Many hospitals are temporarily or permanently reducing the size of their workforce as they grapple with depleted revenues and the thorny question of when they can return to normal operating capacity. Here’s a tracker to follow the latest updates.
Hospitals across the country, financially battered as they face the dual challenges of sick COVID-19 patients and a precipitous decline in patient volume, are struggling to balance quickly shifting staffing needs. While some face and others brace for intense demand, many have announced furloughs of specialists and others that work in elective surgeries that have been drastically scaled back.
Thousands of healthcare workers at hospitals big and small have been asked not to return to work, and it’s still unclear how soon non-essential services will return. While some governors announce plans to reopen businesses, others have extended stay-at-home orders.
Most recent data from the U.S Bureau of Labor doesn’t cover the second half of March or early April, but during the first half of March, the healthcare industry shed 43,000 jobs — reversing a decade of growth in the sector. According to BLS data, the industry added 49,000 jobs in March 2019.
“Even our emergency room has seen a significant drop in patients coming in,” Sue Philips, an ICU nurse at Palomar Pomerado Health in Northern San Diego, told Healthcare Dive.
Phillips is a spokesperson with National Nurses United, the country’s largest nurses union. Palomar Health, which runs three medical centers in northern San Diego County, recently instituted 21-day temporary layoffs of 221 employees.
On April 28, Palomar announced that most of those layoffs were becoming permanent. The system laid off 5% of its workforce, eliminating 317 positions. Fifty of those employees were clinical RNs, mostly in part-time positions, and the rest spread across the organization ranging from clerical staff to technicians.
Due to a 50% decrease in patient volumes, Palomar lost $10 million in revenue in March alone, according to a statement. In April the system said it stands to lose $20 million or more.
“I’m an ICU nurse, so my job is pretty much protected,” Phillips said. “But you didn’t think you were expendable until you became expendable, and that’s a hard pill for nurses and caregivers to swallow.”
Congress has attempted to financially support struggling hospitals through ongoing coronavirus relief legislation, approving some $175 billion thus far. But without knowing what will come next, hospitals are attempting to remain nimble while reining in one of their most costly expenses — paying employees.
The following information is based on publicly reported data, along with interviews with hospital representatives and union members.
It’s not an exhaustive list, but features nonprofit and for-profit hospital systems that reported revenue above $10 billion in 2019. It also takes a look at smaller, more regionally based systems that have announced similar cutbacks.
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Healthcare job losses reached staggering levels amid stay-at-home orders and the widespread cancellation of elective procedures when the COVID-19 pandemic first hit this spring. Dentists and ambulatory services were particularly hard hit.
While the industry has since recovered many of the 1.3 million jobs lost this April, it’s still 527,000 short from February levels, and monthly gains have slowed since, according to the latest data from the Bureau of Labor Statistics.
At the same time, some of the major hospitals that issued furloughs or layoffs early in the pandemic are now further reducing the size of their workforce.
The stagnation will likely continue, as companies “don’t hire as many people, then lay some people off to also try and save money, because worse times may be ahead,” said Erica Groshen, former BLS commissioner and senior labor economics adviser at Cornell’s School of Industrial and Labor Relations.
One example is Dallas-based Baylor Scott & White, which laid off 3% of its workforce, or 1,200 employees in May. It’s now laying off a third of its corporate finance staff, though some impacted employees are being offered positions with a third-party vendor, the system said in a Monday statement.
Providence Health & Services laid off 183 employees in mostly administrative roles as a result of transitioning work to a third-party vendor, while five employees were laid off “as a result of business need,” according to a WARN notice letter the system sent to an Oregon state agency Nov. 16. It previously issued an unknown number of furloughs across its 51-hospital system.
And Utah-based Intermountain Health said it would cut 250 business-related jobs by offering 750 employees voluntary separation packages on Oct. 13.
The moves come even while hospitals are stretched to the brink from the highest surge of coronavirus cases the country has yet seen. In the past few weeks, many have halted elective procedures and paid steep rates for temporary nursing staff, further straining finances.
