The last two years of deep recession have forced many executives in the healthcare sector to take drastic steps to curb costs. Even though healthcare is one of the few sectors in the overall economy to see job growth, hospitals have not been immune to layoffs and other staff reductions.
While the job cuts may have an immediate effect on cost containment, other downstream costs should be considered.
The new HealthLeaders Media Industry Survey 2010 found that 38% of hospital CEOs and 46% of CFOs found layoffs and staff reductions to be an effective strategy when dealing with an economic crisis, while 37% and 35% of CEOs and CFOs, respectively, remained neutral about the idea. Only 25% of CEOs and 19% of CFOs found layoffs to be ineffective. [See Question 13.]
When C-suite denizens are asked in the survey to gauge the impact of healthcare trends on their hospitals in the next three years, their responses provide an interesting contrast. For example, 51% of CEOs say the nursing shortage will negatively impact their operations, and 53% say organized labor will negatively impact their organizations. [See Question 6.]
So, on the one hand, 75% or more of senior hospital executives either support or are neutral on the idea that layoffs are effective, while half of those same executives say they're apprehensive about workforce shortages and unions.
Here's the problem: Cutting staff–regardless of the motive–will save money short term, but it also will exacerbate future workforce shortages when it's time to start hiring again, and push remaining employees–fearful of job security–into the welcoming arms of organized labor.
Is there disconnect here?
Not entirely, but there is some static on the line.
To be fair, these executives in the survey aren't necessarily saying they're in favor of layoffs. They're saying that layoffs are an effective short-term strategy to deal with the worst economic crisis since the Great Depression. Many healthcare executives probably view layoffs as a regrettable last resort.
"I can't envision a scenario where a staff reduction is really an effective long-term strategy. It really falls much more closely along the lines of a short-term tactical response to a financial situation," says Bernie Becker, vice president/CHRO at Stormont-Vail HealthCare in Topeka, KS. "If you look at it strategically, unless you are eliminating programs and services and the people that are needed to deliver those programs and services, when business rebounds you are going to have to staff back up.
Most of the time, you are going to have higher labor costs than if you had left those people in place. It's always more expensive to hire people than it is to keep them." Chris Roederer, vice president of HR at Tampa General Hospital, concedes that layoffs are effective at containing costs. However, he says, hospitals that conduct layoffs risk losing long-term credibility with remaining employees.
"Many organizations that conduct layoffs feel the pain for years to come. Employees do not forget," he says. "With proper planning, organizations would be better served by meeting staffing reductions via attrition. That avoids the negative employee relations impact, potential negative impact on long-term recruitment, and severance and unemployment expense."
Lose employees' confidence and you also lose critical allies in the fight to identify and contain costs. "If employees trust and respect leadership, they will typically understand and even assist leadership in eliminating other expenses to avoid layoffs such as minimizing overtime, special pay practices, or modified shifts," Roederer says.
Once those employees are laid off, Becker says, there is very little chance that they will return, especially if they are skilled clinicians. "They are going to go somewhere where there is work. And, there is work. They may have to move, but we are dealing with a much more mobile workforce than we were 10 or 20 years ago. Our Gen X and Y folks don't have anywhere near the geographic restrictions that their predecessors did, and there is no sense of organizational loyalty. That is not in their blood. They think short term rather than long term anyway."
Becker recommends changing the cost-cutting focus from numbers of employees to payroll costs. "There is a bit of a knee-jerk reaction when an organization is faced with some serious financial obstacles that says ‘We have to let people go,'" he says. "Merely reducing head counts may not be the most effective or efficient way of achieving those targets. The organization is probably better served at looking at total payroll costs without necessarily letting people go. Maybe you examine some of your pay methodologies. Maybe you look at your overtime utilization, or your call pay utilization. Maybe look at benefit redesigns. There are ways to reduce the total labor costs without necessarily reducing head count."
The healthcare workforce shortage is not a threat to the future of healthcare delivery, because it's already upon us. It's not going to get better as our nation ages and requires more medical care and the people tasked with that care age along with us.
We often hear employers saying that "employees are our greatest asset." Why would anybody cut their greatest asset at a time of greatest need?
