Upper Chesapeake Health, which operates both hospitals in Harford County, announced yesterday that it would reduce its work force by 158 positions.
The action comes a day after one of the hospitals, Upper Chesapeake Medical Center, received a 5.7 percent rate increase from state regulators - about half of the 11.5 percent the hospital had been seeking.
"There's a gap between 11 1/2 and [5.7], and one of the things we needed to do was get our expense structure in shape," said Lyle Sheldon, president and chief executive officer of the health system.
Some of the positions will be eliminated by attrition or by reducing hours of workers, but there will be about 120 layoffs, according to Sheldon. Workers will be notified today; for most, this will be their last day of work. Sheldon said layoffs would spare employees who provide direct patient care, particularly nurses, but would otherwise range from housekeepers to the vice-presidential level.
He said the cuts would be about 5 percent at each of the two hospitals, UCMC and Harford Memorial in Havre de Grace, but about 20 percent (nine positions) in the corporate offices. The system also operates a home care agency and participates in joint ventures operating three nursing homes; Sheldon said these operations would not have any job cuts. The system has about 2,000 employees altogether.
Sheldon was not critical of the rates approved by the Health Services Cost Review Commission, which he said were "reasonable in light of the charge they have" - controlling costs.
However, the Maryland Hospital Association said other hospitals could be cutting staff soon as well, depending on how much of a systemwide rate increase the commission approves for the year beginning in July.
"We have been saying that, unless hospitals can keep pace with inflation, there would need to be some additional cuts," said Nancy Fiedler, senior vice president of the hospital association. Hospitals this year received a 2.5 percent across-the-board increase, but cost inflation is 3.9 percent, so the hospitals need more in rates next year to close the gap, Fiedler said.
Last month, the commission approved a 2.9 percent increase for the next rate year - 0.5 percent above expected inflation - and will consider next month a staff recommendation to add another 0.4 percent, targeted to the neediest hospitals.
Insurers, however, have argued that the commission needs to hold the line on rates to prevent premiums from increasing. Hospitals can cope with revenue increases less than inflation, they said, by becoming more efficient.
Robb Cohen, a consultant who has represented several large insurers before the commission, said yesterday that with its new rate increase, UCMC would be somewhat above average in charges, which should be quite sufficient. "They should be able to perform at least at the average level," he said.
Before the rate increase, the system had been projecting a loss of $16.4 million in the current fiscal year.
A large part of the cost pressure on the Upper Chesapeake system came from the opening of the new UCMC in Bel Air at the end of October, to replace the antiquated Fallston General Hospital.
While UCMC has fewer beds than Fallston did - 120 compared with 219 - "we moved from a facility with 100,000 square feet to one with almost 300,000," Sheldon said, bringing an increase in staff.
On top of that, the modern facility and the more convenient location in Bel Air drew many more patients. While normally more patient volume allows a hospital to reduce per-patient costs, Sheldon said the volume was so much beyond projections that it generated extra expense.
For example, he said, it had been spending $140,000 a month on agency nurses and other temporary help to cope with an emergency room volume that was projected at 95 patients a day (up from 75 in Fallston), but turned out to average 120.
While laying off staff in some areas, he said, the hospital also was cutting costs by hiring more nurses, reducing the reliance on more expensive agency nurses. He said it also would continue to recruit in other areas, such as pharmacists and radiology technicians.
Besides the staffing changes, which he said would save about $5 million a year, Sheldon said the hospitals were looking at other measures designed to save another $5 million. For example, he said, the cafeteria at UCMC, which used to serve three hot meals a day to staff and visitors, will serve only hot lunches, with "grab-and-go" meals at other times.