N.C., Chicago hospitals latest to cut payrolls

A large North Carolina hospital and a suburban Chicago system are the latest to trim their payrolls and point to revenue pressure from the federal healthcare reform law as a primary cause.

At Mission Hospital in Asheville, N.C., the belt-tightening hits the C-suite, including the CEO's salary. Three executive vice presidents are among the approximately 70 layoffs announced Monday by officials at 744-bed Mission Hospital. Officials at two-hospital Evanston, Ill.-based NorthShore University HealthSystem, meanwhile, said they're cutting 1% of its workforce, which amounts to about 130 positions.

Mission was looking to cut as many as 500, but cuts to salaries and furloughs will avoid layoffs to that scale, according to WLOS News13 in Asheville. The TV channel acquired a letter sent by President and CEO Ronald Paulus to the hospital's board and staff. Paulus lauded the improvements seen since he came onboard in 2010, including 500 fewer patient deaths per year than expected when compared to 2010's numbers.

Following the footsteps of peers at other hospitals delivering bad news to employees, Paulus attributed the cuts to financial constraints driven by healthcare reform and Medicare cuts.

Paulus also mentioned North Carolina Rep. Gov. Pat McCrory's decision to opt out of Medicaid expansion as a factor, which is presenting a significant and uncertain challenge at hundreds of hospitals in states where leaders have made that choice, as Modern Healthcare's Jessica Zigmond documented in the magazine this week.

“We have tried our best, but to have the time we need to thoughtfully reengineer our processes we do need to make some changes that will reduce our costs more rapidly than reengineering allows,” Paulus wrote.

His plan includes a 26% cut in his own compensation next year. And, in addition to eliminated three VP slots, the hospital will cut management salaries 20% for senior vice presidents, 17% for presidents and vice presidents and 13% for directors.

“For any job elimination, we will work hard to find an alternative role that is appropriate for the skills and experience of that individual,” Paulus added. “While that will not always be possible, I do expect that it will significantly reduce the final number of staff impacted by an actual job loss.”

Meanwhile, suburban Chicago's NorthShore notified employees Monday that the system would eliminate 130 positions and layoffs would begin this week, according to an Aug. 26 memo obtained by Modern Healthcare's sister publication, Crain's Chicago Business. “We have worked closely with the management team to take a balanced approach across the system, finding innovative ways to improve efficiencies and realize cost savings while, most importantly, maintaining the high standards of care our patients expect and deserve,” the memo read.

Crain's previously reported that NorthShore made buyout offers two months ago to about 300 employees. At the time, the organization's chief human resources officer told employees in a memo that the reductions were needed “to get ahead of the sizeable upcoming payment reductions associated with the Affordable Care Act before the start of the new fiscal year.”

Follow Ashok Selvam on Twitter: @MH_aselvam