More job cuts likely at Wake Forest Baptist Medical Center

Wake Forest Baptist Medical Center

WINSTON-SALEM, N.C. — Another round of major expense reductions — including job cuts — are coming at Wake Forest Baptist Medical Center, with management’s plans being announced potentially as early as this week, according to sources.

Multiple employees, who are not being identified because they fear losing their jobs, have told the Journal they understand that several hundred to more than 1,000 job positions could be eliminated, with the process already started in some departments.

People with knowledge of the situation say Wake Forest Baptist’s board of directors could be projecting up to an 8 percent reduction in operating expenses in fiscal 2014-15, which begins July 1. The sources say the board is contemplating a similar step in expense reduction for fiscal 2015-16.

The center reported to bond holders and rating agencies on Feb. 28 that it had $983.9 million in operating expenses through the first half of fiscal 2013-14. If it were to have $2 billion in operating expenses for the full fiscal year, an 8 percent reduction could represent about $160 million.

Operating revenue for the first half was up 4.5 percent to $960.4 million.

The center has about 13,000 full- and part-time employees, making it Forsyth County’s largest workforce. At least 950 job positions have been eliminated since a “re-engineering” initiative began in April 2012 that was projected to reduce expenses by several hundred million dollars.

When asked about another round of cost cutting, the center issued a statement Friday that said “the medical center is deeply engaged in its annual budgeting process and is continuing to proactively address the challenge of declining reimbursement for health care services. Since we are still in the planning cycle, it would be premature to comment further at this time.”

One source said the board and Dr. John McConnell, the center’s chief executive, are “rethinking the size of the expense base,” and that the cuts “are not a one-time measure, although the hope is that through the reductions, the expense situation will improve. There is a need to expand the overall clinical platform to raise revenue.”

Another source with knowledge of the situation said that “fundamentally, the amount of money that would be cut is probably over and above what they have previously announced, based on new analyses that they have in regard to shortfall and expected revenue.”

“There is something new in this in terms of magnitude, although they may not say that.”

The center issued last week a statement that employees say closely resembles what they have been told.

“The majority of these reductions in fiscal year 2015 will come from clinical operations, but expenses will be reduced in all medical center divisions,” according to the statement. “Reducing expenses requires continued scrutiny with regard to filling replacement positions and possible reduction in force that began in 2012.

“The enhancements are similar to those of other academic medical centers and health systems in response to changes in federal health reimbursement formulas, higher mandated requirements for quality and infrastructure, new models of care delivery that are focused on value, and declines in federal funding for research and discovery.”

A person knowledgeable about the situation said clinical and academic department heads “have been given dollar figures with which to determine how much to cut. It’s more about budget dollars than job positions.”

For most corporations and large not-for-profit groups, employee costs are often their largest expense, and therefore the most likely option for cost reduction.

Wake Forest Baptist has said in the past that two-thirds of its operating costs are labor. The center reported that salaries and wages rose by 3.9 percent to $461.6 million in the first half of fiscal 2013-14.

The cost-cutting efforts are being prompted in part by Wake Forest Baptist’s losses from its core operating sources of revenue. The center reported it had a loss of $23.5 million for the first half of fiscal year 2013-14 compared with a loss of $49.8 million for the same period in fiscal 2012-13.

Overall, the center had a loss of $4.06 million for the first half of fiscal 2013-14 because it had a net gain of $18.5 million in investment income. Not-for-profit hospitals depend on investment income to increase their bottom line and to help pay for capital investments.

Previous layoffs in 2012-13

In November 2012, the center announced it was eliminating 950 full-time or full-time equivalent positions, of which half were filled by employees. It said that about one-third of the reduction was to come from corporate services and administration.

At that time, the center said it would eliminate the job positions by June 30, 2013.

In May 2013, the center announced another wave of cost-cutting measures, also aimed at reducing expenses through the end of fiscal 2012-13. That included volunteer employee furloughs and hour-and-wage reductions, a hiring freeze, a reduction in employer retirement contributions, and elimination of executive incentive bonuses for 2013.

Although those measures also were supposed to be short-term in nature, the center has not said publicly if it has rescinded the steps. The center’s latest comment is that “these on-going efforts will continue until our goals are achieved.”

In both instances, McConnell said the cost-cutting measures were necessary to preserve the financial stability of the center.

“This is a time of dramatic change in health care, but it is also a time of great opportunity,” McConnell said in May 2013. “The choices and responses that we make now will help to determine our future strength and success.

“While all employees will be asked to make some sacrifices that will help us bridge to the future, executives will have high reductions in their compensation and bear the greatest impact.”

Even though management told bondholders Feb. 28 that the center is making progress correcting the revenue issues, it acknowledged it “will not meet projected financial targets for the current fiscal year.”

Other industrywide challenges include more people without health insurance seeking medical help in its emergency department, which tends to increase the amount that hospitals are writing off as bad debt.

Edward Chadwick, who is leaving as Wake Forest Baptist’s chief financial officer on June 30, said March 3 that the center “continues to feel the negative financial pressures experienced throughout the health care industry in response to reform readiness requirements, coupled with localized decreased demand for inpatient hospitalization.”

20 comments

    • Thomas Christopher

      Well, the sad part is, the American people voted for this mess TWICE (and in some documented cases, multiple times), so we need to place the blame where it directly lies, especially when they were warned repeatedly that this would be the end result.

    • NobodyAtAll

      Yep, so if you really need to go to the hospital, just stay home…After all, nobody works there thanks to our POTUS..

