New Rounds of Healthcare Provider Layoffs -- Is Sequestration Responsible?

Hospitals and other healthcare providers around the nation are announcing significant layoffs, but the reasons behind them appear to be far more than just sequestration cuts of Medicare or programs related to the Patient Protection and Affordable Care Act.

Most of those layoffs announced in recent weeks appear to be the victim of an uncertain healthcare climate, not only buffeted by healthcare reform and Medicare cuts, but equally a weak economy, healthcare provider consolidation, and reduced demand for healthcare services.

The top stated reason for layoffs, however, are the sequestration and readmission penalty cuts to Medicare. Among them:

• In Quincy, Mass., the new owners of Quincy Medical Center plan to lay off 70, as well as eliminating hospital services such as the in-patient surgical center. The nurses union, whose members comprise30 of those to be terminated, is planning a one-day strike over the cuts. Quincy Medical Center President Daniel Knell said the state’s mandated cap on health care costs such as Medicare has affected the hospital’s budget. “This is the reality we live in,” he said.
• Adirondack Health, based in Lake Placid, N.Y., announced it would lay off 18 to offset losses of $1.2 million, the result of the elimination of a Medicare provision in the fiscal cliff negotiations, as well as the sequestration cuts which reduces revenues by $500,000. ”That’s nearly $2 million in revenue reductions in the first three months of this year,” Adirondack Health spokesman Joe Riccio told the Adirondack Daily Enterprise newspaper. “It’s something we were aware of but we were hoping and advocating hard against, because the effects are, as you see, not good.”
• Detroit Medical Center in Detroit, Mich., announced it is preparing layoffs to reduce expenses in the seven figures to offset sequestration cuts, as well as “state and federal reductions to graduate medical education programs, reduced state disproportionate share funding to care for the poor, and penalties for higher-than-average readmission rates,” according to Crain’s Detroit Business. ”While exact amounts are still unknown, we expect DMC revenue reductions to be in the millions of dollars,” CEO Joe Mullany said in a statement.

Not all layoffs appear to be directly related to government reimbursement cuts or programs related to healthcare reform. Albemarle Health, based in Elizabeth City, S.C., will lay off 39 workers to save revenue to meet its debt obligations that have resulted from consolidation.

Lawrence + Memorial Hospital based in New London, Conn.,  has laid off or reduced hours of 22 workers, part of an austerity measure campaign to bring the not-for-profit hospital’s margins up to a desired 3 percent. The hospital board is ”profoundly worried about the future” based on projections of flat or declining patient volumes and cutbacks from the state and federal governments, hospital spokesman Mike O’Farrell told The Day newspaper.

Despite the ostensibly large number of providers announcing layoffs, this has been a trend in healthcare, at least since the beginning of the so-called Great Recession in late 2008. Healthcare providers had months to prepare for Medicare cuts from sequestration and the readmission penalty. “Painful, but not fatal,” was how Michael Haile, chief financial officer of Faxton St. Luke’s Healthcare in Utica, N.Y., described the reductions to the Observer-Dispatch newspaper. He rated the impact as a “six on a scale of one to ten.”