acing a nearly $35 million shortfall, the largest employer in Central Oregon laid off 30 caregivers this week in order to close the gap for its upcoming 2018 operating budget. It also offered 72 employees "voluntary separation offers," which employees have until Nov. 21 to accept or decline.
Hospital officials say a new state tax on hospitals is one reason for the shortfall—as is the fragmented insurance reimbursement scheme. "A new 0.7 percent real tax is coming off the net revenue, so for us, that translates to about $3 million annually," says St. Charles President and CEO Joe Sluka. "On a nationwide scale, the cost of healthcare has gotten to the point where people can't afford their insurance anymore. What we're seeing is patients buying high deductible plans—anywhere from $2,000-10,000—and it's creating a scenario where people are either not seeking care or can't pay."
Sluka says that there has been a downturn in patient volumes coming through St. Charles but also notes it's a variety of other factors, both local and state, that contribute to the gap.
St. Charles employs more than 3,400 caregivers across Madras, Redmond, Bend and Prineville. Cuts were felt across the system with a 10 percent pay decrease given to executive team members (for a period of at least nine months), reduction of non-contracted caregivers pay by 5 percent (for a minimum of six months) and a suspension of merit increases for caregivers. The organization added that these cuts would not impact the Oregon Nursing Association annual grade increases."W
e have to adapt to a new reality while still fulfilling our mission to serve all patients—and meeting our obligation to lower their overall cost of care," says Sluka when announcing the decision in a Oct. 16 release. Citing the need to close its 3.7 percent operating margin.
The health provider said that the organization was "facing flat to declining revenue, inflation on labor and medical supply expenses and reimbursement impacts due to decisions made by the state legislature." The Oregon Legislature passed a tax bill—House Bill 2391—which went into effect Oct. 6 and adds a 1.5 percent tax on some hospitals and health insurance providers. A special referendum is being called for Jan. 23, 2018, after more than 84,367 signatures were collected to possibly repeal the bill—a source of revenue to help pay for 350,000 low-income Oregonians on Medicaid, according to a Oct 6. report by The Oregonian.
"These are incredibly difficult decisions," Sluka said. "But taking these steps will save an additional 80 positions and will allow us to stabilize our finances without significantly impacting the services we provide to our community." Sluka says regardless of what happens, having a "seat at the table" with both legislators and insurance companies will help move ideas forward.
"The old reimbursement model isn't working." Sluka added that St. Charles is moving toward a "Capitation Model"— one in which regardless of the number of members served monthly, the reimbursement is the same. "This incentivizes providers to keep people out of our hospitals, which I know sounds counter intuitive but it keeps people healthy and really aligns with our philosophy. That's what we're moving towards."