Legacy Health System Cuts Work Force by 400

January 18, 2012 -- Legacy Health System is preparing to reduce its work force by 400 employees because of a $40 million budget gap that includes $30 million in Medicaid payment reductions. Employees will be notified by February 15.

Of those 400 positions, the majority – 230 -- will come from administration at Legacy’s six hospitals, its medical group, laboratory and research functions, according to Brian Terrett, director of public relations, while the remainder represent support for healthcare operations such as information technology, marketing, public relations, legal and accounting.

“Each senior executive is responsible for part of the reduction,” Terrett said. “Ideally, we want to protect care at the bedside, areas of growth that will help in the future and areas of focus in healthcare transformation. Unless something drastic occurs, these are the only reductions we expect for this year.”

Earlier, Dr. George Brown, president of Legacy, announced these layoffs in a memorandum sent to employees, saying that Legacy was targeting a $23 million reduction in labor costs and a $17-20 million reduction in other expenses.

“Even with these reductions,” he told employees, “we will still have uncertainty around future Medicaid and Medicare reductions that may influence our actual budget gap. So we must find ways to increase revenue while we continue to tightly manage expenses.”

According to Brown, “severe Medicaid cuts and increases in the number of uninsured patients are responsible for most of our budget gap,” and he called the labor cuts “critical and unfortunate” adding, that “patient care quality and strategic growth areas are our first priority, and will be spared as much as possible.”
A recent analysis by a healthcare analyst, Doug Elwell, principal of Health Management Associates (HMA), who was hired by the Oregon Health Authority, indicated that the state could save as much as $3.2 billion over the next five years by overhauling the Oregon Health Plan – with many of those reductions coming of the pockets of hospitals.
Asked for a response, Andy Van Pelt, director of communications for the Oregon Association of Hospitals and Health Systems, told The Lund Report:

“Lower hospital costs in the Medicaid program, according to HMA’s analysis, will come from lower utilization estimates. By focusing on well care vs. sick care, the hope is that we will reduce utilization of inpatient hospital services for Medicaid recipients.  

“Hospitals will in essence be asked to do less with less under this program – a laudable goal and something Oregon’s hospitals are committed to working with all stakeholders to achieve. As we work toward this end, we would simply ask that we do so within a time frame and under a set of assumptions that are realistic.

“Oregon’s hospitals are one of the state’s largest employers, providing more 124,000 family-wage jobs. While the tendency is ‘let’s get these changes implemented tomorrow,’ we have a moral responsibility to be sure we do so in a manner that does no unintentional harm to community hospitals, their employees and most importantly, the patients they serve.”