One of New York City's largest hospital holding companies will lay off 800 workers, primarily at its flagship facilities Beth Israel Medical Center and St. Luke's-Roosevelt Hospital Center.
Continuum Health Partners informed its workers of its intent to cut jobs in a memo earlier this month, without specifying a number. But sources familiar with the situation say the reductions will amount to 5% of its total workforce of 16,500.
The cuts are likely to be the first of a wave of hospital layoffs that could cost thousands of local healthcare workers their jobs. In 1998, the city's hospitals lost millions of dollars in their worst financial performance in years. Nearly every institution lost money, and all indications are that results for 1999 and 2000 will be worse.
The whole industry is in dire straits, said Chuck Kachmarik, partner in charge of solutions for the healthcare practice of Deloitte & Touche. Almost everyone is under extreme pressure to really cut staff.
Continuum said that every area of its operations will be scrutinized and that both entire programs and individual positions will be trimmed. While most of the reductions will be at Beth Israel and St. Luke's, some layoffs will be at Long Island College Hospital, Continuum's outpost in Brooklyn. The fourth hospital in the system, New York Eye and Ear Infirmary, will not be affected, having just gone through its own reorganization.
Sources said that services such as pediatrics and OB/GYN will likely see the deepest cuts. A decision to ax a genetics program in pediatrics, eliminating six jobs, has already been made.
Hospitals blame such layoffs on reductions in government Medicare reimbursements and the growing influence of managed care, both of which have put a squeeze on institutions' cash flow and margins. In the past few years, New York City hospitals have lost hundreds of millions of dollars in government payments; by 2001, the damage is expected to reach $2.5 billion.
In the first half of 1999, operating losses at the city's voluntary hospitals were at 2.6%--among the worst in the country--according to a study by the United Hospital Fund. Three-quarters of the facilities had operating losses. Continuum, with two-thirds of its patients on Medicare or Medicaid, has been hit especially hard.
The Balanced Budget Act of 1997 and abusive practices of HMOs are putting hospitals in a fiscal vise and squeezing the blood out of them, said Kenneth Raske, president of the Greater New York Hospital Association.
But analysts said New York hospitals have too many beds and still haven't learned how to operate in a competitive, unregulated arena.
New York hospitals just came out of regulatory reform in 1996, and a lot of them are still operating fat, said Craig Kornett, a director of credit-rating agency Fitch IBCA.
It is clear, in any case, that Continuum won't be alone in having to slash its workforce. Even at Mount Sinai-NYU Health, where occupancy is running ahead of last year's, continuing attempts to cut costs will likely include workforce reductions, said Jack Rowe, M.D., its chief executive officer.
Meanwhile, many hospitals have imposed hiring freezes, and they hope attrition can delay the need for layoffs. They are shutting down or selling money-losing businesses, including home health programs, dialysis and diabetes treatment units, ambulatory-care centers and costly physician practices. Such actions automatically reduce staff, but they only delay layoffs, some observers believe.
Hospitals need to be as efficient as possible, said Kornett. They have to make the tough decisions.