financial strains, the Daily Republic reported July 12.
“The harsh reality is a number of factors contributed to NorthBay’s economic headwinds, including reduced volumes; skyrocketing prices for supplies, drugs and medical devices; the continuing need to rely on expensive temporary workers; and the rising number of Medicare and Medi-Cal patients whose care is not fully covered by government payments,” B. Konard Jones, president and CEO of NorthBay Health, said in a press release shared with the Daily Republic.
This 7 percent encompasses full-time positions or multiple part-time positions that equate to full-time hours. NorthBay Health said that 190 full-time positions will be cut in total.
Mr. Jones added that the healthcare system has a plan in place to get its budget back on track, but details of that plan have not been revealed at this time.
So far, NorthBay Health has already cut senior management positions by 20 percent. It is likely more positions will be cut in the future, according to the Daily Republic.
NorthBay Health is an independent, nonprofit healthcare system with a medical center in Fairfield, Calif., a hospital in Vacaville, Calif., and multiple specialty care clinics throughout Solano County. It was formerly known as NorthBay Healthcare.
As employers plan for 2023, attracting and retaining talent is top of mind amid a competitive U.S. labor market. That’s led to over two-thirds of companies planning to enhance employee health and benefit offerings next year, according to survey results from Mercer published July 6.
The survey was conducted April 26 to May 13. In total, 708 organizations participated, from all industries and of all sizes ranging from fewer than 500 employees to more than 5,000.
Nine things to know:
Among large employers, 70 percent are planning to enhance health and benefit offerings in 2023.
Among all employers, 61 percent are conducting surveys on employee benefit preferences.
Among large employers, 41 percent currently provide a plan option with a low deductible or none at all, and 11 percent are considering it.
Over half of employees say no remote or hybrid work is a deal breaker when considering to join or stay with an organization. Among all employers, 78 percent now allow employees to work from home regularly, compared to 26 percent in 2021.
Among large employers, 52 percent will offer virtual behavioral healthcare in 2023, and 40 percent will offer a virtual primary care physician network or service.
Though 64 percent of employers are not prioritizing a single employee group for benefit enhancements, 35 percent say they are focusing on hourly and low-wage employees.
Nearly one-third of employers will offer benefits such as fertility treatment coverage and adoption and surrogacy benefits by 2023, and almost another third are considering it.
Among all employers, 70 percent currently offer or plan to offer paid parental leave in 2023.
Among all employers, 75 percent offer or plan to offer tuition reimbursement in 2023.
As the economic situation has worsened over the past few months, we’ve been working with several health systems to recalibrate strategy. For many, the anticipated “post-COVID recovery” period has turned into a struggle to reverse declining (often negative) margins, while still scrambling to address mounting workforce shortages. All this amid continued pressure from disruptive competitors and ever-rising consumer expectations.
In the graphic above, we’ve pulled together some of the most important changes we believe health systems need to make. These range from improvements to the operating model (shifting to a team-based approach to staffing, greater use of automation where appropriate, and moving to asset-light capital strategies) to transformations of the clinical model (moving care into lower-cost outpatient and community settings, integrating virtual care into clinical delivery, and creating tighter alignment with key physicians).
In general, the goal is to deliver lower-cost care in less expensive settings, using less expensive staff.
But those cost-saving strategies will need to be coupled with a new go-to-market approach, including new payment models that reward systems for shifting away from high-cost (and highly reimbursed) care models.
Employers and consumers will expect more solution-based offerings, which integrate care across the continuum into coherent bundles of service. This will require a more deliberate focus on service line strategies, moving away from a fragmented, inpatient-centric model.
Contracting approaches must align payment with this shift, changing incentives to reward coordinated, cost-effective, outcomes-driven care.
A key insight from our discussions with health system leaders: short-term cost-cutting initiatives to “stop the bleed” won’t suffice—instead, more permanent solutions will be required that address not only the core operating model, but also the approach to revenue generation.
The post-COVID environment is turning out to be a lot tougher than many had expected, to say the least.
U.S.-based employers announced 32,517 cuts in June 2022, a 58.8 percent increase from 20,476 cuts announced in the same month last year, according to a new job report from Challenger, Gray & Christmas.