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State and national nurses associations are applauding a jury's quick verdict to acquit a Texas nurse of felony charges for reporting a physician to a state oversight board for allegedly providing unsafe patient care.
Anne Mitchell, RN, was charged with "misuse of official information," a third-degree felony, for reporting Rolando Arafiles, MD, to the Texas Medical Board. Had she been convicted, Mitchell could have faced up to 10 years in prison. However, after a four-day trial, a state jury in Andrews, TX, needed less than one hour to acquit Mitchell.
"We are very pleased about the not guilty verdict and that justice prevailed for Anne Mitchell," said Susy Sportsman, RN, president of Texas Nurses Association, in a media release. "If anything was to be gained from the absurdity of this criminal trial, it is the reaffirmation that a nurse's duty to advocate for the health and safety of patients supersedes all else."
That sentiment was echoed by American Nurses Association President Rebecca M. Patton, RN, who feared that a guilty verdict would have had "a lasting and negative impact on future nurse whistle blowers."
"Nurses play a critical, duty-bound role in acting as patient safety watch guards in our nation's healthcare system. The message the jury sent is clear: the freedom for nurses to report a physician's unsafe medical practices is non-negotiable," Patton said.
"However, ANA remains shocked and deeply disappointed that this sort of blatant retaliation was allowed to take place and reach the trial stage—a different outcome could have endangered patient safety across the U.S., having a potential 'chilling effect' that would make nurses think twice before reporting shoddy medical practice," Patton said. "Nurse whistle blowers should never be fired and criminally charged for reporting questionable medical care."
Attempts by HealthLeaders Media to contact Mitchell through her attorney following Thursday's acquittal were not successful. However, Mitchell told TNA she was relieved by the verdict.
"I was just doing my job," Mitchell said in a TNA media release. "But no one should have to go through this. I would say to every nurse, if you witness bad care, you have a duty to your patient to report it, no matter the personal ramifications. This whole ordeal was really about patient care."
TNA said that more than $45,000 has been donated by individuals and organizations across the country to the TNA Legal Defense Fund for Mitchell and former co-defendant Vicki Galle, RN. Prosecutors had dismissed charges against Galle on Feb. 1.
"No one in North Carolina should have to endure unwanted robo calls that tie up phone lines and disturb their peace and quiet," Cooper said in a media release. "People have had enough of answering their phones and hearing a recorded message."
The company commissioned robo calls to 100,000 North Carolina residents in October without following state law, which requires a live operator to announce the automated message and give recipients the chance to refuse the call, the AG's office said. The settlement is the result of complaints filed with the attorney general in October after robo calls were made by vendor Campaign Connections on Blue Cross's behalf to North Carolinians. Blue Cross agreed to stop the calls when the health insurer was contacted by state consumer protection lawyers.
"We regret this mistake, and we apologize for the error made in how these calls were placed. We continue to believe that it is important for BCBSNC to take an active role in the health reform debate," BCBSNC Executive Vice President and General Counsel Maureen O'Connor said in a media release.
The 35-second robo call warned against the healthcare reform bill that Congress was working on last October. The insurer told policyholders to expect a mailer containing a prepaid post card. They were asked to sign the postcard, which expressed opposition to the reforms, and send it to U.S. Sen. Kay Hagan, D-NC.
"From the beginning of the healthcare debate, BCBSNC has affirmed its support for health reform that covers all Americans, promotes quality care, and controls costs," O'Connor said. "The company has taken an active role in this discussion, particularly in educating North Carolinians on the likely impact of various health reform proposals. We will continue to be engaged."
Blue Cross is not legislatively exempt from the robo calls law, Cooper said, because it is not tax-exempt. The North Carolina General Assembly exempted some automated calls for healthcare and insurance purposes, but only for certain people, such as those who have business with the company, Cooper said.
The company has agreed to follow the law and adopt policies guiding its vendors to do the same. The $95,000 fine will go to the public schools in the state, Cooper said.
Healthcare IT systems provider Quality Systems Inc., of Irvine, CA, announced today it will acquire inpatient services software developer Opus Healthcare Solutions, Inc. Financial terms were not disclosed in a media release announcing the deal.