And other healthcare establishments, such as some doctor’s offices and medical labs, are still struggling to get reluctant patients back in.
A recent Labor Department survey covering the onset of the pandemic through September found among all healthcare businesses, 64% experienced a decrease in demand while only 13% experienced an increase in demand.
In November, healthcare businesses overall added 46,000 jobs in — fewer than the 58,000 jobs added in October; 53,000 in September; and 75,000 in August, according to BLS data.
Hospitals added about 4,000 jobs in November and are about 100,000 jobs short from February.
Dallas-based Baylor Scott & White Health said it will lay off 102 employees in finance and accounting roles as part of an effort to reshape operations and reduce costs, according to The Dallas Morning News.
The duties of the affected workers will be outsourced to a third-party vendor in India. About 18 of the affected Baylor employees will be offered positions with the vendor, according to the report.
A spokesperson for Baylor Scott & White told Becker’s Hospital Review that the system will retain about two-thirds of its corporate finance department.
“Our system is continuously looking for ways to reduce costs and improve our ability to provide affordable and quality healthcare for our patients and members. As part of this, we are transforming the way we deliver our corporate finance services,” the nonprofit health system wrote in a statement obtained by Becker’s.
The cuts follow a larger round of layoffs and furloughs announced in May, which affected about 1,200 employees, or 3 percent of its workforce.
The health system said it is working to be more efficient and intentional in how resources are used. It is working to add front-line caregivers and has more than 2,000 open clinical jobs, a spokesperson told Becker’s.
“We care deeply about all our colleagues and are committed to supporting them through this process,” the statement read.
The financial challenges caused by the COVID-19 pandemic have forced hundreds of hospitals across the nation to furlough, lay off or reduce pay for workers, and others have had to scale back services or close.
Lower patient volumes, canceled elective procedures and higher expenses tied to the pandemic have created a cash crunch for hospitals. U.S. hospitals are estimated to lose more than $323 billion this year, according to a report from the American Hospital Association. The total includes $120.5 billion in financial losses the AHA predicts hospitals will see from July to December.
Hospitals are taking a number of steps to offset financial damage. Executives, clinicians and other staff are taking pay cuts, capital projects are being put on hold, and some employees are losing their jobs. More than 260 hospitals and health systems furloughed workers this year and dozens of others have implemented layoffs.
Below are 11 hospitals and health systems that announced layoffs since Sept. 1, most of which were attributed to financial strain caused by the pandemic.
1. NorthBay Healthcare, a nonprofit health system based in Fairfield, Calif., is laying off 31 of its 2,863 employees as part of its pandemic recovery plan, the system announced Nov. 2.
2. Minneapolis-based Children’s Minnesota is laying off 150 employees, or about 3 percent of its workforce. Children’s Minnesota cited several reasons for the layoffs, including the financial hit from the COVID-19 pandemic. Affected employees will end their employment either Dec. 31 or March 31.
3. Brattleboro Retreat, a psychiatric and addiction treatment hospital in Vermont, notified 85 employees in late October that they would be laid off within 60 days.
4. Citing a need to offset financial losses, Minneapolis-based M Health Fairview said it plans to downsize its hospital and clinic operations. As a result of the changes, 900 employees, about 3 percent of its 34,000-person workforce, will be laid off.
5. Lake Charles (La.) Memorial Health System laid off 205 workers, or about 8 percent of its workforce, as a result of damage sustained from Hurricane Laura. The health system laid off employees at Moss Memorial Health Clinic and the Archer Institute, two facilities in Lake Charles that sustained damage from the hurricane.
6. Burlington, Mass.-based Wellforce laid off 232 employees as a result of operating losses linked to the COVID-19 pandemic. The health system, comprising Tufts Medical Center, Lowell General Hospital and MelroseWakefield Healthcare, experienced a drastic drop in patient volume earlier this year due to the suspension of outpatient visits and elective surgeries. In the nine months ended June 30, the health system reported a $32.2 million operating loss.
