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Analysts: Hospital mass layoffs on the rise

Several hospitals have announced drastic staffing reductions

Topics: Budgeting, Finance, Staffing, Labor Expense, Cost Management, Margin Performance, Medicare, Reimbursement, Recession/Downturn, Market Trends, Strategy

September 30, 2011

The sluggish economy and looming provider payment cuts have driven more hospitals to consider reducing staff as a way to stabilize their bottom lines.

According to recent Bureau of Labor Statistics (BLS) data, there were 13 hospital mass layoffs—defined as involving 50 or more employees—in August, resulting in 1,085 initial unemployment benefit claims. If the layoff pace continues, BLS analysts say hospitals in 2011 will post 127 mass layoffs involving 8,257 people, which would give 2011 the third-highest number of mass layoff incidents in the last decade.

Systems nationwide announce staff reductions

This week, several major hospitals and health systems announced mass layoffs, highlighting the continuing trend.

For example, Virginia-based Inova Health System on Thursday announced plans to cut 606 employees as it moves to outsource environmental services, laundry, and referral management and scheduling. Meanwhile, MetroHealth System in Cleveland this week announced plans to reduce its workforce by 450 employees over the next two months in an effort to handle $30 million in budget cuts and stem 2011 losses.

Meanwhile, Western Connecticut Health Network (WCHN) on Thursday announced plans to lay off 60 workers, which accounts for about 1% of the network's workforce. According to Phyllis Zappala, WCHN's senior vice president of human resources, the system "was forced to make this difficult decision due to the sluggish economy and as a result of state and federal cuts to hospital reimbursements."

Analysts offer 'gloomy' predictions for industry

As major state and federal budget cuts loom, financial analysts and industry advocates continue to predict financial difficulties for the industry.

A recent Moody's Investor Service report outlined dismal fiscal prospects for not-for-profit hospitals, noting that median operating revenue dropped to a decade low of 4% in fiscal year 2010.

Meanwhile, the American Hospital Association (AHA) earlier this month said hospitals would lose $41 billion from 2013 to 2021 if Medicare payments are cut by 2%. According to AHA, the 2% cut would cost 92,866 jobs in 2013 and 194,522 jobs by 2021 (Stagg Elliott, American Medical News, 9/29; Fischer, Washington Business Journal, 9/29; Tribble, Cleveland Plain Dealer, 9/27; Miller, Danbury News Times, 9/29).

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