QSI said Austin, TX-based Opus will be combined with Sphere Health Systems, Inc., a Laguna Hills, CA-based healthcare software services developer that was acquired in August. The two acquisitions will become part of NextGen Healthcare Information System, Inc., QSI’s wholly owned subsidiary that will focus on community and rural hospitals with 100 beds or less.
"We have seen demand grow in the rural and community marketplace due to the Stark relaxation, emergence of health information exchange initiatives, and impending incentives resulting from the American Recovery and Reinvestment Act," said NextGen Healthcare President Scott Decker, in a media release. "Through our many years of working with ambulatory providers closely associated with or owned by community hospitals, it became clear that we could meet this demand by broadening our offering to include both ambulatory and inpatient solutions."
Decker said there is a growing demand for a single, "cloud-based" technology platform that can coordinate across both ambulatory and inpatient care settings. "These new acquisitions afford us the necessary capabilities to address client needs and fill a void currently present within the rural and community hospital marketplace," Decker said.
CVS/pharmacy has reportedly agreed to pay Indiana $1.95 million to settle complaints that two pharmacists with long-expired licenses had dispensed more than 60,000 prescriptions at two stores, Indiana Attorney General Greg Zoeller announced this week.
Indiana prosecutors said in a media release that between 1997 and 2007, CVS employed two pharmacists whose licenses had expired: Morris "Mo" Skirvin at a store in Nashville, IN, and Edward Certain at a store in Marion, IN.
The Indiana AG's Medicaid Fraud Control Unit investigation reported that Skirvin's pharmacist license expired in 1990, long before his employer, Hook-SupeRx, was acquired by CVS, but he did not renew the license and allegedly forged a new one each renewal period.
After MFCU began investigating Skirvin's license, CVS disclosed that another pharmacist, Certain, also had been practicing without a license. Certain had a valid license at one time, but it expired in 2002 and he did not renew it, MFCU reported.
Together, Skirvin and Certain filled an estimated 60,778 prescriptions, the investigation alleged, and the Indiana Medicaid program was overbilled for fees to which the unlicensed pharmacists were not entitled, prosecutors said.
"To its credit, CVS has resolved this situation in a responsible way," Zoeller said. "First, it came forward and acknowledged that a pharmacist with an expired license had been employed at its Marion store. Now, CVS will implement a screening program to ensure that none of its pharmacist employees are operating without a license."
CVS issued a statement reiterating much of what the AG said. "There have been no allegations that any customers were harmed in any way as a result of the employment of these individuals, who ceased employment with CVS/pharmacy in 2007. There have also been no complaints or issues raised by any customers. There is no admission or finding of wrongdoing by CVS/pharmacy related to these allegations and the company entered into this agreement to avoid the delay expense, inconvenience and uncertainty of litigation," CVS said.
Zoeller agreed that the $1.95 million settlement—to be paid within two months—is not a fee, a fine or an admission of guilt. He said the money will be used to reimburse the Indiana Medicaid program and investigative costs.
As part of the settlement, CVS agreed to verify that pharmacist employees and contractors have valid Indiana licenses, and to require applicants for pharmacist positions to disclose any aliases they have used and whether they are ineligible to hold a license.
Within the next three months, CVS will perform records checks on its Indiana pharmacist employees through the Indiana Professional Licensing Board. The company will perform regular checks every six months for three years, the agreement said.
"The agreement underscores that the health and safety of its customers is a top priority for CVS/pharmacy," CVS said.
The former CFO of Tustin Hospital and Medical Center in Los Angeles has pleaded guilty to paying illegal kickbacks for patients recruited from the city's "Skid Row" area, the U.S. Attorneys Office in Los Angeles has announced.
In a plea agreement filed in United States District Court Tuesday, Vincent Rubio 49, of Los Angeles, admitted paying kickbacks to "marketers" who recruited homeless people and transported them to Tustin Hospital, federal prosecutors said in a media release. With the plea, Rubio faces up to 15 years in federal prison. He is expected to make his initial appearance in United States District Court on March 1.
