Memorial Hermann to lay off 350 more

Economy, health care limbo cited in system’s cuts

The Memorial Hermann Health System, Houston’s largest employer, is laying off another 350 employees, the third significant workforce reduction by a Texas Medical Center hospital this year.

Memorial Hermann announced the layoffs Tuesday, the same day it notified most of the affected employees. The latest reduction brings the layoff total at the hospital system this year to more than 460, just under 2 percent of Memorial Hermann’s 25,000-employee workforce.

“This is an unprecedented time in health care,” Chuck Stokes, Memorial Hermann’s interim president, wrote in an email to employees. “We continue to face an uncertain healthcare environment with escalating costs and declining reimbursements. In addition, we are impacted by a softened local economy.”

Stokes said that Memorial Hermann still is profit-

able, but is driven “to make proactive adjustments to position itself for continued success and financial sustainability.” He added, “It’s important to note that this reduction is only one part of an overall strategy to adapt and prosper under the ‘new normal’ in health care.”

No doctors or nurses are included in the layoffs, Memorial Hermann officials said.

The layoff announcement came a week after the abrupt departure of former Memorial Hermann President Benjamin Chu, a year after he assumed the top job.

Stokes said there was no connection between the two events. He noted Chu inherited the financial situation and initiative to become more efficient, begun under his predecessor Dan Wolterman.

The layoffs follow larger workforce reductions at MD Anderson Cancer Center, which laid off 778 employees in January; and Catholic Health Initiative’s Texas division, which since August has laid off 810 employees and cut its payroll by 1,295 jobs, most at the St. Luke’s Health System in Houston.

Houston health care economist Vivian Ho said all three institutions are being hit by the same forces.

“Health care costs have grown faster than the overall economy almost every year over the past three decades,” said Ho, director of the Center for Health and Biosciences at Rice University’s Baker Institute for Public Policy. “In the last few years, employers have passed those higher costs on to workers, who are more price sensitive and may have pulled back on demand because of those higher out-ofpocket costs. Plus, many workers lost generous health insurance coverage in layoffs due to the oil slump.”

Post-Obamacare services

Ho added that Memorial Hermann “likely benefited from the bump in insurance that resulted from Obamacare, but like others, doesn’t see that coverage number expanding any further or perhaps falling substantially. So, there was no point keeping on additional staff in expectation of future growth.”

Ted Shaw, president and CEO of the Texas Hospital Association, said that “Texas hospital leaders are facing significant challenges as the population increases, the rate of uninsured rises, and hospitals are forced to do more with less.” He said that“as hospital leaders innovateto address these challenges, costs have added up in a time of great upheaval.”

Ho said the medical center layoffs raise the question of how Houston Methodist Hospital is doing.

Methodist spokeswoman Gale Smith said the system is not planning any layoffs, adding that “we beat budget in 2016 and are beating it so far in 2017. Our workforce is the right size for the institution.”

Memorial Hermann is comprised of 12 acute-care hospitals, five specialty hospitals and more than 200 outpatient clinics scattered around the region. Leaders refer to it as the largest safety-net hospital system in Houston.

Stokes said it provided $510 million in uncompensated, or charity, care last year, a drain on its finances. He said it also hurt that Texas did not participate in the expansion of Medicaid under the AffordableCare Act, which Congress now is attempting to dismantle.

Memorial Hermann’s new workforce reduction comes five months after the system laid off 112 employees, mostly in leadership positions. Those lay offs were characterized as“flattening” the organizational structure so the system could more nimbly respond to changes in the industry, but Chu wrote at the time that the system “would look for additional ways to reduce operational expenses.”

In an interview, Stokes said Memorial Hermann hopes to save another$100 million in the fiscal year that begins July 1. He said such savings would not come from further layoffs but improvements such as clinical care redesign, reducing lengths of stay, cutting overtime, the cost of supplies and attrition.

“In the last few years, employers have passed those higher costs on to workers, who are more price sensitive and may have pulled back on demand because of those higher out-of-pocket costs.” Vivian Ho, Center for Health and Biosciences at Rice University

Streamlining the system

Stokes said he does not anticipate any big layoffs going forward, but added that Memorial Hermann will consolidate services or programs if the opportunity presents itself. Laid-off employees will continue working until July 7, then receive severance packages.

“We must respond to this new normal by creating a new operating and cost structure for the organization ,” Stokes wrote to employees .“This means re formatting how we get work done — continuously looking for ways to improve our operations by being more cost efficient and consumer-focused than ever before.”