Hoping to stem 2001 operating losses expected to top the $44 million lost in 2000, Detroit-based Henry Ford Health System will consolidate services at two hospitals, close three outpatient clinics and cut more than 500 jobs to achieve $70 million in cost savings and new revenue this year, the hospital announced last week.
The five-hospital system has been struggling financially, with net losses of $36.8 million in the first nine months of 2001, and has predicted fourth-quarter losses. Most of the cuts will come at the system's money-losing flagship facility, 685-bed Henry Ford Hospital, founded by the auto magnate in 1916.
The system is calling off a proposed joint venture with four-hospital Oakwood Healthcare System, Dearborn, that would have merged Oakwood's 72-bed Seaway Hospital with Henry Ford's 105-bed Riverside Osteopathic Hospital, both in Trenton. The plan called for both systems to jointly own and build a new hospital that would replace the other two. In a written statement, the system said that joint venture was predicted to lose money.
Oakwood Healthcare System spokeswoman Martha Shea said Oakwood learned only last week that Henry Ford was pulling out of the joint venture, which was announced three years ago.
"We were disappointed by their decision," Shea said. "But we plan to invest the $25 million we'd planned to spend on building a new hospital in Oakwood Seaway Hospital. We see a growing market in the Downriver area (south suburban Detroit), and it's still an important market for us."
Henry Ford spokesman David Olejarz declined to specify where the job cuts would take place and who would be affected. Nor would Olejarz say which services would be consolidated at Henry Ford's Riverside hospital and its 355-bed Wyandotte Hospital. "No decisions have been reached yet," he said. "And I'm not going to speculate."
Some of the 500 job cuts, which represent about 3% of Henry Ford's 18,000 employees, will come from the 900-physician Henry Ford Medical Group, the closed clinics, corporate staff reductions and the system's behavioral health division.
The system attributed its losses to reduced Medicare payments, stingy managed-care payments and underfunded Medicaid HMOs that do not fully cover the cost of services, as well as significant growth in the area's uninsured population and rising costs of drugs and labor. The system expects to see growth in core strengths of cardiac care, neurosciences, cancer and orthopedics as well as stronger efforts to develop philanthropic support.
The Hunter Group, a St. Petersburg, Fla.-based hospital turnaround consultant Henry Ford hired in September for advice and strategy, developed some of the recommendations in the performance improvement plan.
Susan Schwandt, a spokeswoman for Henry Ford's 538,000-member Health Alliance Plan, said the HMO is trying to ensure that its members are covered during the restructuring. Schwandt said the system has not announced any sale of the not-for-profit plan, which earned $37.7 million on total 2000 revenue of $1.1 billion, according to Minneapolis healthcare analyst Allan Baumgarten of Allan Baumgarten & Associates, who tracks managed-care companies in eight states.