Rubio admitted to participating in a scheme to pay Estill Mitts, who operated a center on Skid Row. The center allegedly recruited homeless people to receive unnecessary health services and others to refer homeless Medicare and Medi-Cal beneficiaries to Tustin Hospital for in-patient hospital stays. Tustin Hosptial entered into "consulting" contracts intended to conceal the kickbacks. Tustin billed Medicare and Medi-Cal for in-patient services provided to the recruited homeless people, including those for whom in-patient hospitalization was not necessary, according to the federal government.
Rubio also admitted that he failed to report the payments he received from one of the marketers on his federal tax returns, the feds added.
Tustin is a subsidiary of Pacific Health Corp., which also owns Los Angeles Metropolitan Medical Center, Anaheim General Hospital, and Bellflower Medical Center.
Rubio is one of five people charged so far in an ongoing investigation into healthcare fraud related to Skid Row residents. Mitts, 65, of Los Angeles, pleaded guilty in September 2008 to conspiracy to commit healthcare fraud, money laundering, and tax evasion, and he is scheduled to be sentenced on June 21.
Rudra Sabaratnam, 65, one of the owners of City of Angels Hospital in Los Angeles, pleaded guilty in December 2008 to paying illegal kickbacks for patient referrals, and he is scheduled to be sentenced on April 5. Dante Nicholson, 52, senior vice president of City of Angels, pleaded guilty in March to paying illegal kickbacks for patient referrals, and he is scheduled to be sentenced on June 14. Robert Bourseau, co-owner of City of Angels, pleaded guilty in June to paying illegal kickbacks, and he is scheduled to be sentenced on Feb. 22, according to the federal government.
The theft of 57 hard drives from a BlueCross BlueShield of Tennessee training facility last fall has put at risk the private information of approximately 521,761 customers in at least 32 states, the insurer said this week in an investigative update.
Of those customers identified as being at risk, 220,133 have received notices that their personal information was included on the stolen hard drives, BCBS of Tennessee said in a media release.
The hard drives containing 1.3 million audio files and 300,000 video files related to coordination of care and eligibility telephone calls from providers and members were reportedly stolen from a leased office in a Chattanooga strip mall that once housed a BCBS of TN call center. The video files were images from computer screens of customer service representatives and the audio files were recorded phone conversations from Jan. 1, 2007 to Oct. 2, 2009. The files contained customers' personal data and protected health information that was encoded but not encrypted.
The 220,133 members notified are in the so-called Tier 3 category, confirmed as having their name, address, BlueCross member ID number, diagnosis, Social Security number, and/or date of birth included in the stolen hard drives. Notifications have been sent to all identified Tier 3 members.
Additionally, 301,628 current and former members have been identified in the Tier 2 category. Members in the Tier 2 category of personal information (name, address, BlueCross member ID number, date of birth, and/or diagnosis) will begin to receive their notifications with details of the hard drive theft and remediation services offered to them in mid-February, the insurer said.
The number of members reported in the Tier 2 category is larger because of BlueCross' decision to offer remediation services to all family members associated with the specific subscriber ID number identified during the data audit process. This decision was made to ensure all potentially at-risk members are protected.
To illustrate this point, 131,909 subscriber ID numbers were identified during the review of the customer service calls and there were 169,719 family members associated with the member ID numbers. Each of these 131,909 subscribers will receive a Tier 2 letter that extends the offer of remediation to all family members.
As of Feb. 5, there have been no reports of identity theft or credit fraud of BlueCross members as a result of the theft, the insurer said.
Hospital patients, their families, and visitors may be stealing about $52 million in property each year from hospital rooms, including towels, linens, TV remotes, surgical scrubs, and even telephones, according to figures extrapolated from a recent survey.
The survey, conducted by the Irving, TX-based healthcare supply chain network VHA Inc., found that 64% of the nearly 100 hospitals that responded reported that patients and/or their families and visitors pilfered hospital property.
Nearly 30 hospitals in the survey reported that the losses amounted to less than $15,000. While the sum is hardly a bank breaker for most hospitals, VHA Implementation Manager Jack Parker says it's another "headache" for hospitals and takes money away from investments in clinical and operational improvements.
