Empire Health Services lost $7.1 million last year and is treating fewer patients, a two-fisted problem that executives said Wednesday is forcing them to cut about 130 jobs at Deaconess Medical Center and Valley Hospital and Medical Center.
It’s the latest episode for a system awaiting regulatory approval to sell to a large, for-profit hospital chain.
That sale, to Community Health Systems Inc., is on track, although it’s not expected to occur until late summer, Empire executives say.
Originally the deal was to have been finalized early this year, and the delay – caused by the oversight and approval process – has put Empire in financial straits.
“We simply have to stabilize this institution and be able to assure long-term employment for more than 2,000 people … while ensuring Spokane retains two strong hospital systems,” said new Empire Chief Executive Officer C.E. “Mickey” Bilbrey.
The layoffs and other restructuring measures are expected to save $10.5 million, which should turn another projected year of losses into a narrow gain, Bilbrey said.
In recent years, Empire has lost about 3 percent of its market share to Providence Health, which operates Sacred Heart Medical Center and Holy Family Hospital.
Empire board Chairman Ron McKay sounded the alarm last month, calling Empire’s pending sale “urgent.” He called the layoff decision Wednesday unfortunate for the employees, but necessary to keep the hospital system viable.
In its 4,800-page application to state regulators, Community Health has proposed paying $172 million in cash and debt absorption for Empire while pledging to invest $100 million over the next five years in building renovations and technology and equipment upgrades.
Empire’s widely hailed financial turnaround in recent years has not had lasting power. McKay has said the underlying fundamentals that first caused losses at the hospitals have not changed, despite the effort of expensive turnaround leaders and pricey consultants.
As Bilbrey, who was hired in January, said in a memo to employees: “While over the last three years EHS undertook initiatives that yielded some short-term positive results, our operational and financial performance is simply not where it needs to be to ensure the stability and sustainability of our programs.”
If the sale is rejected, Empire may be forced into bankruptcy, according to Community Health’s application filed with the Washington State Department of Health.
Spokeswoman Rosemary Plourin said Wednesday that Community Health was not involved in Empire’s layoff decision. Nor has it become financially involved beyond its purchase offer. McKay and Bilbrey rejected any notion that Community Health was involved in the day-to-day operations of Empire.
The cuts announced Wednesday were described as widespread, but layoffs will be deepest among a group of lower-paid employees who assist nurses. Roughly two-thirds of these assistants, or about 90, will be laid off.
Some patient care assistants and nursing assistants contacted Wednesday said eliminating their jobs would jeopardize the bedside care given to patients. These are workers who bathe patients and provide other care such as taking people on walks and helping them move.
But Shelley Peterson, chief nursing officer at Deaconess, said the restructuring program would bring nursing assistant numbers in line with national standards.
An administration memo to employees said the nursing assistant jobs would be eliminated in the hospital’s intensive care, obstetrics, hyperbaric therapy and cardiac short-stay units. There would still be nursing assistants in several departments, though those jobs would be allocated to employees with the most seniority, as called for in a labor pact with Service Employees International Union 1199NW.
The layoffs take effect March 4.
Empire’s board of directors had asked Bilbrey for a complete review of operations. After weeks of research, Bilbrey forwarded his management team’s analysis.
Though about 6 percent of the Empire staff will be laid off, the results call for no loss of registered nurses and a hospital that still adheres to what management calls “best practices” standards. Some managers were terminated, as were some technicians in certain departments, such as the emergency room.
Chris Barton, secretary treasurer of SEIU 1199NW, said the layoffs were disappointing.
“We’re sensitive to the fact that Empire has some financial challenges,” she said, “but there are questions: ‘Why are you laying off direct patient care employees?’ and ‘How does the hospital plan to cover the jobs that these folks have been doing?’ “
Peterson said the hospital has plans that will ensure patient safety and uncompromised care.
Bilbrey said the layoffs will account for about 70 percent, or $7.3 million, of the $10.5 million in savings for the hospital system. The remaining 30 percent will come from other cutbacks, including travel, overhead and supplies.