DMC cutting jobs as part of Tenet cost-cutting
Tenet Healthcare Corp. instructed executives at Detroit Medical Center to cut its workforce by 150 by the end of this year as part of the investor-owned hospital chain's previously announced companywide 1,300 layoffs, according to three sources briefed on the matter by senior DMC officials. The sources requested anonymity.
DMC officials confirmed some staff reductions but declined to provide a figure, describing the reductions as "strategic" and focused on flattening management layers with the goal of investing more caregivers at the bedside. John Truscott, the DMC spokesman with Lansing-based Truscott Rossman, denied Tenet ordered DMC to lay off a specific number of employees.
DMC operates seven hospitals in metro Detroit and employs more than 12,000 people.
One of the casualties of the downsizing was Victor Jordan, who had been CFO of DMC since 2012. Jordan was asked to leave earlier last month by DMC CEO Dr. Tony Tedeschi.
DMC officials, however, said Jordan's departure was a "mutual decision." Jordan had been with Vanguard Health Systems, and Tenet after it acquired Vanguard in late 2013, for 14 years.
Truscott said Tedeschi told him there have been some layoffs and some workers have been offered positions in other departments. It is not known how many layoffs have occurred so far, but the three sources estimated at least 50.
Some employees in DMC's quality department have also been laid off or transferred to other duties in the past few weeks. A knowledgeable DMC source said "more than one-third" of the quality staff have been laid off or reassigned. A specific number of jobs cut was not available.
Many doctors and nurses have voiced concern about the negative effects of cutting costs across many departments, especially quality control, when DMC is already lean.
For example, one source who spoke on condition of anonymity said DMC is in the process of laying off 15 to 20 employees in the ambulatory care department at Children's Hospital of Michigan because of patient volume declines.
Truscott said some doctors and employees have told Tedeschi that they support changes underway to improve operations at DMC.
In September, COO Dr. Reginald Eadie began taking on some quality oversight responsibilities once held by Dr. Suzanne White who resigned as chief medical officer during the summer to take a job as medical director with the Detroit Health Department. Shawn Levitt, chief nursing officer, also has taken over some of White's former chief medical officer responsibilities.
Eadie has been asked to move to DMC's chief medical officer role in a full-time capacity and is expected to do so shortly, two sources said. Eadie was unavailable for an interview.
Truscott said he couldn't confirm whether DMC will replace the CFO and CMO positions. However, he said Tedeschi will likely take a different approach with filling those positions.
To reduce costs, Tenet officials also wanted to close several DMC units because of poor margins and low volume, but two sources said Eadie and other doctors fought against the moves and they have been postponed.
Sources told Crain's DMC is considering outsourcing the outpatient pharmacy department to reduce financial losses. This proposal has been in the works for several months.
Tenet is considering bids from Walgreens and CVS to take over outpatient pharmacy management, two sources said. A decision is expected soon.
Few hospitals still operate outpatient pharmacy departments and DMC has been losing money in the department in recent years, two sources familiar with the matter told Crain's.
The department was profitable under former CEOs Mike Duggan and Joe Mullany, but rising drug costs have eliminated profits, the two sources said.
Truscott told Crain's that said Tedeschi is evaluating outpatient pharmacy and is talking with vendors. He said he wasn't aware any bids are under review. He said outpatient pharmacy services helps to improve quality care as patients tend to fill their prescriptions more often with an inpatient department.
"DMC is routinely in conversations with potential vendors about how to better serve our patients," Truscott said in an email.
Although Truscott said there is an effort to bring more caregivers to the bedside, DMC has laid off advance practice nurses. Earlier this summer more than 22 workers were laid off at DMC, including 14 advanced practice providers, many of whom are nurses with master's degrees. More APP layoffs are expected as DMC moves to a employed physician hospitalist model, if they can hire more doctors, two sources said.
Over the past two years, Tenet has been undergoing restructuring as it grapples with financial losses and stock market declines. The 77-hospital chain has sold or is in the process of selling about a dozen hospitals in an attempt to increase its stock price, which was at $13.24 on Nov. 17 from about $60 in July 2015.
But since Tenet announced its management reorganization on Oct. 5, its stock price has dropped even lower, from $15.63 to $14.15.
The company's longtime CEO, Trevor Fetter, resigned in late October under pressure from major stockholder Glenview Capital Management, which has been advocating for more restructuring and cost reductions to bolster anemic stock performance. Executive Chairman Ronald Rittenmeyer is serving as CEO while the company searches for a permanent successor.
Also in late October, Tenet announced it planned to cut 1,300 jobs as part of its regional management reorganization plan to reduce operating expenses by $150 million.
Tenet reported a net loss of $366 million on continuing operations in the third quarter, which ended Sept. 30.
DMC hospitals reported $138.4 million in net income in 2016, according to Medicare cost reports. However, surgical volumes and admissions earlier this year were down compared with 2016, according to a DMC June activity report Crain's obtained. DMC also was under financial targets for the first six months of 2017 compared with the same period in 2016, the report said.
Over the past three years, usually in December, DMC has laid off or not filled a total of more than 325 positions as part of cost-cutting moves. DMC also has nearly completed its five-year, $850 million major construction building project that has transformed its downtown Detroit campus.
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