October 30, 2013

UMass Memorial Plans Layoffs Amid Loss Projection

UMass Memorial Medical Center CEO Patrick Muldoon told employees on Tuesday that the UMass system is facing a project $57 million operating loss for fiscal 2013 and layoffs are imminent.

UMass Memorial Health Care is bracing for layoffs as well as other cost-cutting measures in the face of a projected $57-million operating loss for its recently completed fiscal year.

In a letter to employees of UMass Memorial Medical Center (UMMMC) in Worcester on Tuesday, CEO Patrick Muldoon issued a warning in light of the projected loss by its parent organization.

"The only way we can successfully care for our patients, community and you, our dedicated employees, is with a strong financial performance at the medical center. Right now, we are spending more than we are earning and this has to change," Muldoon wrote in a memo to employees. "Specifically, it absolutely must change by this time next year. I hope you sense the urgency in my statement."

Muldoon, who was not available for interview, went on to outline steps UMass Memorial Health Care (UMMHC) will take to correct the operating losses in fiscal 2014 and beyond. Those include layoffs, the reduction and elimination of programs and services, reducing the use of consultants and contractors and exploring consolidation between UMass Memorial Medical Group and UMMMC, according to the memo.

Muldoon did not address which services, programs and departments will be impacted by budget cuts and UMMHC spokesman Robert Brogna said those details will be released at a later date.

Brogna said UMMHC is trying to be candid with its employees ahead of reductions and layoffs, but that budget numbers for the fiscal 2013 year, which ended Sept. 30, have not been finalized, so the actual impact of cuts is not yet known. UMMHC will announce more details when they become available, Brogna said.

UMMHC has been forecasting an operating loss for several years now, according to Brogna. "Now I think it's certainly going to get people's attention," he said.

UMMMC carried the majority of the system's projected operating loss at approximately $34 million, according to Muldoon. Operating losses for the remainder of the system's hospitals and physician group were not available. UMMHC employes 13,000 people system-wide at UMMMC, Marlborough Hospital, Clinton Hospital, HealthAlliance Hospital in Fitchburg and Leominster, Wing Memorial Hospital in Palmer, as well as physician practices across the region.

While hospital officials are bracing for austerity, the system is actually projecting a surplus of about $75 million for fiscal 2013. Dr. Erik Dickson, CEO of UMMHC, touched on the surplus when the looming operating loss was first discussed on his blog, www.everydayinnovators.org, on Oct. 18. But he explained that the surplus is due to investment income and the sale of the system's clinical outreach lab and home health and hospice businesses in fiscal 2013 and is not expected to be repeated.

According to Brogna, a number of factors are putting pressure on the system's profitability. Theyinclude inflation; declining patient discharges; increased patient observations; reduced reimbursement rates, and health care reform pressure.

In terms of patient volumes, Brogna said projected fiscal 2013 discharges across the system totaled 53,228, which he said is a significant decrease from 59,000 in fiscal 2009. Meanwhile, patients receiving treatment through observation without being admitted , which yield lower reimbursement than admissions, are on the rise. Projected fiscal 2013 observations totaled 15,800, compared to 9,500 in fiscal 2009.

Brogna declined to speculate on what's driving those trends.

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