A revitalized General Motors Corp. may indeed emerge quickly from bankruptcy, if the measured optimism from Detroit and Washington comes true, but the automaker will be much smaller no matter how successful, and the health benefits it pays employees and retirees will be less comprehensive.
Healthcare stalling in Motor City
GM’s problems has healthcare revenue downshifting
A New GM, as leaders have dubbed it, means new challenges for healthcare providers in GMs home state of Michigan and beyond where communities have grown and then struggled in sync with the companys tottering fortunes.
Jack Weiner, president and CEO of 403-bed St. Joseph Mercy Oakland in Pontiac, Mich., said that he is expecting to lose as much as 10% of patient volume in the next fiscal year, which begins July 1, compounding the growth in charity care already up 120% over the past two fiscal years as the communitys economy eroded. The hospital has anticipated the challenges by eliminating 150 full-time positions, including three executive posts, and shifting mission resources from activities such as cardiovascular education to primary-care clinics. The bottom line is that hospitals are community assets, Weiner said. We will find ways to do whats needed to continue to fill that role. We have no choice.
Pontiac is home to an assembly plant for full-size Chevrolet and GMC trucks that GM announced would close by October, as well as a metal-stamping facility set to go idle for standby capacity in December 2010.
Also scheduled to go dark on standby is a plant a few miles north of Pontiac in Lake Orion, which has assembled the Chevy Malibu and some Pontiac models, a nameplate GM plans to phase out.
St. Joseph Mercy Oakland is part of a seven-hospital division of Novi, Mich.-based Trinity Health called St. Joseph Mercy Health System. Its president and CEO, Garry Faja, said that four of his hospitals will suffer consequences of an estimated 17,000 jobs lost at eight plants closed or idled in communities they serve, and they are planning for flat volume in fiscal 2010 while charity care and bad debt burdens grow by $16 million, a 25% increase.
Yet the St. Joseph Mercy executives are optimistic their hospitals and their communities will weather the challengesand they and their Michigan peers noted theyve logged several years of experience adjusting to automakers misfortunes; the GM bankruptcy is just the latest step, though a precipitous one.
I would much rather have a smaller but stronger GM survive in this marketplace than no GM at all, said Robert Riney, executive vice president and chief operating officer of seven-hospital Henry Ford Health System, founded in Detroit nearly a century ago by Henry Ford. But, Riney added, a smaller GM means its payer mix will continue to include fewer of the premium insured and more patients covered by Medicaid, traditional Medicare or no insurance at all.
GM will continue to provide health benefits during its court-supervised haggling with creditors, and Michigan insurance companies that cover large numbers of GMs employees, such as Henry Ford subsidiary Health Alliance Plan and Blue Cross and Blue Shield of Michigan, notified their GM plan members that their claims will be processed as usual.
Peter Schonfeld, senior vice president, policy and data services for the Michigan Health & Hospital Association, said that many of its member hospitals will feel the loss of insurance for tens of thousands of GM employees whose jobs are shed and also the reduced benefit levels agreed to by the United Auto Workers. Many of the employees who keep their jobs will work reduced hours, Schonfeld added.
The Michigan Senate Fiscal Agency has forecast that auto industry jobs will have fallen to about 70,000 by 2010. With the states economy tied closely to the auto industry, shortfalls in the state budget led Gov. Jennifer Granholm to issue an executive order reducing Medicaid reimbursement by 4% for the final quarter of fiscal 2009, which the association estimates will cost hospitals $14 million.
Though Southeast Michigan will suffer the most concentrated job losses under the restructuring, the dramatic downsizing of the auto giant will present challenges to healthcare providers much farther from the companys Detroit headquarters. The list of facilities GM plans to close include major employers in Indianapolis, Mansfield, Ohio, and Wilmington, Del.
At two-hospital MedCentral Health System in Mansfield, where a stamping plant is slated to close by June 2010, a spokeswoman said a quick assessment of the fallout showed that GM employees are the largest single revenue source of 308-bed Mansfield Hospitals privately insured patients, accounting for about $1 million of business a year. The figure doesnt include dependents or retirees.
In order to get the Obama administration to prop up the company with the U.S. Treasury, the United Auto Workers and GM agreed to immediately reduce benefit levels for retirees and amend their 2007 agreement transferring the responsibility and a $10 billion fund to cover retiree health benefits to the union effective Jan. 1, 2010.
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