Hospital Layoffs Rise In ObamaCare Era

Investor's Business Daily

That busy health care industry to-do list ahead of ObamaCare includes an increasing number of hospital job cuts. Since the start of May, hospital groups have announced plans to lay off nearly 6,000 workers. Add in several thousand additional positions seeing fewer hours or cuts through attrition and buyouts, and the work reductions impact more than 9,000 jobs.

An IBD review found layoff and workforce reduction announcements covering 75 hospital groups in 33 states and the District of Columbia.

Prognosis Negative

While hospital layoffs are much more common in recent years, what is notable is how widespread they've become, impacting even firms that have never before resorted to job cuts. Even more striking is the sudden change in patient behavior and rapid deterioration in hospital finances.

Baystate Franklin Medical Center, in Massachusetts, which is cutting up to nine nurses on its surgical staff, noted that the average hospital stay for its patients has fallen from 3.4 days in 2012 to 2.4 days this year.

Jordan Hospital, also in Massachusetts, is cutting 43 positions partly as a response to a 9% decline in inpatient admissions.

Cone Health of North Carolina, which earned $100 million in 2010, was reportedly $11 million in the red through eight months of its fiscal year. As a result, the hospital group is laying off 150 employees.

Baptist Health of Arkansas, which this week said it will lay off 170, nearly 2.5% of its workforce, listed the array of challenges forcing hospitals to find efficiencies wherever they can: "substantially less government reimbursement, burdensome government regulations, rapidly rising costs of supplies, increasing charity care and bad debt, and the need for technology and medical innovations.

Nashville, Tenn.-based Community Health Systems (CYH), with 135 hospitals in 29 states, warned late Thursday that it experienced its "first significant earnings miss" in almost seven years in the June quarter. The hospital group gave no word of layoffs but said it is intensifying its focus on managing expenses.

After-tax profit in the quarter sank to $65 million vs. $151.7 million a year earlier as admissions fell 5.1% and uncompensated care costs topped expectations.

Community Health, whose shares fell 9% Friday, also cited "a deterioration in payor mix" — which is another way of saying it wished more patients had private insurance, not Medicare and Medicaid.

Pain Will Grow

Some deterioration in hospital finances is to be expected, given Medicaid cuts in some states and a 2% reduction in Medicare payments due to sequestration. But these financial challenges are being exacerbated by patient frugality — partly a function of high-deductible policies — and by new federal regulations to curb Medicare costs.

Some hospitals said they were making cuts to be proactive because they expected Medicare reimbursements to continue to lag due to ObamaCare reforms.

"Admissions are expected to continue at a reduced rate because of initiatives that are part of health care reform," Florida's Indian River Medical Center said in a memo explaining the reduction of 50 staffers, including 21 layoffs. "For example, admission criteria will deny payment for a number of conditions that now must be taken care of on an outpatient basis.

As economists and federal budget watchers herald evidence that health care cost growth has slowed and projections that the slowdown will be sustained, the apparent acceleration in hospital layoffs demonstrates that the path toward that end is far from pain-free .

Medicare's actuaries have warned in recent years that ObamaCare's prescribed payment reductions would be difficult to achieve and could, over time, leave a sizable percentage of providers operating at a loss.

Aware that the financial pressures will be longstanding, a number of operators said that further work reductions are on the way.

Lifespan of Rhode Island, which laid off 53, told workers to expect an additional reduction of 200 jobs. The Hospital of Central Connecticut said it has avoided layoffs by cutting 100 positions through attrition and voluntary retirement, while decreasing hours "to maintain jobs for people who wanted to keep working." But that approach, the hospital warned, is "going to become more difficult.

Those hospitals are in states that have signed onto ObamaCare's Medicaid expansion. In states such as Missouri that have not signed up, hospitals warned that their finances may deteriorate further. That's because ObamaCare will reduce Medicaid payments to hospitals that serve a disproportionate share of low-income patients. Those cuts were passed when the expansion was supposed to be mandated.

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