UMass Memorial Health Care shedding up to 900 jobs through layoffs, sale of divisions
UMass Memorial Health Care, which lost money in the last three months of 2011 amid shrinking patient volume, is telling employees today that it will shed 700 to 900 jobs, about 6 percent of its workforce, through a combination of layoffs at its flagship Worcester hospital and by selling divisions that provide health services.
The health care system, which operates UMass Memorial Medical Center and four community hospitals, is the largest employer in central Massachusetts, with about 13,500 workers. But its profitability has been eroding for several years as it faces increasing pressure from businesses and commercial insurers to reduce costs.
Patient discharges declined 6 percent in the most recent quarter compared with the same period a year earlier, while imaging tests dropped by more than 7 percent, said John G. O’Brien, chief executive of the Worcester-based system. He said the numbers are falling as the system prepares to shift from a fee-for-service model to so-called global payments, under which insurers give its hospitals and doctors a budget to provide patient care.
“We’re getting ready for the future,’’ O’Brien said this morning. “We feel like we have to be more affordable. We hear that every day from employers in the Worcester area.’’ He also cited anticipated payment cuts from Medicare and Medicaid, the government programs insuring older and low-income residents.
Many of the same financial stresses have been affecting other Massachusetts medical care providers. Last month, Taunton State Hospital, which houses 169 mentally ill patients, said it would close its doors by the end of the year, while long-term care provider Kindred Healthcare Inc. said it will shut its 45-bed Waltham hospital.
UMass Memorial, which eliminated 350 jobs at the end of 2010, posted an operating gain of $35 million for the year ending last Sept. 30, according to O’Brien. But that was down from $55 million in the prior year and an $84 million gain the year before that. In the first quarter of the current fiscal year — the three months ending Dec. 31 — the system lost an unspecified sum, he said.
One factor in UMass Memorial Health Care’s predicament is that its Worcester medical center, a teaching affiliate of the University of Massachusetts Medical School, is on the highest-cost tier of many new insurance plans that give members the option of paying less at more affordable providers, O’Brien said. Another is the weak economy, which has caused many people to postpone elective surgery because they have lost their insurance or are reluctant to take time off from work and jeopardize their employment.
In a memo to employees today, O’Brien outlined the system’s plans. “To respond to immediate declining volumes and reimbursements at our medical center during the first quarter of this fiscal year,’’ he wrote, “we need to reduce our expenses by about $50 million right away if we are going to avoid ending the current fiscal year with a loss.’’
The steps will include paring 150 jobs in the next several weeks from the medical center, which has 10,000 employees. The job cuts will be across the board, hitting managers and union employees. No doctors will be laid off, though some are retiring.
At the same time, the system plans to sell two divisions over the next few months. One, employing another 150 people, provides home health and hospice services. Another, with 400 to 600 employees, performs lab tests for doctors offices in Massachusetts, Connecticut, New Hampshire, and Rhode Island. Many workers at those units may be retained by the buyers, though no sales have been finalized.
UMass Memorial, which has more than 500 employed or affiliated primary care physicians, will keep some of its labs for “rapid response’’ tests for its own hospitals as well as pathology tests such as pap smears and tumor biopsies.
While the system will cut 700 to 900 jobs, it will also be hiring employees in some areas ranging from urologists to pharmacists. That will reduce the overall job losses, O’Brien said. He said the system plans to hire a management consulting firm to help it reorganize and control expenses ranging from wages and benefits to pension costs.
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