Providence notifies employees of planned job cuts

Providence Health & Services is telling employees it will eliminate some positions in the next two months as the nonprofit health system copes with falling revenue from reimbursement rates not keeping pace with the rising cost of care.

The largest health care provider in Washington and largest employer in Spokane, the Catholic health care system hasn’t said how many jobs will be cut in Spokane or its other 15 locations across five states. Most are in administration and the total across Eastern Washington is “very small,” spokeswoman Liz DeRuyter said Thursday.

“We have been doing a tremendous amount of work to reduce expenses over the past several years,” DeRuyter said. “Even though there will be positions that are lost, the number will be relatively small.”

No positions directly related to patient care are being cut, she added.

Renton-based Providence operates Sacred Heart Medical Center and Holy Family Hospital in Spokane, Mount Carmel Hospital in Colville and St. Joseph’s Hospital in Chewelah, plus hospitals in Centralia, Everett, Olympia and Walla Walla. About 7,800 employees work in Spokane and Stevens counties.

“We are working with all of the individuals for any sort of placement, and we just don’t have exact numbers to share,” DeRuyter said.

Most employees whose jobs are being cut will remain on staff through Jan. 6 and will be given priority consideration for open positions within Providence.

“We’re making every effort to match employees to open positions and give priority consideration to those individuals,” DeRuyter said.

Elaine Couture, CEO of Providence’s Eastern Washington operations, notified employees of the cutbacks this week.

“Health care economics have changed dramatically, and we need to adjust how we operate so we can continue to fulfill our mission to serve our communities,” Couture said.

Other steps Providence has taken to reduce costs – postponing noncritical building projects, leaving noncritical open positions unfilled and cutting operational costs – have not been enough, she said, “and some positions… unfortunately had to be eliminated.”

DeRuyter said several forces are converging to diminish operating income, including cuts in Medicaid funding and supply costs that have risen 10 percent in large part due to the high price of specialty and generic drugs. Also, private insurers are struggling on health insurance exchanges set up under the Affordable Care Act and are passing costs on to providers, she said.

Providence’s year-to-date gross income is about the same as it was this time last year, DeRuyter said. “The difference is that we have had many more patients. That’s the fundamental shift in our industry – we are called to provide more care to more patients but are receiving the same amount of revenue, or less, to cover the costs,” she said.

In her memo to employees, Couture said rising costs and lower revenue is a “new reality in health care.”

“Providence is feeling the pressures of an industry-wide trend in reduced payments from Medicare, Medicaid and commercial (employer-sponsored) insurers, while at the same time, expenses such as supplies, prescription drugs and labor costs are increasing higher than general inflation,” she said.

Throughout this year, Providence has “experienced significant challenges in our financial performance as a result of those reductions in payment and increased costs,” she said.

Providence operates 34 hospitals, 600 physician clinics, 22 long-term care facilities, 19 hospice and home health programs and 693 supportive housing units in Washington, Montana, Oregon, Alaska and California. It has over 82,000 employees, and its health plan covers 513,000 members.

One administrative position being eliminated is chief executive of Providence St. Mary Medical Center and Providence Medical Group in Walla Walla. CEO Steve Burdick is retiring at the end of the year, and his responsibilities will be distributed among other executives, Providence announced last month.

Burdick told the Walla Walla Union Bulletin that Providence is having “a tough time” dealing with rising drug costs, Medicaid and Medicare payment cuts and a tight labor market.

Medicaid payments were cut by 8 percent and Medicare funding is also likely to be cut by 2 to 3 percent, he said.

“Ensuring our ministries remain financially sustainable is integral to preserving our Mission for the future, but it is never easy to see colleagues leave our ministries,” Couture said.

Earlier this year Sacred Heart closed its aging laundry facility and moved those services to the Kalispel Economic Tribal Authority. That affected about 50 employees, and nearly all of them transitioned to new jobs at the Kalispel facility or filled other jobs at Providence.

Providence in 2015 reported $14.25 billion in revenue and $76.8 million in income, according to Modern Healthcare’s financial database. In 2014, Providence posted $771.4 million in income, and its annual average over the past five years is $536 million.

Two weeks ago, Providence agreed to pay nearly $352 million to settle class action claims that it underfunded its pension plan by improperly treating it as a “church plan” exempt from federal funding requirements.