June marks the highest month since February 2021, when 34,531 cuts were announced. It is the second time this year that cuts were higher in 2022 than the corresponding month a year earlier.
Healthcare/products manufacturers and providers announced the most job cuts this year with 19,390, which is up 54 percent from the 12,620 announced through June 2021. The automotive industry posted the second-highest cuts with 15,578, a number that is up from the 6,111 cuts in the previous year.
Andrew Challenger, senior vice president of executive search firm Challenger, Gray & Christmas, said the numbers demonstrate increasing economic strain.
“Employers are beginning to respond to financial pressures and slowing demand by cutting costs. While the labor market is still tight, that tightness may begin to ease in the next few months,” Mr. Challenger said.
Locations suffering the highest losses include California with 28,692, New York at 15,952, and Pennsylvania at 9,310.
IBM Watson Health, in partnership with Fortune, has released its top 15 health systems, which they find set an example for health systems and hospitals across the nation. With its data, the report will continue to stand as a resource for these groups to improve their quality of care and efficiency.
In its 14th year of publishing this study, IBM Watson Health found that the top 15 health systems had better survival rates, fewer patient complications, fewer healthcare-associated infections, better long-term outcomes, better 30-day mortality/revisitation rates and more. The study also found that patients revered the top 15 hospitals more than peer system hospitals.
Fortune/IBM Watson Health divides its top 100 hospitals into three main categories listed below. It is noted that each system in the table is featured in alphabetical order and does not reflect performance rating. The full report, which includes further details on the methodology of rankings, can be found here.
Top 5 large health systems
Allina Health (Minneapolis)
Baylor Scott & White Health (Dallas)
Mayo Clinic (Rochester, Minn.)
Penn Medicine (Philadelphia)
Rush University System for Health (Chicago)
Top 5 medium health systems
Cone Health (Greensboro, N.C.)
Edward-Elmhurst Health (Naperville, Ill.)
PIH Health (Whittier, Calif.)
Scripps Health (San Diego)
St. Luke’s Health System (Boise, Idaho)
Top 5 small health systems
Asante (Medford, Ore.)
CHI Memorial (Chattanooga, Tenn.)
CHI St. Vincent (Little Rock, Ark.)
Franciscan Sisters of Christian Charity Sponsored Ministries (Manitowoc, Wis.)
Several hospitals are trimming their workforces due to financial and operational challenges, and some are offering affected workers new positions.
1. Santa Cruz Valley Hospital in Green Valley, Ariz., closed June 30. The closure resulted in 315 workers losing their jobs. CEO Steve Harris said the decision to close Santa Cruz Valley Regional Hospital was made after it was unable to secure emergency department staffing for the Fourth of July weekend. The hospital issued a Worker Adjustment and Retraining Notification Act notice June 20, which gave the hospital’s 315 workers notice of the mass layoff.
2. Claxton-Hepburn Medical Center in Ogdensburg, N.Y., is cutting approximately 5 percent of its 800-person workforce as it makes changes aimed at improving revenue cycle functions. The hospital said in late June that it is planning to outsource revenue cycle functions and lay off revenue cycle staff.
3. Sturgis (Mich.) Hospital said it is planning to lay off 194 employees in July as it scales back services or closes. The hospital subsequently secured a loan to keep it open through July, according to WTVB.
4. Bristol (Conn.) Health on June 16 eliminated 31 positions, including 10 that were filled and 21 that were vacant. The majority of those laid off were in management.
5. Citing skyrocketing expenses and flat revenue, St. Charles Health System in Bend, Ore., will cut 181 positions, according to a May 18 announcement. The workforce reduction includes laying off 105 caregivers and eliminating 76 vacant positions. The layoffs affect mainly nonclinical workers, including many leadership positions. The four-hospital health system said it took steps to address its financial challenges, but it ended the month of April with a $21.8 million loss.
6. Toledo, Ohio-based ProMedica’s health plan, Paramount, is laying off about 200 employees in July after losing a Medicaid contract. Anthem acquired Paramount’s Medicaid contract, and ProMedica and Anthem have been working to identify open roles for employees affected by the layoffs.