7. Baptist Health Floyd in New Albany, Ind., part of Louisville, Ky.-based Baptist Health, eliminated 36 positions. The hospital said the cuts, which primarily affected administrative and nonclinical roles, are due to restructuring that is “necessary to meet financial challenges compounded by COVID-19.”
8. Cincinnati-based UC Health laid off about 100 employees. The job cuts affected both clinical and non-clinical staff. A spokesperson for the health system said no physicians were laid off.
9. Mercy Iowa City (Iowa) announced in September that it will lay off 29 employees to address financial strain tied to the COVID-19 pandemic.
10. Springfield, Ill.-based Memorial Health System laid off 143 employees, or about 1.5 percent of the five-hospital system’s workforce. The health system cited financial pressures tied to the pandemic as the reason for the layoffs.
11. Watertown, N.Y.-based Samaritan Health announced Sept. 8 that it laid off 51 employees and will make other cost-cutting moves to offset financial stress tied to the COVID-19 pandemic.
A complete financial recovery for many organizations is still far away, findings from Kaufman Hall indicate.
For the past three years, Kaufman Hall has released annual healthcare performance reports illustrating how hospitals and health systems are managing, both financially and operationally.
This year, however, with the pandemic altering the industry so broadly, the report took a different approach: to see how COVID-19 impacted hospitals and health systems across the country. The report’s findings deal with finances, patient volumes and recovery.
The report includes survey answers from respondents almost entirely (96%) from hospitals or health systems. Most of the respondents were in executive leadership (55%) or financial roles (39%). Survey responses were collected in August 2020.
Findings from the report indicate that a complete financial recovery for many organizations is still far away. Almost three-quarters of the respondents said they were either moderately or extremely concerned about their organization’s financial viability in 2021 without an effective vaccine or treatment.
Looking back on the operating margins for the second quarter of the year, 33% of respondents saw their operating margins decline by more than 100% compared to the same time last year.
Revenue cycles have taken a hit from COVID-19, according to the report. Survey respondents said they are seeing increases in bad debt and uncompensated care (48%), higher percentages of uninsured or self-pay patients (44%), more Medicaid patients (41%) and lower percentages of commercially insured patients (38%).
Organizations also noted that increases in expenses, especially for personal protective equipment and labor, have impacted their finances. For 22% of respondents, their expenses increased by more than 50%.
IMPACT ON PATIENT VOLUMES
Although volumes did increase over the summer, most of the improvement occurred in areas where it is difficult to delay care, such as oncology and cardiology. For example, oncology was the only field where more than half of respondents (60%) saw their volumes recover to more than 90% of pre-pandemic levels.
More than 40% of respondents said that cardiology volumes are operating at more than 90% of pre-pandemic levels. Only 37% of respondents can say the same for orthopedics, neurology and radiology, and 22% for pediatrics.
Emergency department usage is also down as a result of the pandemic, according to the report. The respondents expect that this trend will persist beyond COVID-19 and that systems may need to reshape their business model to account for a drop in emergency department utilization.
Most respondents also said they expect to see overall volumes remain low through the summer of 2021, with some planning for suppressed volumes for the next three years.
Hospitals and health systems have taken a number of approaches to reduce costs and mitigate future revenue declines. The most common practices implemented are supply reprocessing, furloughs and salary reductions, according to the report.
Executives are considering other tactics such as restructuring physician contracts, making permanent labor reductions, changing employee health plan benefits and retirement plan contributions, or merging with another health system as additional cost reduction measures.
THE LARGER TREND
Kaufman Hall has been documenting the impact of COVID-19 hospitals since the beginning of the pandemic. In its July report, hospital operating margins were down 96% since the start of the year.
As a result of these losses, hospitals, health systems and advocacy groups continue to push Congress to deliver another round of relief measures.
