Baystate Eliminates 354 Positions Officials Say Steps Address Impact of Recession, Health Care Costs

SPRINGFIELD — Citing continued cuts in state reimbursement and “the government’s inability to properly fund the expansion of health care,” as well as the lingering impact of a weak economy, Baystate Health recently announced a reduction in workforce totaling 354 positions.

The cuts, announced on July 20, involve positions held by 169 managers and staff, as well as another 185 vacant, funded positions. Affected employees will receive severance pay and other benefits “in accordance with Baystate Health’s workforce-transition policy,” said Gregory Harb, executive vice president and COO at Baystate Health.

“Our leadership carefully reviewed all positions system-wide,” said Harb, “and today [July 20] announced a reduction in our workforce by 354 positions.”

Baystate Health, the region’s largest employer, took the action to ensure its financial viability and ability to fulfill its charitable mission, focused on improving the health of the people of Western Mass., said Mark Tolosky, president and CEO of the system. The combination of continued reductions in state reimbursements, inadequate funding of the expansion of health care, and a soft economy is creating dire situations for health care organizations throughout the state, and Baystate Health is not immune from these challenges, he added.

Baystate senior leaders project a $25 million budget shortfall in 2011 growing to $54 million in 2012 unless expenses are reduced. Plans are to continue to monitor the situation closely to ensure the long-term viability of the system.

“At Baystate Health, we embrace changing models of patient care and health coverage expansion — however, these changes are not based on a properly funded plan,” said Tolosky. “Massachusetts has expanded and enhanced health care for our residents, which we applaud, but the Commonwealth is not paying for these commitments.”

Elaborating, he said that health care providers are facing intense pressures to transition to a less costly, highly coordinated, patient-centered model of care amid an environment of continuing underpayments.

Massachusetts health care providers are faced with freezes in reimbursements for patient care by Medicaid and other state programs, Tolosky explained, while medical inflation is rising by 3{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 4{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} annually. The disparity created by decreasing revenues and increasing costs threatens the financial viability of hospitals throughout the Commonwealth.

Baystate, like so many others within health care, is being paid less than the cost of the care it provides, he went on. The three hospitals of Baystate Health — Baystate Medical Center in Springfield, Baystate Franklin Medical Center in Greenfield, and Baystate Mary Lane Hospital in Ware — were underpaid $26.5 million by the state government for the cost of care for Medicaid patients in 2010. Medicaid patients represent 26{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of the patient population at Baystate’s hospitals, resulting in significant financial loss for care of these patients.

At the same time Baystate and other health care providers throughout the state are faced with the trend of declining reimbursements, patients are holding back on seeking medical care due to a variety of reasons, including increased out-of-pocket costs and concern about time away from their jobs, which have led to lower patient volumes, said Tolosky.

To prepare for the many uncertainties brought on by state health care cost-containment policies along with the wavering economy, Baystate Health has implemented numerous strategies to increase revenue and reduce expenses, system officials said in a prepared statement. These strategies include the consolidation of non-clinical services, the implementation of initiatives to reduce the costs of materials and supplies that resulted in millions of dollars saved through less-costly purchasing contracts; using a performance methodology called ‘lean’ to help cut waste and increase efficiency; and development of new insurance products to grow Health New England (majority-owned by Baystate Health). In addition, Baystate has held off on filling vacant positions and has added only those most critical to its needs.

Citing the many steps Baystate has taken to address the financial pressures it faces, Tolosky explained that these strategies alone were not enough. “The realities of the health care cost-containment environment caused us to take additional steps which include reducing the size of our workforce,” he said.

“Throughout our health system, we experience the joys of new lives coming into this world and the extraordinary talents of our staff who improve and save lives each day,” Tolosky continued. “This day is a somber one for all of us because it affects the lives of our Baystate family. Working in health care, where we link our work to our charitable mission ‘to improve the health of people in our communities every day with quality and compassion,’ our work fulfills a passion for so many of us along with a career. Today, that road takes a different turn for 169 members of the Baystate family.”

As part of its commitment to the community, Baystate invested in the Hospital of the Future project to replace outdated facilities and add necessary capacity and space to meet current and future needs. The first phase of this replacement hospital, including the Davis Family Heart and Vascular Center, is on time and on budget, and will open in March 2012. Generous philanthropic support from community leaders, along with Baystate physicians and employees, who recognized the necessity of building this critical hospital project have contributed $20 million to date.

“We have the talents of our leaders, physicians, employees, and voluntary board of trustees along with business and community partners to manage our way through these challenging and uncertain times,” Tolosky added. “We recognize that we will be making difficult organizational decisions along the way as we redesign models of care that are highly coordinated and patient-centered. What will not change is our commitment to quality and compassionate care to all the patients we are privileged to serve.