Reduction in federal funding will result in job cuts at many Vermont hospitals

Preliminary numbers from the Green Mountain Care Board show that half of the state’s 14 community hospitals are budgeting for fewer full-time workers next year.

The federal sequester and other cuts to the Medicare program will cost Vermont hospitals hundreds of millions of dollars over the next 10 years. Coupled with lower hospital use, executives are projecting lower-than-expected revenues, which will affect staffing levels at many hospitals (see map below for employment projections).

Dr. John Brumsted, CEO of Fletcher Allen Health Care

Dr. John Brumsted, CEO of Fletcher Allen Health Care

John Brumsted, CEO of Fletcher Allen Health Care, says Medicare cuts will result in more than $200 million in losses over the next decade for Vermont’s largest hospital.

“In 2013, it’s $5 or $6 million less than what we otherwise would have gotten in reimbursements, if the trend had kept going forward,” he said. “If you go another year out in 2014, it gets to eight figures. If you look over a decade, which is what CMS projects, it gets to very significant dollars.”

Fletcher Allen executives expect to lose about $34 million due to federal budget sequestration. The 2 percent reduction in Medicare reimbursements went into effect for services provided on or after April 1.

“These reductions will result in $11 billion (annually) in lost revenues to Medicare doctors, hospitals, and other providers, who will only be reimbursed at 98 cents on the dollar for their services to Medicare beneficiaries,” said Courtney Jenkins, spokesperson for the federal Centers for Medicare and Medicaid Services (CMS).

The sequestration cuts took effect just months after Congress carved $10.5 billion from Medicare for fiscal years 2014 to 2018. Brumsted said Medicare changes in the Affordable Care Act are also putting a dent in the hospital’s more-than $1 billion in expected revenues for 2014.

Despite the federal hit to Fletcher Allen’s budget, the hospital is slated to add about 280 full-time jobs. A third of those jobs are coming from Fletcher Allen subsidiaries, such as Vermont Managed Care.

“We’re already starting to see new types of jobs emerge. I’m seeing more of a morphing of what the workforce looks like than an absolute reduction in numbers,” Brumsted said. “You do create new jobs. If you’re going to interface new technology, you need people who are savvy about health care and that are savvy at getting into relatively complex software and systems.”

But seven of Vermont’s hospitals are budgeting for fewer non-physician jobs in 2014. Physician numbers have not yet been organized and released by the Green Mountain Care Board, but hospital executives and state officials say there are no marked changes.

When only looking at the shift in budgeted jobs from 2013 to 2014, Rutland Regional Medical Center and Southwestern Vermont Medical Center in Bennington are leading the way in job reductions. Rutland is decreasing its 1,184-member workforce by 113 jobs, and Southwestern is decreasing its 843-member staff by 92 positions.

Executives at both hospitals, however, say that these numbers don’t paint a full picture.

For starters, Southwestern Chief Financial Officer Steve Majetich said about 25 jobs that the hospital budgeted for last year were never actually created. Another 30 to 40 jobs, he said, were eliminated through early retirement incentives and attrition.

Some full-time employees were shifted to part-time status, and Southwestern spokesman Kevin Robinson said the hospital was also forced to cut jobs.

“There have been a few limited involuntary reductions in force,” he said. “The word layoff is a term we don’t really use because it carries the connotation of recall. Layoff is a term used in manufacturing a lot. We’ve done some limited reductions in force, and I don’t have an exact number for that.”

Majetich said the job reductions were due to lower patient volumes and federal cuts.

“The cut is about $1 million (annually) to the hospital, and there’s no replacement of those dollars anywhere,” he said.

Overall, Majetich expects the hospital’s revenues to drop 6.4 percent, or $9.6 million, on a 2014 budget of $139.6 million.

Tom Huebner, CEO of Rutland Regional, said most of the reductions at the state’s second-largest hospital were not involuntary, but the hospital laid off 12 to 14 full-time employees.

The hospital’s revenues are expected to go up 3 percent, or $6.3 million, on a proposed 2014 budget of $217.8 million. But Huebner said revenues are not what the hospital was betting on a year ago.

“The biggest single chunk was through action in Washington,” he said of revenue losses. “Through the sequester and the fiscal cliff, we lost $4 million in (annual) Medicare reimbursements. The second more modest impact was, like many hospitals across the country and Vermont, on the in-patient side of our world we are seeing a reduction in volume.”

Huebner said that although job numbers were going down at the hospital, the level of care would not suffer.

“The one thing that did not change was any of our nursing ratios,” he said. “We would reduce nurses if we had a decline in volume, but the number of nurses per patient was not reduced.”

The Green Mountain Care Board is looking at job shifts as part of its hospital budget approval process. Later this month, the board will hold hearings with executives from each of the hospitals, and it is expected to approve or deny budgets in mid-September.

Click on map point for hospital employment projections.


Follow Andrew on Twitter @andrewcstein

Comments

  1. Patricia Crocker :

    This is what happens when government meddles in healthcare. We’re going to start to see a degradation in the quality of our healthcare delivery in this state.

  2. Wally Roberts :
  3. Kristin Sohlstrom :

    Medicare for All, right?

    Well done folks. Way to stick it to your neighbors.

    Medicare for all, indeed.

  4. Jim Barrett :

    Thanks to the politicians who keep being re-elected each cycle without question for making these half baked ideas. Also, didn’t I just read where FAHC is spending hundreds of millions to expand when the patient caseload is going down? Go figure!

  5. Todd Taylor :

    Apparently our elected representatives have determined Medicare isn’t sustainable given the current rate of retirements. No surprise they won’t tell the truth, but instead keep cutting the reimbursement rates. Medicaid? You’re golden. Medicare? Sorry about that – better get a part-time job until you’re 85.

  6. Peter Liston :

    A little off topic but interesting none the less:

    Fletcher Allen CEO John Brumsted’s starting salary in 2011 was $749,031.

    His predecessor, Melinda Estes, was paid $1,440,093 in her final year.

    Remember that the next time they call your house asking for a donation.

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