"It's not a huge amount for each hospital, but you multiply $15,000 times a few thousand hospitals and it becomes a lot of money," Parker says. "I've been in hospitals where they have stolen the telephones right out of patients' rooms, or walked out with a TV, saying they were the repairman. They can't even use the telephones because they're not made to work in the home."
"Unfortunately, the nurses are very busy and they can't be police. And we don't expect them to be police. But patients need to understand that hospitals are not hotels and do not factor room supplies into the cost of healthcare," he says.
Parker says there is no indication that thefts are on the increase because of the rough economy, but he adds it's a bigger issue for hospitals that are searching to reduce costs. "It's just one of those things that have always gone on, and it's one of those things where when you work in an industry whose margin is less than 2%, you have to look at every dollar," he says. "That $15,000 has to come out of your budget somewhere."
Parker recommends not overstocking patient rooms to minimize the impact of the thefts. "When people go to a hotel and there are three or four bottles of shampoo, people will take them, thinking they paid for them," he says. "Bed linens, water pitchers, are things that aren't charged to a patient. It's overhead for the hospital. So anything you can do to put less in the room, as long as the patients' needs are met, is what you need to do.
Parker says his cost estimates don't include theft of hospital equipment by employees. He estimates that the theft of surgical scrub suits, for example, is an even bigger issue that patient thefts.
"That is thousands of dollars, maybe tens of thousands of dollars. If I had to point to the one thing that was taken the most in hospitals, it's scrubs, and 99% of it is employees," he says.
Shareholders of pharmaceutical and healthcare consultants IMS Health have approved the previously announced acquisition by TPG Capital, LP, and the CPP Investment Board, in a deal valued at $5.2 billion, IMS Health announced this week.
The agreement was unanimously approved by the IMS board in early November. Under the agreement, IMS shareholders will receive $22 cash for each share of IMS common stock they own, which at the time of the Nov. 5 announcement represented a 50% premium over the closing share price on October 16, the last trading day prior to public speculation that IMS was considering its strategic alternatives.
The acquisition will be financed through a combination of equity to be invested by TPG and CPPIB, and debt financing to be provided by affiliates of Goldman, Sachs & Co.
"This transaction enables our shareholders to realize substantial value from their investment in IMS with an immediate cash premium, while at the same time strengthening our position to capture long-term growth opportunities," IMS Chairman/CEO David R. Carlucci said during the November announcement. "With the backing of world-class private equity partners, we will continue our focus on expanding into new markets, further improving the quality and depth of offerings we deliver to our clients, and playing a bigger role in the healthcare market."
With operations in more than 100 countries, IMS Health provides market intelligence to the pharmaceutical and healthcare industries. The company generated $2.3 billion in revenues in 2008.
TPG Capital is the global buyout group of TPG, a private investment firm with approximately $45 billion of assets under management. TPG Capital’s healthcare investments have included Axcan Pharma, Biomet, Fenwal, IASIS Healthcare, Quintiles Transnational, and Surgical Care Affiliates.
The CPP Investment Board invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. The CPP Investment Board invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure, and fixed income instruments. Headquartered in Toronto, the CPP Fund totaled $116.6 billion in June 2009.
Adventist Health has signed an agreement with the Frank R. Howard Foundation to build a new, 25-bed community hospital in Willits, CA.
Adventist Health will continue to lease the existing hospital from the foundation while funding construction of the hospital in Willits, located about 118 miles north of San Francisco.
"This will enable us not only to have a new facility for our community, but also starts to fulfill our vision for a master campus plan," said Margie Handley, chair of the foundation's nine-member board, in a media release.
Adventist Health Senior Vice President Scott Reiner, who chairs the hospital board, said the project represents "a significant investment in this community."
"Our organization anticipates investing $58 million into the new Howard Memorial Hospital and then will continue to lease the property that the hospital will be built on," Handley said.
The project design is expected to be finalized by this fall. Adventist is a not-for-profit, faith-based, 17-hospital, healthcare system operating in California, Hawaii, Oregon, and Washington.
