Mountain States Health Alliance takes action to mitigate financial impact of federal health care cuts, volume declines


Ongoing challenges to hospital industry affecting hospitals throughout the nation

JOHNSON CITY, Tenn. – Citing significant reimbursement cuts and volume declines associated with federal health care reform, Mountain States Health Alliance officials announced Wednesday the organization is implementing a series of new initiatives that will include reduction of some fixed overhead costs and an evaluation of costs in non-patient-care areas. 

In an effort to avoid immediate layoffs, MSHA will address necessary staffing changes by utilizing its Career Resource Center to provide career services or possible retraining for positions within the health system.  Affected team members will continue to be employed with their regular pay and benefits for 90 days while Mountain States Health Alliance resources are dedicated to assist in their search for employment both inside and outside the organization.

Direct patient care areas will not be part of this cost reduction initiative.   It is expected that 116 currently filled positions out of approximately 9,000 positions will be directly affected, and another 45 currently vacant positions will be eliminated.

The majority of hospital systems across the nation are facing unprecedented financial challenges as the effects of health care reform continue to materialize. The first phase of implementation of the federal health care reforms included significant cuts to hospitals that began taking effect in 2012.  On top of these federally imposed cuts, federal sequestration has imposed additional reductions that were estimated to cost nearly 500,000 health care jobs nationally in 2013 alone. (* It is estimated that an additional 250,000 jobs will be impacted through the effects of sequestration.  These job loss estimates only relate to sequestration and do not consider the added impact of the other federal cuts hospitals are absorbing.

In addition to the sequestration cuts, federal policies also include cuts to hospital payments for services provided, enormous cost shifting to hospitals and Medicare beneficiaries, and significant out-of-pocket deductibles that hospitals must attempt to collect from patients, most of whom cannot afford to pay them. 

The second phase of federal health care reform was intended to help mitigate these cuts by providing coverage for the uninsured.  While a multitude of cuts have been imposed, resulting in a combined $30 million negative annual impact to Mountain States Health Alliance, the expansion of coverage for the uninsured has not occurred as planned.   The lack of coverage expansion has cost Mountain States Health Alliance nearly $20 million annually.  

As a result of new policies, hospital volumes nationwide have reached their lowest level in a decade. (The Advisory Board Company Modern Healthcare also reported last week that health care employment nationwide has dropped for the first time in a decade. (

“Mountain States Health Alliance is a strong organization that is positioned well to manage through these challenges,” said Alan Levine, President and CEO.  “But we are not immune to the realities imposed on us.  The problem would be dramatically worse for our local hospitals if we didn’t act rationally on an ongoing basis to ensure our cost structure reflects the cuts we are expected to absorb.  

“As we deal with these challenges, we must remember that the people who are directly impacted are our friends and our neighbors, and this is very real for them. Even though these folks will continue to be employed while they look for other work, any mandated job change is disruptive and stressful for both workers and their families. Our prayers and thoughts need to be with those who are affected and with those who are tasked with the heavy burden of implementing these steps. It is the last thing we want to see happen, but hospitals are simply left with no choice but to react to these unprecedented challenges.” 

In direct patient care areas, staffing is routinely adjusted to reflect patient volumes.  Since January 2012, MSHA’s inpatient volumes have declined 9.5 percent, and the organization has implemented a net reduction of 700 FTEs through attrition as a result. However, as hospital volumes have declined, fixed overhead departments also need to adjust to bring their costs in line with the ongoing decline in patient volumes. The current changes at MSHA are concentrated primarily in supervisory and management positions and will impact roles all the way up to the vice president level. 

 “While hospitals and health care organizations are having to reassess staffing based on declining volumes and revenue, many employers in other industries continue to hire,” said Levine. “Because Mountain States Health Alliance has such selective hiring policies, we believe our people are among the best available. If any employer is interested in learning more about the availability of any team member impacted by this initiative, please call 423-431-4748, and we will help connect you with these extraordinary individuals.”

MSHA human resources will also hold a recruitment fair for displaced team members on January 21 to help them find new positions inside the organization.