7. Greenwood (Miss.) Leflore Hospital announced in May that it will lay off 30 employees to help offset losses. The layoffs, which include an undisclosed number of physicians, affect less than 4 percent of the hospital’s workforce. Many of the affected employees were notified May 17.
8. Mercy Medical Center in Springfield, Mass., part of Trinity Health of New England, is trimming jobs. The hospital laid off 12 of its 380 unionized nurses, the Massachusetts Nurses Association told Western Mass News in May. Translators and ancillary staff were also affected by the cuts. Trinity Health of New England, which declined to provide the number of workers affected by the layoffs, attributed the cuts to national disruption in the healthcare industry. In addition to the layoffs, Trinity Health of New England is also eliminating some positions that are currently vacant.
Private insurers pay high and rising prices to hospitals. But whether this is “good” or “bad” depends on what’s behind this phenomenon. Do high prices reflect investments in quality? Or do they instead reflect issues like lack of competition due to hospital consolidation? The answer matters for efforts to reduce health care spending.
In a new paper in the Journal of Health Economics, Craig Garthwaite, Christopher Ody and Amanda Starc investigated whether the prospect of financial rewards drove differences in hospital quality measures — including things like mortality rates, patient experience, technology adoption and emergency department wait times. Specifically, the authors’ examined whether hospitals are more likely to invest in quality if they will be rewarded through higher prices. This is more feasible if they’re serving lots of commercially insured patients, since private insurers may pay higher rates if patients value those hospitals. But that strategy may not be successful in areas with large shares of the population on Medicare and Medicaid, which do not negotiate prices.
The researchers found that:
Hospitals in areas with more privately insured patients had higher quality scores compared to hospitals with more publicly insured patients.
Hospitals targeting more privately insured patients also had higher costs than those relying more on payers like Medicare and Medicaid.
These results suggest hospitals make strategic investments in quality to attract privately insured patients. This is consistent with what one might expect from market competition and the results of other recent research. These findings do not, however, imply that prices are “optimal.” Prices also reflect factors like provider consolidation that have little observable effects on quality. Indeed, hospital prices likely reflect a mix of valuable and wasteful spending.
The analysis does have limitations. The authors used the demographics of the areas around the hospital instead of each hospital’s actual potential mix of patients. In addition, it is possible that some quality differences across hospitals actually reflect differences between patients with private and public insurance which aren’t easy to capture in data. However, the authors’ results were similar across several quality measures, including those where this is less of a concern.
These results can help better inform efforts to reduce health care costs. Policymakers interested in reducing hospital prices should be aware that doing so might reduce investments in quality. This suggests placing a greater emphasis on policies that target prices stemming from clear sources of inefficiencies, like consolidation, since such tradeoffs are likely smaller.
Summary U.S. hospitals and health systems continued to face difficult financial and operational headwinds in May. Operating margins rose from April but remained significantly lower than pre-pandemic levels and May 2021.
Volumes were up slightly from the previous month, with rising ED visits close to numbers last seen in 2019 and earlier. Gross operating revenues rose month-over-month and in comparison to May 2021. But expenses — especially labor costs — were elevated across nearly every metric month-over-month.
Margins The median Kaufman Hall Year-To-Date (YTD) Operating Margin Index reflecting actual margins was -0.33% through May. The median change in Operating Margin was up 18.9% from last month but down 45.6% from May 2021. The median change in Operating EBITDA Margin was up 13.5% month-over-month, but down 36.1% from May 2021.
Volumes Patient volumes rose in May, with Length of Stay (LOS) up 2.3% from April and 5.5% compared to May 2021. Patient Days increased by 4.8% month-over-month but dropped 0.5% versus May 2021. Adjusted Patient Days grew 3.5% from April to May and were 4% above May 2021 levels. Adjusted Discharges rose slightly, at 0.6% month-over-month, but were down 0.3% compared to May 2021. Surgeries barely fluctuated, with Operating Room Minutes down 1.0% from last month and up just 0.1% YOY. Emergency Department (ED) Visits jumped 9.5% from April to May and were up 4.5% YOY.