Earlier this month, the House passed a $2.2 trillion stimulus bill called the HEROES Act, 2.0. The bill has yet to pass the Senate, and the chances of that happening are slim, with Republicans in favor of a much smaller, $500 billion package. Nothing is expected to happen prior to the presidential election.
The Department of Health and Human Services also recently announced the third phase of general distribution for the Provider Relief Fund. Applications are currently open and will close on Friday, November 6.
Trinity Health Michigan is raising its minimum wage to $15 per hour for hospital and medical group employees, the organization announced in an Oct. 19 news release.
The wage increase will affect 2,100 full- and part-time employees at Norton Shores-based Mercy Health and Canton-based Saint Joseph Mercy Health System, and their medical groups, IHA, St. Joe’s Medical Group and Mercy Health Physician Partners.
Employees affected by the wage increase include non-union environmental services workers, medical assistants, patient companions, food and retail services and transporters.
Trinity Health Michigan officials said an additional 6,000 employees making between $15 to $19 an hour will also “have their wage adjusted in order to maintain meaningful distinctions in pay.” They said the additional wage increases are to improve pay for a large number of employees, and help retain and attract talented workers.
“Our dedicated and compassionate employees are at the heart of what makes our health ministry remarkable,” Rob Casalou, president and CEO of Trinity Health Michigan, said in a statement. “As we continue to face the COVID pandemic and work together to address economic challenges, we want to recognize our employees whose commitment and talent have enabled us to care for our communities during this challenging time. These investments in our people are part of an overall philosophy to offer equitable and market-competitive pay and benefits for our staff, as together we build a strong future.”
Trinity Health Michigan officials said eligible employees are still slated to receive their annual wage increases for 2020-2021, and no increases are planned in medical health plan premium contributions for employees for 2021. Additionally, they said the base minimum of the employer’s core contributions will climb from $1,200 to $1,400 for calendar year 2021.
Mercy Health and Saint Joseph Mercy Health System are part of Livonia, Mich.-based Trinity Health’s Michigan region. Mercy Health serves the Grand Rapids, Muskegon, Shelby and the Lakeshore communities, and Saint Joseph Mercy Health System has hospitals in Ann Arbor, Chelsea, Howell, Livonia and Pontiac, according to Trinity Health’s website.
Philadelphia-based Jefferson Health is taking steps to reduce costs to help offset losses tied to the COVID-19 pandemic.
The 14-hospital system plans to eliminate between 500 and 600 positions through attrition and will cut pay for its “most senior executives,” according to the Philadelphia Business Journal.
Jefferson Health is making cuts after reporting a net loss of $298.7 million in the fiscal year ended June 30. The system posted a loss after receiving $320 million in grants made available under the Coronavirus Aid, Relief and Economic Security Act to help cover lost revenue and expenses linked to the pandemic, according to The Philadelphia Inquirer.
“As one of the health systems in the United States with the largest amount of Covid patients during the surge, and one of the lowest employee infectivity rates, we took a ‘no expense is too much to protect our employees’ approach with PPE and other measures that drove up short-term expenses,” Stephen Klasko, MD, president of Thomas Jefferson University and CEO of Jefferson Health, told the Philadelphia Business Journal.
Dr. Klasko said patient volumes are beginning to rebound, and the health system is ahead of budget for fiscal year 2021.
“We made a conscious decision, as the region’s second-largest employer, to do no furloughs and only very few pre-planned layoffs during the pandemic surge,” Dr. Klasko told the Philadelphia Business Journal. “Due to our financial stewardship and growth over the past five years, our balance sheet was very stable and remains very stable despite the pandemic tsunami.”
In addition to cutting unfilled positions and reducing executive pay, the health system is taking a few other steps to achieve savings, including a pay freeze and a one-year suspension of employer contributions to employee retirements plans beginning Jan. 1.
Fort Myers, Fla.-based Lee Health is freezing salaries for its 13,500 employees next year to help offset financial losses tied to the COVID-19 pandemic, according to the Fort Myers News-Press.
