Hospitals cut jobs and services as rising costs weigh on budgets

Bozeman Health had a problem, a problem that health system officials with hospitals and clinics in southwestern Montana said they had been building for months.

It had weathered the toughest ordeals of the covid-19 pandemic, but lost employees and paid a premium to traveling workers to fill the void. Inflation has also pushed up operating costs.

The system, which serves one of the wealthiest and fastest growing regions in the state, was losing money. It spent nearly $15 million more than it brought in from January to June this year, chairman and chief executive John Hill said. On August 2, Hill announced that Bozeman Health had laid off 28 people in leadership positions and would not fill 25 open leadership positions. The system has a staff of approximately 2,400 and a budget of approximately $450 million for the year.

The pandemic has intensified a longstanding shortage of health care workers that has hit large rural states like Montana especially hard, which have few candidates to replace departing workers. Expensive palliatives – including traveling nurses – have driven up hospital costs. Staffing shortages have also left patients waiting longer for treatment or fewer providers to care for them.

In addition to Montana, hospitals in California, Mississippi, New York, Oregon and elsewhere have laid off workers and reduced services this summer. Health systems have highlighted low surgery volumes, high equipment prices, sicker patients and struggling investments. Along with these problems, hospitals’ biggest expense – the payroll – has skyrocketed.

“If you talk to just about any hospital leader across the country, they would put workforce at the top of their priorities,” said Akin Demehin, senior director of quality policy and patient safety for the American Hospital Association.

Workers have left the health sector in droves during the pandemic, citing low pay and burnout. Hospitals across the country have been vying for contractors to fill the void, driving up prices. This has left hospitals with a delicate balancing act: keeping existing employees and filling essential roles while cutting costs.

Bozeman Health chief financial officer Brad Ludford said the system had grown from less than $100,000 a month for short-term workers before the pandemic to $1.2 million a week last fall. That figure is now closer to $1.4 million per month. Overall, system labor costs are approximately $20 million per month, an increase of approximately 12% over the same period last year.

Hill said the health care system took other steps before it cut jobs: It stopped all out-of-state business travel, cut executive pay and readjusted workloads. Simultaneously, he tried to convert contract workers to full-time employees and retain existing employees through an increase in the minimum wage. Hill said the hospital system has had some success, but is slow. As of mid-August, there were 487 vacancies for essential workers.

“It still wasn’t enough,” Hill said.

Vicky Byrd, registered nurse and CEO of the Montana Nurses Association, said nationwide shortages mean nurses are being asked to do more with less help. She wants to see more hospitals offer long-serving employees the kind of incentives they’ve used for recruitment, like giving nurses a bonus for taking extra shifts or bonuses for longevity.

“It’s not just about recruiting — you can bring anyone in for $20,000 bonuses,” Byrd said. “But how are you going to keep them there for 10 or 20 years?”

Hospitals’ financial challenges have evolved since the start of the pandemic, when concerns focused on covid response costs and revenues that have not returned because people have delayed other care. In 2020, thanks to federal aid and a return to more normal service levels, many wealthy hospitals across the country have made money.

But hospital officials said the financial picture changed in early 2022. Some hospitals have been hit hard by the omicron push, as well as rising inflation and staffing issues.

Hospitals have received millions of dollars in pandemic relief from the government, but industry officials said that has dwindled. Bozeman Health, for example, received about $20 million in federal aid in 2020. It received $2.5 million last year and about $100,000 in 2022.

John Romley, a health economist and senior fellow at the Schaeffer Center for Health Policy and Economics at the University of Southern California, said that with federal aid drying up and inflation taking off, some hospitals could now losing money. But he warned that more data is needed to determine how hospitals have fared overall compared to previous years.

Providence, a health system with 52 hospitals across the West, reported a net operating loss of $510 million for the first three months of the year. In July, Providence announced it was implementing a “lean management team.” The system operates one of Montana’s largest providers, Providence St. Patrick’s Hospital in Missoula.

Kirk Bodlovic, chief operating officer of Providence Montana, said the new structure has yet to affect local positions, though he said hospital leaders are looking at open jobs that aren’t essential to care. to patients. He said the hospital was trying to reduce its reliance on contract workers.

“Recruitment efforts are not keeping up with demand,” Bodlovic said.

Hospital job cuts across the country have driven out some medical professionals who had stuck to their jobs during the stress of the pandemic. And the cuts have forced some patients to travel further afield for treatment.

In Coos Bay, Oregon, the Bay Area Hospital faced backlash from the community after announcing it would cut the contracts of 56 travel workers and end its behavioral health services in hospitalization. Hospital officials cited the high cost of filling vacancies quickly.

St. Charles Health System, headquartered in Bend, Oregon, laid off 105 workers and eliminated 76 vacant positions in May. The system’s CEO at the time, Joe Sluka, said in a press release that labor costs had “skyrocketed” largely because of the need to hire contractors. He said the hospital ended April with a loss of $21.8 million.

“It took us two years of the pandemic to get us into this situation, and it will take us at least two years to recover from it,” Sluka said in the statement.

In Montana, Bozeman Health has been unable to offer dialysis to inpatients at its largest hospital for months, so patients who need the service have been referred elsewhere. Hill said he expects delays for services outside of intensive care, such as lab tests. Ludford said the hope is the system will begin to break even in the second half of this year.

About 100 miles away, Shodair Children’s Hospital in Helena cut the number of patients it was accepting in half due to a lack of staff. It is Montana’s only children’s mental hospital and is building a $66 million facility to increase bed capacity.

CEO Craig Aasved said the 74-bed hospital was downsized about two years ago instead of adding contract workers to make room for patients to quarantine in the event of covid outbreaks. Aasved said he was scrambling to open another unit. Shodair, which historically did not rely on travel workers, has hired four traveling workers in recent months, he said.

“It’s a double whammy: we’ve lost revenue because we’ve closed beds, and on top of that you have the extra expenses for travellers,” Aasved said. “The objective is no layoffs, no furloughs, but we cannot stay in what we have always been doing.”

He said the hospital raised salaries for some employees and opened a nursing residency program about six months ago to recruit new people. But these measures did not bring immediate relief.

Nearby, St. Peter’s Health CEO Wade Johnson said the hospital has closed part of its inpatient unit and reduced hours for some departments due to staffing shortages. Some beds remain out of use.

Administrators plan to automate more services, such as asking patients to order food by iPad rather than through a hospital employee. They also allow for more flexible hours to retain existing employees.

“Now that we have adjusted to life with covid in many ways in the clinical setting, we are dealing with the repercussions of the impact of the pandemic on our staff and our communities as a whole,” Johnson said.

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