Hospital will cut expenses up to $5 million this fiscal year

BENNINGTON - Faced with a decline in projected revenue, the hospital intends to reduce its expenses this fiscal year by between $4 million and $5 million, which officials say will impact an unknown number of jobs.

Southwestern Vermont Health Care spokesman Kevin Robinson said that over the past six months SVHC, which operates Southwestern Vermont Medical Center, has seen a drop in revenue that appears it will continue long-term. He said that by the end of the fiscal year the hospital is expecting to see a $3 million to $5 million gap in projected revenue.

Robinson said the hospital's expense budget for this year is around $160 million, and it budgets to take in more than it spends so it can reinvest in the facility and remain financially viable.

Robinson said that after the hospital makes its reductions for this year, it will form a plan to reduce expenses by 15 to 20 percent over the next five or six years.

"This work will lead to changes in the jobs people do within health care. And yes, it will lead to fewer hospital jobs, even as we add jobs in other health care settings," SVHC CEO Thomas Dee said in a letter sent to SVHC employees Tuesday and to the Banner as a guest column.

"I recently challenged our management team to reduce our expenses by $4 to $5 million in the coming year," wrote Dee. "That's a first step. To survive with payments at Medicare levels, we will need to reduce our expenses by 15 to 20 percent over the next five to six years."

Robinson said there are no plans to shed a large number of employees, and the hospital has yet to determine how many employees it expects to lose. "We think within 90 days we should have a clearer plan for reducing our fiscal expenditures for this year," said Robinson.

Dee said in an interview Tuesday that he expects there to be fewer staff positions at the hospital itself, but those in the outpatient services will likely increase as the health care system moves toward a different model of care. He said that for example there may be fewer floor nurses at SVMC's main facility in Bennington, but those nurses can be trained to work in an outpatient setting.

Over the past few months, the hospital had reduced its work force by 3.5 full-time positions. One was an upper-management position and one was a middle-management position, according to Robinson. Those reductions were part of the normal course of business, as the hospital is always looking for ways it can reduce expenses, he said.

Robinson said other hospitals in the region have been reporting revenue losses. The losses are largely the result of fewer billable services like surgeries and tests. He said September revenues were particularly low this year, while October showed an increase. However, both months were below last year's mark.

Dee said SVHC is fortunate to not be making these adjustments during a financial crisis. He said these reductions, along with changes like partnering with Dartmouth-Hitchock health care to take over SVMC's medical group, are part of a long-term shift in the way things are done. "This is the new normal," he said.

"No matter how unsettling or difficult these changes may be, we must begin them now," wrote Dee. "We cannot wait for falling payments or government regulation to force change upon us."

"In the coming years, we expect payments from private insurance to drop to Medicare levels, which are below our costs. That makes reducing expenses an imperative," Dee wrote in his letter. He went on to write about reducing health care costs through improving communication between providers and changing payment models to reflect keeping populations healthy rather than the existing fee-for-service model, which some say promotes more hospital visits and procedures, and inflates costs.

Dee said the cost of health care is not sustainable for anyone, and the hospital's changes are in response to federal and state efforts to curb costs.

According to Dee, one of the aspects the hospital will be looking at is how its current employment levels reflect the type of business it plans to be doing in the future. He said there may be fewer jobs in the hospital, but as more patients are nudged toward outpatient and home care, jobs in those areas may increase. Robinson said the hospital feels it is important that it be honest and up-front with employees on what direction the health care group is going. He said that after the 90 days when a clearer picture of this year will be formulated, the hospital will work on more long-term goals.


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