Salary and benefit changes account for about 25 percent of the total financial impact MSHA is seeking to achieve by making adjustments to fixed overhead and support departments, as well as modifications to certain benefits.  Importantly, the system will evaluate and pursue operational efficiencies in every aspect of the organization. 

*Study commissioned by American Hospital Association, American Medical Association and American Nurses Association

NOTE: Info sheet attached below is a sample of hospital changes nationwide related to reimbursement cuts and volume declines.



Headlines: The Effects of Healthcare Reform


Massive job losses expected under Medicare sequester

  • Study commissioned by American Hospital Association, American Medical Association and American Nurses Association
  • Nearly 500,000 health care jobs projected to be lost in 2013 due to sequestration
  • A total of 766,000 jobs expected to be lost by 2021


Hospital admissions reach weakest levels in a decade

  • In Oct. and Nov. 2013, admissions were 4-5percent lower than during the same period in 2012
  • Attributed to new regulations from the federal government that redefine and limit what Medicare will pay for certain types of hospital care


Healthcare employment drops for first time in a decade

  • The healthcare industry shed 6,000 jobs in December 2013 alone
  • Attributed to “hospitals scaling back expenses in response to Medicare reductions and the growth of accountable care”


Wake Forest Baptist Hospital to eliminate 950 jobs

  • Cutting 950 positions total
  • Includes 76 currently filled positions
  • Attributed to “deep cuts in Medicare and Medicaid payments”


Vanderbilt University Medical Center cutting several hundred more jobs

  • Expected to cut total of 1,000 positions by end of 2013
  • System needs to cut $250 million from $3.3 billion operating budget
  • Attributed to “lower reimbursement rates from insurance companies, lack of Medicaid expansion in Tennessee and reduction in National Institutes of Health grant funding”

UMass Memorial posts $57 million operating loss, faces layoffs

  • In 2013, experienced first operating loss in 8 years
  • In FY 13, the company sold its lab and hospice companies, shedding 750 employees
  • Attributed to “increased costs, falling inpatient volumes, increasing observation cases, reduced reimbursement rates and other costs associated with healthcare reform”


Layoffs coming to Cleveland Clinic in plan to reduce budget by $330 million

  • Early retirement offered to 3,000 eligible employees
  • Vacant jobs not being filled
  • Neighboring hospital MetroHealth laid off 450 employees in 2011


Baptist Health Care announces new round of Memphis layoffs

  • Laid off 23 managers in first round
  • Second round includes 61 additional employees
  • Attributed to “increased charity care and lower government reimbursements”



Cone CEO on layoffs: “Everybody’s very nervous”

  • Cutting 300 positions total
  • Includes 150 currently filled positions
  • Profit margin normally 3.5-5 percent, now $11 million negative


Novant Health eliminating nearly 300 jobs

  • Eliminating 289 management and staff positions
  • One fifth of the layoffs affect employees who deliver patient care
  • Attributed to “recession and changes in health care”


IU Health to lay off 800 employees

  • Layoff of 800 employees is second in a year
  • Prior layoff affected 865 employees
  • Attributed to lower volumes and declining reimbursement


Hospital to close labor and delivery, announce layoffs

  • Expected to eliminate 5 to 10 percent of staff
  • Employee number has declined 24 percent in past five years
  • Attributed to cuts in federal and state funding
  • Hospital has lost almost $900,000 in federal funding


Franciscan Alliance announces layoffs

  • Eliminating 275 employees
  • Cutting an additional 650 FTE positions
  • Attributed to “reduced reimbursements, new payer models, healthcare reform laws and shifts from inpatient to outpatient care


MedStar Washington Hospital cuts 300 jobs, cites mounting financial pressures

  • Layoff affects 5 percent of the company’s workforce
  • Finances off budget by $8.5 million
  • Attributed to 4 percent decrease in admissions, 8 percent decrease in inpatient surgeries, cuts from Medicare and Medicaid, bankruptcy of local health insurance plan



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