    • JWS

      “Overall, the center had a loss of $4.06 million for the first half of fiscal 2013-14 because it had a net gain of $18.5 million in investment income. Not-for-profit hospitals depend on investment income to increase their bottom line and to help pay for capital investments”.

      Read this again and then tell me how it could possibly be the Affordable Health Care Act that is causing their problems. It is the horrible economy this is still from the “Great Recession” that was caused by your hero’s.

      Also, a lot of their losses is from people who cannot pay their bills due to no health care insurance and they have to write off the huge bills produced by these people. If everyone either paid their bills or had insurance to pay the bills I can assure you their bottom line would look much better.

      • FaithC

        @JWS..look you’re apparently drinking the kool-aide once again. These cuts are due largely in part to one simple fact Medicare reimbursements!! Sorry that you’re miserable Democrat president has let you down for the 200th time.

      • lw

        “The enhancements are similar to those of other academic medical centers and health systems in response to changes in federal health reimbursement formulas, higher mandated requirements for quality and infrastructure, new models of care delivery that are focused on value, and declines in federal funding for research and discovery.” Re-Read sentence 2 half way across and I quote” IN RESPONSE TO CHANGES IN FEDERAL HEALTH REIMBURSEMENT FORMULAS, HIGHER MANDATED REQUIREMENTS FOR QUALITY AND INFRASTRUCTURE, NEW MODELS OF CARE DELIVERY THAT ARE FOCUSED ON VALUE AND DECLINES IN FEDERAL FUNDING!” Do you Not Get It!? This is talking about Obamacare, plain and simple. The cause is The Federal Gov’t has got it’s hands in the Medical Field and this is the effect. This all began in 2012???? When Your President was voted back in for the second time… Economy continued to fall and still is> therefore people with job loss don’t have insurance= no insurance means no funds for medical care and thus the use of the the Emergency Room for things that should be handled at Dr.s offices, but No Insurance, so…the ER costs of write-offs are draining the Hospital. The lucky few people who still have their jobs for now…..their employers’ costs of Med. insurance has skyrocketed, because of Obamacare…so many can’t afford it any longer and have discontinued insurance. Who do you think is going to have to pay for Obamacare? And, who do you think is going to suffer from it…with the loss of their job. On top of it all, Medicare is almost broke and Federal funding is being cut, so Mdcr patient visits are paid less and larger portions written off by the hospital, lowering profits substancially.

  • C.D.Childress

    If they could manage money these lay offs would NOT be needed. They should have filed the BCBS claims on time for one thing. People Not doing their job correctly as they should.

  • kim

    I don’t understand why they build and open up a medical facility in Bermuda Run and then turn around and have massive layoffs … where is the logic there? I will be pissed if my doctor leaves!

    • NobodyAtAll

      For one solid year, just one, force him to live as he never has…$7.25 per hour, 30 hours per week, absolutely no benefits, and with his family of four…Then he can tell the country how easy it is to make payments on his new BMW…

      • u have NO clue

        Well since you have all the right ideas, why don’t you throw congress, the senate and the house or representatives..all of the white house AND capital hill in the mix…GEZZZZZ MOST of you people are so dense, you don’t even know WHO to blame for your problems…1 MAN didn’t do this u bunch of sheep. By that same logic, blame EVERY OTHER president past and in the future that may have a policy or 2 you don’t agree with…I cant with the ignorance..

    • u have NO clue

      Oh and at least this president SHOWED his tax return..What about your hero, Mitt Romney, hiding all that money offshore…WHERE was the complaining then? Or did y’all forget about that? Ill wait..

  • Mark Stabler

    They have invested millions in areas other than direct care of patients and it is really beginning to show. Most of these millions upon millions of dollars in “so called research” has yielded nothing to supporting the cost of operating the hospital. What kind of pay cut has Dr. McConnell taken to reduce the size of the expense base. What was once one of the most respected and admired medical facility in the Nation is becoming an also ran, and it is a shame.

    • Me perfect

      @Mark your comment has to be one of the dumbest listed herein. If you do not conduct research you can’t provide healing treatments & better medicine. You obviously have no idea how the medical field operates so just get back to your drive thru window because someone needs to order a double cheese burger.

  • Rupert

    McConnell is the major player in the downfall of this institution. He cares absolutely nothing for the employees and that’s been clear since day one. It’s all about growth and expanding and at the employee’s and, ultimately the patient’s, expense. Short staffed in clinical now!! He has done nothing to reduce his salary or expenses nor his cronies in administration. The Medical Center used to be a great place to work where employees felt valued and were treated with respect but I bet you can’t find one person below the administration floor that feels that way now (nor many on that floor as well)! Sad for all involved. Where has the Board been all this time and why have they allowed him to turn it into ruins? They should be held just as accountable.

  • Duh huh.

    The health care act has cut payments to the hospital & the hospital is forced to cut jobs which in turn make the wait to get care even longer. Obamacare is awesome. The solution is to borrow more & more money to fill the gaps. 40 years from now, we will Greece. Yay.

    • Joel

      So you say that the shortfall is caused by lower Medicare payments (that is, payment from tax money), and yet you say this will cause the government to borrow more money till we are like Greece! Gosh, you sound like a WBush financial expert! Thank God YOU aren’t in control, or we’d all be visiting a witch doctor when we were sick.

  • MJ

    I’m so glad this reporter is disseminating information on the specifics of future financial decisions based on hearsay from naive employees. Eye roll. Quit stirring the pot.

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