The pay freeze in 2021 will mark the first time in nine years that the publicly operated health system has not given employee raises. Salaries and benefits make up about half of the system’s nearly $2 billion in spending each year, according to the report.
Lee Health is facing a budget deficit for the first time in two decades due to financial strain linked to the pandemic. The salary freeze is one of several steps the system is taking to offset losses and avoid layoffs.
The system has halted most capital projects, and its top executives took pay cuts earlier this year. Lee Health will also reduce the match for employee retirement plans from 5 percent to 4 percent next year, and health plan premiums and copays will also increase, according to the report.
Read the full Fort Myers News-Press article here.
For-profit hospitals are expected to see a financial decline over the next 12 to 18 months as federal relief funds that shored up revenue losses due to COVID-19 start to wane, a recent analysis from Moody’s said.
The analysis, released Monday, finds that cost management is going to be challenging for hospital systems as more surgical procedures are expected to migrate away from the hospital and people lose higher-paying commercial plans and go to lower-paying government programs such as Medicaid.
“The number of surgical procedures done outside of the hospital setting will continue to increase, which will weaken hospital earnings, particularly for companies that lack sizeable outpatient service lines (including ambulatory surgery centers),” the analysis said.
A $175 billion provider relief fund passed by Congress as part of the CARES Act helped keep hospital systems afloat in March and April as volumes plummeted due to the cancellation of elective procedures and reticence among patients to go to the hospitals.
Some for-profit systems such as HCA and Tenet pointed to relief funding to help generate profits in the second quarter of the year. The benefits are likely to dwindle as Congress has stalled over talks on replenishing the fund.
“Hospitals will continue to recognize grant aid as earnings in Q3 2020, but this tailwind will significantly moderate after that,” Moody’s said.
Cost cutting challenges
Compounding problems for hospitals is how to handle major costs.
Some hospital systems cut some costs such as staff thanks to furloughs and other measures.
“Some hospitals have said that for every lost dollar of revenue, they were able to cut about 50 cents in costs,” the analysis said. “However, we believe that these levels of cost cuts are not sustainable.”
Hospitals can’t cut costs indefinitely, but the costs for handling the pandemic (more money for personal protective equipment and safety measures) are going to continue for some time, Moody’s added.
“As a result, hospitals will operate less efficiently in the wake of the pandemic, although their early experiences in treating COVID-19 patients will enable them to provide care more efficiently than in the early days of the pandemic,” the analysis found. “This will help hospitals free up bed capacity more rapidly and avoid the need for widespread shutdowns of elective surgeries.”
But will that capacity be put to use?
The number of surgical procedures done outside of the hospital is likely to increase and will further weaken earnings, Moody’s said.
“Outpatient procedures typically result in lower costs for both consumers and payers and will likely be preferred by more patients who are reluctant to check-in to a hospital due to COVID-19,” the analysis said.
The payer mix will also shift, and not in hospitals’ favor. Mounting job losses due to the pandemic will force more patients with commercial plans toward programs such as Medicaid.
“This will hinder hospitals’ earnings growth over the next 12-18 months,” Moody’s said. “Employer-provided health insurance pays significantly higher reimbursement rates than government-based programs.”
There are some bright spots for hospitals, including that not all of the $175 billion has been dispersed yet. The CARES Act continues to provide hospitals with a 20% add-on payment for treating Medicare patients that have COVID-19, and it suspends a 2% payment cut for Medicare payments that was installed as part of sequestration.
The Centers for Medicare & Medicaid Services also proposed increasing outpatient payment rates for the 2021 fiscal year by 2.6% and in-patient rates by 2.9%. The fiscal year is set to start next month.
Patient volumes could also return to normal in 2021. Moody’s expects that patient volumes will return to about 90% of pre-pandemic levels on average in the fourth quarter of the year.
“The remaining 10% is likely to come back more slowly in 2021, but faster if a vaccine becomes widely available,” the analysis found.