St. Charles planning $6 million in cuts; layoffs possible

(Update: More comments from CEO, video)

St. Charles Health System, Central Oregon’s largest employer, continues to be buffeted by financial storms and is looking to make $6 million in cuts, cost savings or additional revenue by year’s end, with layoffs not off the table, a top official said Monday.

Chief Financial Officer Jenn Welander told NewsChannel 21’s Jacob Larsen that St. Charles, which has more than 4,000 employees, is facing much the same financial struggles as other Oregon hospitals, all of which she said are looking at cutbacks in some form or fashion.

Among the key reasons — drug and supply costs continue to rise, and legislative changes to health care around the state have hurt hospitals’ financial position, Welander said.

“All of those efforts, along with our supply initiatives — we are just intensifying our focus on that, in order to hit the targets that we have set,” she said.

But just as crucial is that 75 percent of the hospitals’ business involves patients on Medicare and Medicaid — and those reimbursements still don’t cover the cost of care.

Welander said the goal is to “improve the financial performance” by $6 million by the end of the year, out of a total health system budget of $749 million.

The health system, which operates all four of the region’s hospitals, also said it is offering a voluntary buyout program for caregivers, as well as incentives for employees who come up with cost-saving or revenue-generating ideas.

“We have to balance those long-term strategies with our short-term needs, so that we are meeting our obligation to this community,” Welander said. “They are counting on us to keep St. Charles viable.”

As with most large organizations, St. Charles is reviewing any open positions and working on consolidating the need to fill those positions with improving hospital processes. As for cutting the cost of procedures — a step many hard-pressed businesses might take — Welander said with the fixed costs the organization faces, that won’t really work.

“We’re paid to keep you healthy, and so we actually benefit by keeping you healthy and not having you utilize our services as much,” Welander said.

Welander said the health system cannot rule out layoffs, but officials are trying to make that the last option. She also said the scaled-back, three-story $66 million patient tower project is still set to go as planned.

The health care system nationwide is in a state of flux, she said, creating uncertainty for providers. Cuts become necessary, she said, for the hospital system to remain viable in coming years.

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Here’s the letter that was sent Monday to all caregivers by St. Charles President and CEO Joe Sluka:

AUG. 28, 2017

Financial status update – A note from Joe Sluka

Caregivers,

Hospitals throughout the state and nation are struggling with unprecedented financial challenges and, unfortunately, St. Charles is no exception. Although we have worked hard to reduce our costs and increase revenue, our financial performance is not improving at the rate we had hoped. Our finances have been deteriorating for much of the year and in July we were short by almost $1 million. Our aim is to improve our expected performance by $6 million by the end of the year.

As always, the safety of our patients and the quality of the care we provide comes first. In order to keep providing necessary services to our community, we have to continue focusing on creative financial solutions. Each area – the hospitals, clinics and support services – has been given a target for budget reductions.

We are exploring many ideas to reach these goals including:

Developing an incentive program where caregivers receive a portion of the proceeds from any cost savings or revenue generating idea that is successfully implemented Looking at all open positions to determine if we have a need to proceed with filling them Exploring the creation of a buy-out program for those who want to volunteer for a position reduction Spreading the successful nurse recruiting value stream work throughout the organization to ensure we are staffed at the right level and can continue to reduce overtime, premium pay and the use of travelers Evaluating service lines to determine their long-term sustainability and alignment with our vision Continuing to focus on process improvement through Value Improvement Practice efforts

Labor remains our largest expense. We have already eliminated some positions and are evaluating additional reductions. It is our goal that most of these reductions can be handled through the voluntary buy-outs and by not filling open positions, but layoffs may be necessary.

It is important to note that eclipse preparations and the costs associated with Epic and the new tower are not responsible for this situation. We are seeing a natural erosion of hospital services moving to an outpatient setting, our investment income is unreliable and we can no longer make up our differences by increasing prices for our commercially insured. We have an obligation to reduce costs for our patients. Health care as a whole is too expensive. We have to change it.

I’d like to thank all of you who have already submitted improvement ideas and have worked to implement them with your teams. Every idea really does make a difference and helps us grow toward a mindset of innovation and continuous improvement. Please keep them coming.

We will hold Caregiver Connect town halls later this week and next so that you can ask questions and receive information in person. Watch In the Know and CaregiverNet for the times and locations.

Our goal is to make adjustments while doing our best to continue to advance our culture. We want caregivers to be involved and invested in making the decisions that will shape our future. All of us have an obligation to ensure that St. Charles remains a viable health care institution.

Our community is depending on us.

Sincerely,

Joe