Hospitals Look At Labor As Their Surpluses Shrink | Growing losses reported in Clinton, Southbridge, Marlborough and MetroWest
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John G. O'Brien, president and CEO of UMass Medical Center in Worcester.
Central Massachusetts hospital executives eager to keep operating budgets out of the red are ready to fight it out with employees to save money.
It’s become so costly to run a hospital that hiring freezes, increased employee contributions to health insurance plans, union give-backs and smaller annual raises are all on the table, executives say.
Even hospitals on target to meet or exceed 2007’s operating surpluses are bracing for tough times.
The University of Massachusetts Medical Center in Worcester reported a second quarter operating surplus of $12.6 million, an improvement over the $5.4 million operating surplus reported for the first quarter. The hospital’s operating surplus for all of 2007 was $48.3 million.
Still, UMMC President and CEO John O’Brien said shortfalls in state funding, smaller payments from Medicare and Medicaid and the number of uninsured patients have put a noticeable strain on the hospital.
But the numbers are grimmer at smaller community hospitals.
Cost Controls
Clinton Hospital, Harrington Memorial Hospital in Southbridge, Marlborough Hospital and the MetroWest Medical Center reported deep second quarter operating losses in state Office of Health and Human Services filings.
At $348,915, Clinton Hospital’s second quarter operating loss was nearly 57 percent greater than the $151,529 operating loss it reported to the state in the first quarter and far above the $20,749 loss it reported for the entirety of 2007. The hospital has reported an operating loss every year since 2005.
And Clinton Hospital is not alone.
Harrington Memorial Hospital’s second quarter loss was $2.27 million, 65 percent greater than the $800,687 operating loss it reported for the first quarter. Harrington reported a $3.7 million operating loss for the 2007 fiscal year.
Marlborough Hospital’s second quarter operating loss was $1.2 million. That’s a loss 74 percent greater than the previous quarter.
The MetroWest Medical Center in Framingham has been reporting operating losses since 2006, when its loss for the year was $3.5 million. For the second quarter of this year, MetroWest Medical Center reported a $7.8 million operating loss. In the first quarter, the hospital reported a $5.5 million loss, still greater than the $5.3 million operating loss it reported for 2007.
UMMC started its cost-cutting efforts by looking over its supply chain, O’Brien and hospital CFO Todd Keating said. It joined a group purchasing organization and feels that it has trimmed almost all the waste it could possibly trim from its supply chain.
Now, UMMC management is casting the same analytical gaze on its employees.
“We focused on the supply chain and got a little bit of uniformity, but we also did a scan of our labor situation. A large number of our employees are members of unions,” Keating said. Their pay is high, their benefits are generous and the Massachusetts Nurses Association is notoriously touchy in labor/management relations.
“We’ve been steadily growing, but we’re not going to keep growing at that clip,” O’Brien said. “Going into next year, at least for the first six months, our full time equivalent count is going to remain flat.”
Keating said the hospital is ready to negotiate smaller cost-of-living increases, as well as greater contributions to the hospital’s health insurance plan with union employees.
Smaller hospitals tend to face more problems than the bigger ones. In addition to rising costs, shrinking reimbursements and state funding, they deal with patients choosing larger teaching hospitals over the closer, smaller community hospitals and higher turnover rates among physicians and nursing staff.
Staff at smaller hospitals, like patients who seek out the big names and reputations of larger teaching hospitals, migrate toward higher salaries there.
Ed Moore, president and CEO of Harrington Memorial Hospital, said the Southbridge hospital is constantly recruiting and planning to fill those vacancies.
“Hospitals can plan by constantly monitoring medical staff activity and continually recruiting for difficult-to-find positions,” he said by e-mail.
According to Julie Pinkham, executive director of the Massachusetts Nurses Association, smaller community hospitals wouldn’t be in that position if Massachusetts hadn’t deregulated its health care system in 2006.
The state’s partial deregulation was intended to expand health insurance coverage, provide greater consumer choice and be less of a burden on taxpayers.
Pinkham said the competition has become bitter, and despite executive rhetoric, the goal of every hospital is to put its competition out of business. “They look to steal each other’s market share and destroy each other’s business,” she said, adding, “They’re just trying to put it on the customers and their employees. I’m not surprised by the rhetoric, but it’s unsubstantiated.”
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