He said the hospital would have to change the way it priced services. Palomar had been using CMS chargemaster fee-for-service rates. Covert said the system is looking to reduce all expenses, not only labor costs.
Covert also said that “coming to an agreement with the (nurses') union that is amenable to all parties will be vital to the growth of the organization and its employees.”
In an interview Tuesday afternoon, Covert said Palomar has considered layoffs since January. Employees, mostly nurses, were notified of the layoffs last week.
Despite stable Hospital Consumer Assessment of Healthcare Providers and Systems scores for Medicare, Covert said he worried about the potential for reduced patient satisfaction that could affect admissions and payment. The system potentially could lose $2 million to $3 million if satisfaction scores fall, Covert said.
“I was not in the position where we could count on (the scores) and anticipate the dollars would be there in a consistent fashion,” he added.
Congressionally mandated Medicare sequestration cuts cost Palomar about $10 million, he added, and that provided another reason why the health system needed to cut its budget. There's also been a change in the patient mix at Palomar, with an increase in use of outpatient facilities, which lowered revenue, Covert added.
Susanne Philips, a Palomar nurse and member of the California Nurses Association, said the timing of the cuts is dubious. The health system's labor contract expired on Friday, though Philips said rumors of the layoffs first circulated three weeks ago. There are three scheduled bargaining sessions in June, and negotiations have been ongoing since January. Philips has called talks cordial, but wonders how the layoffs will affect the negotiations.
She also wonders what message the system is sending by laying off workers less than a year after opening up an 11-story hospital in August that cost nearly $1 billion, funded thanks to a $496 million bond issue approved by voters in 2004. The union isn't sure the community needed an additional hospital serving the area.
“Meanwhile, we have a new hotel-like building,” Philips said. “I'm not sure we needed that.”
The health system cited increased health insurance and employee pension costs as additional reasons for the layoffs, Philips said. The union represents about 1,900 nurses at the three hospitals.
Covert said he's aware of how the situation may look to outsiders but defends the system's actions.
“I understand how this might look to people, but there are much larger consequences if we don't position ourselves and manage all of our facilities in the future,” he said.
Follow Ashok Selvam on Twitter: @MH_aselvam