Study: Medicare cuts to eliminate 36,000 Florida jobs; Collier, Lee hospitals prepare

In this Aug. 30, 2011 file photo, Labor Secretary Hilda Solis speaks at the National Press Club in Washington. An aging population and an economy that has been slow to rebound are straining the long-term finances of Social Security and Medicare, the government's two largest benefit programs. Those problems are getting new attention Monday as the trustees who oversee the massive programs release their annual financial reports. (AP Photo/Manuel Balce Ceneta, File)

AP

In this Aug. 30, 2011 file photo, Labor Secretary Hilda Solis speaks at the National Press Club in Washington. An aging population and an economy that has been slow to rebound are straining the long-term finances of Social Security and Medicare, the government's two largest benefit programs. Those problems are getting new attention Monday as the trustees who oversee the massive programs release their annual financial reports. (AP Photo/Manuel Balce Ceneta, File)

Alan Levine

Alan Levine

— Southwest Florida hospital leaders are bracing for Medicare cuts that a study says could result in the loss of nearly 36,000 health-care jobs in Florida next year.

Hospitals expect a 2 percent reimbursement cut, scheduled to take effect in January, for treating the elderly. The Congressional Budget Office estimates the cut at $10.7 billion in 2013, growing to $16.4 billion by 2021.

The cut is automatic and lasts nine years, the result of Congress failing to reach an agreement on a budget deficit reduction plan last year.

It's possible that Congress can reach some budget agreement during the lame duck session after the November election but it isn't looking good, said Alan Levine, president of the Florida Group for Naples-based Health Management Associates, which has 22 hospitals in Florida and 48 in 14 other states.

"At this point, I'm going to presume it (the cut) is going to happen," Levine said.

No layoffs are expected but vacant positions may not be filled and patients could see delays in getting access to certain medical services, said Jim Nathan, president and chief executive officer of the publicly run Lee Memorial Health System in Lee County.

"It is part of leadership's responsibility to look at economic realities and move earlier rather than later," Nathan said.

Dr. Allen Weiss, president and chief executive officer of the nonprofit NCH Healthcare System in Collier County, said NCH is scrutinizing operations and spending to find ways to be more efficient.

"This is a continuing journey we have been on for the last six years," Weiss said, adding that the coming years won't be any easier.

The problem is Florida has a much higher Medicare population, so a 2 percent cut will be more substantial to Florida hospitals. That comes on top of separate reimbursement reductions that are starting for hospitals with high readmission rates and cuts in Medicaid for the poor and disabled.

"We as a company tend to be pretty agile so we are always looking at our cost structure," Levine said.

The first area to look for savings is in nonpatient areas and the hope is to avoid layoffs, he said.

Companywide, HMA has 43,000 employees, with 15,000 of them in Florida.

A study by Pittsburgh-based Tripp Umbach released this month for the American Hospital Association projects 766,000 health-care jobs and "indirect" jobs will be eliminated through 2021 because of the automatic Medicare spending reduction plan.

In the first year alone, 496,000 jobs are projected to be cut in 2013. In Florida, the potential job loss starts at 35,800 next year and could climb to 55,300 jobs by 2021, the analysis shows.

"We go hospital by hospital when there are opportunities to reduce costs," he said. "At this point we are not entertaining eliminating any programs."

Even though federal lawmakers say the elderly on Medicare won't be subjected to health-care rationing, Nathan said "it is creating some rationing effect."

On a broader front, hospitals and the health-care industry as a whole could cope by layoffs. The health-care industry largely averted layoffs during the recession and actually saw job growth. At the same time, worker productivity in health care hasn't improved in the past 20 years and wages represent 56 percent of all spending in the industry, according to researchers at the Brookings Institution and Harvard Business School.

A study by Pittsburgh-based Tripp Umbach released this month for the American Hospital Association projects 766,000 health-care jobs and "indirect" jobs will be eliminated through 2021 because of the automatic Medicare spending reduction plan.

In the first year alone, 496,000 jobs are projected to be cut in 2013. In Florida, the potential job loss starts at 35,800 next year and could climb to 55,300 jobs by 2021, the analysis shows.

"Hospitals' ability to maintain the kind of access to services that their communities need is being threatened," Rich Umbedenstock, president of the association, said in a statement. "Cuts to hospital services could create devastating job losses in communities where hospitals have long been an economic mainstay."

That's what Southwest Florida hospital leaders hope to avoid by pre-emptive cuts in spending, and eliminating waste and inefficiency that for a long time has been pervasive in hospital operations.

Jim Nathan on NewsMakers

Jim Nathan on NewsMakers

"A year ago in October, I convened my management team to begin meeting every other Friday and told them to take $125 million out of our budget," Lee Memorial's Nathan said.

He came up with that figure by taking 10 percent off the hospital system's $1.2 billion annual budget and rounding the number up, a recurring strategy for three to five years.

The Lee Memorial board recently approved a budget for the new fiscal year starting Oct. 1. It's roughly the same $1.2 billion operating budget as last year, but $35 million in savings was found.

"That was our start," Nathan said, adding that there will be no layoffs.

The budget includes merit pay increases averaging 3 percent. The last merit increase was in 2011 at Lee Memorial, which has 10,000 employees.

Management now faces the task of finding savings of 2 percent in the budget to cover the Medicare cuts. His managers will focus on ways to stay on schedule in operating rooms and achieve savings in other "process" functions.

In some ways, he said, economic pressure can be healthy because it forces a business to evaluate how it operates. At the same time, areas like Southwest Florida are at a disadvantage to deal with government cuts because many more patients here are on government insurance or are uninsured compared to elsewhere where more people have commercial insurance, Nathan said.

"If you are proactive, you can avoid layoffs," which Lee Memorial was able to do in 2007 when it was facing $60 million in reduced revenue for the coming year, Nathan said. He credits his finance team for having an "early warning" system in place to deal with an expected $60 million drop in revenue.

"I can't guarantee you we will stay ahead of the curve but my goal is we always do so," he said.

Dr. Allen Weiss, CEO of NCH, on NewsMakers 8-19-12.

Dr. Allen Weiss, CEO of NCH, on NewsMakers 8-19-12.

At NCH, staff is focused on streamlining different functions, like how to get patients from the front door faster into the cardiac catheterization laboratory or from the front door into seeing an emergency room physician, chief executive Weiss said."Among the many things NCH has done, we have become more efficient," he said.

Other changes in the past year have included outsourcing much of radiology interpretations to an Ohio company and outsourcing the jobs of 244 employees in housekeeping and food service to a company that had been managing those services.

NCH starts its new fiscal year Oct. 1 and the hospital board of trustees has approved a budget that is slightly less than $500 million, about the same as last year. Eligible employees this coming year are receiving a 2 percent pay increase.

In the busy winter months, NCH's workforce is about 4,000 employees; it drops to 3,500 employees off-season.

This past week, NCH joined VHA Inc., a network of nonprofit hospitals that purchases hospital supplies at a discount. Previously, NCH used Premier for its cooperative purchasing arrangement.

NCH also has become the state's first Florida hospital to join Mayo Clinic's care network for Internet-based assistance from Mayo specialists for consults for difficult cases to diagnose and to help attract patients to NCH and prevent transfers to other hospitals.

Weiss noted that the hospital industry for quite some time has faced a continuous squeeze from the government because of the federal deficit.

"We have anticipated this the last five or six years and it will get worse over the next five or six years," he said. "It's not a surprise."

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