EASTON -- Shore Health System President and CEO Kenneth Kozel Tuesday said almost a year of budget analysis and planning has brought the four-county Mid-Shore organization to its latest, and what he said he hopes are the last, cuts to its staff and services in a fiscal year of loss.
The cuts will affect the Shore Health facilities in Talbot, Dorchester, Caroline and Queen Anne's counties, and staff and service reductions will be in place by July 1, the beginning of the coming fiscal year.
Shore Health has more than 1,900 employees, with more than 200 attending, consulting and associate medical staff members.
Kozel said 48 staff positions were cut, with clerical, clinical and support categories each accounting for 30 percent of the layoffs and management positions accounting for 10 percent.
In addition, Shore Health eliminated vacant positions amounting to 52 full-time equivalent (FTE) posts, and reduced and consolidated some services across the hospital system.
The savings to the Shore Health budget for fiscal year 2014 added up to $3.9 million in staff salaries, and about $8 million in services, for a total of $12 million in a proposed $246 million budget, down from its budget of $250 million for 2013, said Kozel.
Kozel said the cuts are the necessary result of federal and state-regulating factors and increases in inflation and costs for supplies and services.
One of the biggest, and unavoidable, factors impacting Maryland hospital budgets is its unique, state-mandated rate-setting system. As the only state in the U.S. whose hospital reimbursement rates, and therefore revenues, are determined by an outside agency instead of in the open marketplace, Maryland is dependent on the Health Services Cost Review Commission (HSCRC) for deciding its level of financial support. When local hospitals prepare their budgets, they look to the HSCRC to set the rates for how much they can charge for their services.
Earlier this month, the HSCRC granted state hospitals a 1.65 percent increase in the rates they can charge for their services. Even so, with inflation rates at 2.31 percent, the increase will not bridge the financial distance needed to balance hospital budgets.
"Within the state of Maryland, health care represents about 100,000 jobs," said Kozel. "We have been experiencing some significant rate reductions from the state that really has been challenging us over the last several years. This isn't anything new that happened this fiscal year, but it is the continuation of events that have been occurring at the state level with our reimbursement rates that's starting to hit a culmination point where we can't do much more of what we have done in the last four years."
According to the Maryland Hospital Association (MHA), the impact of low reimbursement rates, rising health care costs, rates of inflation, insurance premiums and prescription drug prices, and 2 percent cuts to funding from Medicare due to sequestration that will cost Shore Health System a projected $3 million in 2014, will ultimately "threaten the financial well-being of hospitals across the state."
Because Shore Health salaries represent about 50 percent of the organization's budget, workforce reductions, though undesirable, became a necessary way to make budget savings a reality, said Kozel. Shore Health also looked to see where consolidating services would trim expenses and move its hospitals toward more outpatient-centered care a growing trend in the nation as organizations seek to reduce the overall cost of health care, said Kozel.
"We can't be all things to all people health care is not moving in that direction anymore," said Kozel. "We need to contract our services a little bit, but where can we do it in a way that minimizes the impact to our patients in our community as best as possible?"
Effective July 1, the Centreville Diagnostic Center will close and patients will be at the Grasonville Medical Office Building. Centreville's physicians will remain on site, said Kozel, but patients needing imaging prescribed by physicians will have the option to go to Grasonville.
Chemotherapy patients who are seen at Dorchester General Hospital will now go to the Shore Regional Cancer Center in Easton. Kozel emphasized the organization was not eliminating any services available to patients, but rather consolidating ones to make operations more efficient.
Understanding transportation might be a problem for some cancer patients, Kozel said social workers would sit down on a case-by-case basis with cancer patients in their care to make arrangements for them.
Kozel said the Child Development Center, the child care facility at Memorial Hospital at Easton, would be closing Aug. 30. Although slated for closure, Kozel said Shore Health used its foundation funds to keep the center open until the end of the summer to give parents of the 45 children enrolled there the time to make other child care arrangements.
Dorchester General Hospital's pharmacy department will close and its services will be transferred to Memorial Hospital at Easton. Kozel said with the help of technology, the pharmacy teams will be able to maintain levels of inventory at the home base of Easton and have a shuttle system that transports needed items to Dorchester. Kozel said if the consolidation proves to be a viable solution, Shore Health will consider using it when they merge with Chester River Hospital on July 1.
Memorial Hospital at Easton's "Short Stay Unit" will close, said Kozel, in an effort to focus on more efficient outpatient care. The short stay unit serves as a stopping point for operating room patients who need only a few hours to recuperate, complete paperwork, fill prescriptions and go home. Kozel said under the current financial constraints, the unit is not needed and can be closed without interruptions to the care patients receive.
Shore Health also will reduce the number of beds at the Sleep Center in Easton from four to two.
Kozel said Shore Health's human resources department will be working with the 48 staff members who lost their positions to find new jobs within the system if they so choose. Eight employees already have been placed, he said.
As for the plans to build a new Shore Health Regional Medical Center in Easton, Kozel said they still are awaiting approval on their Certificate of Need from the state. And like the 2014 budget, which will be on the table for consideration and changes on a monthly basis, the plans for the new hospital will continue to be monitored and evolve as the future financial picture of the Shore Health System emerges.
"We are a team at Shore Health," said Kozel. "We care about each other and respect each other and it was a hard decision to get to where we are today. We are saddened by these circumstances. These are our colleagues and our friends that we have had to let go. We don't take this lightly this is a serious industry and a serious business ... (but) it really is about what resources we have to care for our patients and serve the community.
"I feel confident with a regional vision, with a board that's coming together with Chester River and Shore Health to form Shore Regional Health on July 1, we are moving in the right direction to effectively care for our patients and provide health care in our community ... In large part because of the team we have, I think we are going to take things to the next level and be at the forefront of health care in this community, such that others will want to emulate what we have done here."