Revenues Volume increases resulted in slightly improved revenue performance in May. Gross Operating Revenue was up 3.4% from April and 7.6% YOY, and is up 6.9% YTD. Similarly, Outpatient (OP) Revenue rose 2.2% from April levels, 9.4% YOY and is up 9.1% YTD. Inpatient (IP) Revenue climbed 3.5% from the previous month and 2.6% from May 2021, and is up 4.2% YTD.
Expenses Total Expenses continued to climb in May, rising 1.1% from April and 10.7% from May 2021. Inflation and labor shortages contributed to total costs climbing 10.4% YTD.
Labor Expense per Adjusted Discharge inched up by 1.0% from April and has surged 13.6% YTD, while Full-Time Employees Per Adjusted Occupied Bed (FTEs per AOB), is down by 2.7% YTD, indicating that hospitals are spending more on labor costs with fewer hours worked. However, FTEs per AOB rose slightly in May, up 2.8% from April. Total Expense per Adjusted Discharge increased by 0.3% from April, and Labor Expense per Adjusted Discharge rose 1.0% from last month.
Non-Operating The Federal Reserve raised its benchmark rate by 75 basis points in mid-June, the most aggressive increase since 1994, as inflation hit a 40-year high of 8.6% in May. New projections show The Federal Open Market Committee (FOMC) participants expect the Fed to raise rates to at least 3% this year, with half indicating 3.375%. Labor metrics remain strong with unemployment reading 3.6% in May and employers adding 390,000 new jobs.
Consumer sentiment hit a record low reading of 50.2 in early June, comparable to the low point reached during the 1980 recession. US equities ended May with marginal gains after weeks of volatile trading due to economic data and corporate earnings sowing doubt over the health of the US economy.
Takeaways at a Glance
Nearly halfway through 2022, margins are cumulatively negative. While some metrics have normalized, hospitals continue to perform below pre-pandemic levels, and there is an uncertain outlook for the rest of the year.
Elevated labor costs remain a significant challenge. Hospitals are still seeing higher labor costs and fewer hours worked, a sign of inflation and an indicator that long-standing labor shortages are likely worsened by increased turnover.
Warmer temperatures and ED visits drove up volumes and revenues. Patients often schedule elective procedures during the summer months, which may have contributed to growing volumes. Emergency department visits also spiked this past month as people spent more time outdoors.
Pent-up demand for hospital services also contributed to an increase in patients. Sicker patients continued to schedule procedures they had previously postponed, suggesting a return to normalcy as COVID-19 hospitalizations remained relatively low.
Here are 19 health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.
1. Morristown, N.J.-based Atlantic Health System has an “Aa3” rating and stable outlook with Moody’s. The health system has strong operating performance and liquidity metrics, Moody’s said. The credit rating agency expects Atlantic Health System to sustain strong performance to support capital spending.
2. Banner Health has an “AA-” rating and stable outlook with Fitch. The Phoenix-based health system’s core hospital delivery system and growth of its insurance division combine to make it a successful highly integrated delivery system, Fitch said. The credit rating agency said it expects Banner to maintain operating EBITDA margins of about 8 percent on an annual basis, reflecting the growing revenues from the system’s insurance division and large employed physician base.
3. Clearwater, Fla.-based BayCare has an “AA” rating and stable outlook with Fitch. The 14-hospital system has excellent liquidity and operating metrics, which are supported by its leading market position in a four-county area, Fitch said. The credit rating agency expects strong revenue growth and cost management to sustain BayCare’s operating performance.
4. CentraCare has an “AA-” rating and stable outlook with Fitch. The St. Cloud, Minn.-based system has a leading market position and solid operating margins, Fitch said. The credit rating agency said it expects CentraCare’s operating platform to remain strong.
5. Greensboro, N.C.-based Cone Health has an “AA” rating and stable outlook with Fitch. The health system has a leading market share and a favorable payer mix, Fitch said. The health system’s broad operating platform and strategic capital investments should enable it to return to stronger operating results, the credit rating agency said.
