Summa Health System laid off 54 employees on Tuesday as it contends with lower-than-expected revenues and prepares for looming changes from health-care reform.
Summit County’s largest employer expects to save nearly $4.5 million from the move, which affects less than half a percent of its work force of about 11,000.
The health system also is saving another $8.2 million in wage and benefit costs by not filling select open positions, said Thomas J. Strauss, Summa’s president and chief executive.
No registered nurses who provide bedside patient care are impacted by the work force reduction, which includes clinical and non-clinical staff throughout the health system, Strauss said.
“We’ve done everything to preserve bedside care,” he said. “That is our No. 1 priority.”
The layoffs are a small part of Summa’s ongoing, 10-year performance improvement plan, which was launched in 2011 to reduce the health system’s expenses by about $966 million over the next decade. The initiative started after an analysis showed health-care reform could cost Summa from $200 million to $950 million in revenue over 10 years.
The plan — which includes everything from reducing supply costs to earning federal incentive payments for implementing electronic medical records — saved Summa about $20 million in 2011 and between $45 million and $48 million in 2012, Strauss said.
Those savings, he said, enabled Summa to minimize layoffs after the health system missed its projected operating revenue by about $23 million in 2012.
“We have done everything we can to cut expenses everywhere except staffing,” Strauss said.
Summa owns and operates Akron City, St. Thomas, Barberton and Wadsworth-Rittman hospitals, as well as SummaCare insurance, a physician group and other businesses. The health system also has an ownership stake in Summa Western Reserve Hospital in Cuyahoga Falls.
Summa had planned for an operating margin last year of 3.2 percent on its revenues of $1.4 billion, Strauss said. Preliminary numbers show the operating margin for the year was closer to 1.5 percent.
Strauss attributed the difference to reduced revenue because of industry trends toward lower-paying observation days instead of inpatient days, decreased inpatient volume, increased charity care and more patients delaying care because of high deductibles.
Like hospital systems nationwide, Summa is facing financial challenges as it prepares for health-care reform, which will financially reward hospitals for keeping patients healthy and avoiding inpatient stays, Strauss said. But during the transition, hospitals still are being paid primarily for procedures, tests and inpatient stays.
In a new report issued this month, health-care business advisory firm Camden Group predicted health-care providers nationwide will enact layoffs, reduce employees’ hours and outsource work this year as they contend with “unrelenting revenue pressure.”
“With the countdown under way to the biggest overhaul in U.S. health care since the enactment of Medicare and Medicaid more than 50 years ago, it’s do-or-die time for many institutions,” Steven T. Valentine, president of the Camden Group, said in a prepared statement. “The changes are painful for all concerned. But they must adapt, while simultaneously operating under the current system, or become increasingly irrelevant.”
Through November of last year, U.S. hospitals had a total of 115 “mass layoffs,” defined as layoffs affecting 50 or more workers, according to data from the U.S. Bureau of Labor Statistics. A total of 5,512 hospitals workers were laid off through the first three quarters of 2012, compared to 4,474 the same time period in 2011.
Summa plans to boost its operating margin to 2 percent this year by keeping expenses flat and growing revenue, Strauss said.
“We think the emphasis has to be primarily on revenue growth and growing our market share rather than cost-cutting,” he said. “We think we’re very well positioned for that.”
Summa already has a strong 58 percent market share in the Akron area, according to Fitch Ratings.
The growth strategy includes recruiting doctors who can bring new services to the region, Strauss said. Target areas include cancer, heart, women’s health, senior health, orthopedics and surgery.
Summa also is continuing talks with larger nonprofit hospital systems to become its minority owner and partner.
The search has been narrowed to “a few” potential suitors, which Strauss declined to identify. A deal is expected within 60 days.
“It includes not only an investment in Summa but also looking at ways we can enhance our performance mutually through back-office efficiencies and new product development,” Strauss said. “ ... There are some things we could do in statewide initiatives.”
Beacon Journal staff writer Rick Armon contributed to this story. Cheryl Powell can be reached at 330-996-3902 or firstname.lastname@example.org. Follow Powell on Twitter at twitter.com/abjcherylpowell.