Naperville, Elmhurst hospitals planning $50 million in cuts after revenue drops
Edward-Elmhurst Health will make $50 million in cuts this year to correct course after a year that didn't meet income expectations, its CEO said Tuesday.
The system plans to make those cuts by laying off an unspecified number of workers, renegotiating contracts for supplies and consultants, and finding efficiencies in facility operations, CEO Mary Lou Mastro said.
Some changes already have started, as the employer of nearly 9,000 people is leaving 300 open jobs unfilled. Other cuts will take place during the coming months as the health system adjusts to nationwide trends that are causing hospitals financial strain.
These trends include an increase in patients covered by Medicaid and Medicare as well as increases in charity care provided free and in patients with insurance who are unable to pay their copays and deductibles.
"This is an industrywide issue," Mastro said. "Nobody is happy with the rising cost of health care. It's incumbent up on us to be more efficient without compromising quality."
Edward-Elmhurst Health, which operates three hospitals in Naperville and Elmhurst and more than 50 other care sites across the West and Southwest suburbs, fell $8 million short of its expected operating income for its fiscal year that ended June 30.
Mastro officially took over as system CEO July 1, after serving for six months as co-CEO with now-retired CEO Pam Davis. Mastro said Tuesday she has been considering cuts for the past three or four months as she's reviewed the hospital's bottom line.
"We're still seeing revenue growth, but our expenses have outpaced some of that growth," Mastro said. "It's been a one-year trend for us, but we don't think we can sit back and wait and watch."
As the system takes on more patients covered by government programs Medicaid and Medicare, Mastro said it expects to see continued gaps of about 25 percent between what it costs to provide care and how much the hospitals are reimbursed. And as hospitals have taken on more patients who can't meet their copays and deductibles, the system has seen its "bad debt" grow to $38.8 million of its total debt of $695 million.
The $50 million in cuts that will be made this year represent about 4 percent of Edward-Elmhurst Health's $1.4 billion budget for expenditures this year.
The announcement of cuts comes four years after Edward Hospital and Linden Oaks Behavioral Health in Naperville merged with Elmhurst Hospital to form the system. Mastro said the organization is not in talks to join any other hospital system, but is keeping an open mind and trying to "determine whether we are large enough."
Despite planned layoffs and operating efficiencies, Mastro said patients will not see any service cuts or notice anything different.
She said the hospital system is embarking on projects to make the health care experience "safe, seamless and personal" by aiming to address points in the patient experience when communication between various providers fails and things don't go smoothly. Some patients even are journaling their experiences receiving care to help officials identify where they can do better.
"There's a lot of unknowns moving into the future," Mastro said, especially about the future of health care legislation at the federal level. "We're trying to be proactive to be a strong, viable organization."