6. Franciscan Alliance has an “AA” rating and stable outlook with Fitch. The Mishawaka, Ind.-based health system has a very strong cash position and maintains leading market shares in seven of its nine defined primary service areas, Fitch said. The health system benefits from a good payer mix, the credit rating agency said.
7. Gundersen Health System has an “AA-” rating and stable outlook with Fitch. The La Crosse, Wis.-based health system has strong balance sheet metrics and a leading market position and expanding operating platform in its service area, Fitch said The credit rating agency expects the health system to return to strong operating performance as it emerges from disruption related to the COVID-19 pandemic.
8. Falls Church, Va.-based Inova Health System has an “Aa2” rating and stable outlook with Moody’s. The health system has a consistently strong operating cash flow margin and ample balance sheet resources, Moody’s said. Inova’s financial excellence will remain undergirded by its favorable regulatory and economic environment, the credit rating agency said.
9. Vineland, N.J.-based Inspira Health Network has an “AA-” rating and stable outlook with Fitch. The health system has strong operating performance, a leading market position in a stable service area and a growing residency program, Fitch said. The credit rating agency expects the system’s growing outpatient footprint and an increase in patient volumes to support its operating stability.
10. Oakland, Calif.-based Kaiser Permanente has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile, and the system’s operating platform is “arguably the most emulated model” for nonprofit healthcare delivery in the U.S., Fitch said. By revenue base, Kaiser is the largest nonprofit health system in the U.S., and it is the most fully integrated healthcare delivery system in the country, according to the credit rating agency.
11. Mass General Brigham has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. The Boston-based health system has an excellent clinical reputation, good financial performance and strong balance sheet metrics, Moody’s said. The credit rating agency said it expects Mass General Brigham to maintain a strong market position and stable financial performance.
12. Rochester, Minn.-based Mayo Clinic has an “Aa2” rating and stable outlook with Moody’s. The credit rating agency said Mayo Clinic’s strong market position and patient demand will drive favorable financial results. The health system “will continue to leverage its excellent reputation and patient demand to continue generating favorable operating performance while maintaining strong balance sheet ratios,” Moody’s said.
13. Methodist Health System has an “Aa3” rating and stable outlook with Moody’s. The Dallas-based system has strong operating performance, and investments in facilities have allowed it to continue to capture more market share in the fast-growing Dallas-Fort Worth, Texas, area, Moody’s said. The credit rating agency said it expects Methodist Health System’s strong operating performance and favorable liquidity to continue.
14. Traverse City, Mich.-based Munson Healthcare has an “AA” rating and stable outlook with Fitch. The health system has a strong market position, a good payer mix and robust cash-to-adjusted debt levels, Fitch said. The credit rating agency expects the system to weather an expected period of weakened operating cash flow margins.
15. Albuquerque, N.M.-based Presbyterian Healthcare Services has an “Aa3” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with Fitch. Presbyterian Healthcare Services is the largest health system in New Mexico, and it has strong revenue growth and a healthy balance sheet, Moody’s said. The credit rating agency said it expects the health system’s balance sheet and debt metrics to remain strong.
16. Chicago-based Rush Health has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile and a broad reach for high-acuity services as a leading academic medical center, Fitch said. The credit rating agency expects Rush’s services to remain profitable over time.
17. Stanford (Calif.) Health Care has an “AA” rating and stable outlook with Fitch. The health system has extensive clinical reach in a competitive market and its financial profile is improving, Fitch said. The health system’s EBITDA margins rebounded in fiscal year 2021 and are expected to remain strong going forward, the crediting rating agency said.
18. University of Chicago Medical Center has an “AA-” rating and stable outlook with Fitch. The credit rating agency said it expects University of Chicago Medical Center’s capital-related ratios to remain strong, in part because of its broad reach of high-acuity services.
19. University of Iowa Hospitals and Clinics has an “Aa2” rating and stable outlook with Moody’s. The Iowa City-based health system, the only academic medical center in Iowa, has strong patient demand and excellent financial management, Moody’s said. The credit rating agency said it expects the health system to continue to manage the pandemic with improved operating cash flow margins.
HENRY KOTULA 