Layoffs of 200 set by UMMS Maryland System blames $3 million loss over 5 months

January 14, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

The University of Maryland Medical System will lay off about 200 employees, system officials said yesterday, because it lost $3 million in the first five months of its fiscal year.

The system will identify and notify the employees by the end of the month, Robert A. Chrencik, senior vice president for finance, said. Since the number of patients has remained steady, he said, no cuts will be made in "direct care people" such as nurses, or in the staff that processes claims and payments.

In fact, Chrencik said, UMMS will be hiring some nurses -- to fill vacancies and eliminate dependence on contract nurses, who cost $2 million over the five-month period -- and some staff to improve bill collection by processing claims and HMO care approvals.

A major factor contributing to the hospital's budget squeeze, Chrencik said, is a sharp rise in unpaid bills, as the hospital treats more uninsured patients and as insurers deny more claims. For the five months beginning in July, the hospital had $31 million in uncompensated care, about $4.9 million more than budgeted, out of total revenue of $230 million.

"At the end of a five-day stay, the insurer will say, 'The last day was not medically necessary -- we're only going to pay for four days,' " said Nelson Sabatini, UMMS vice president for integrated delivery systems operations.

"HMO profits are down," Chrencik agreed, "and they've got the radar gun out, looking to reduce costs."

The hospital system -- including University Hospital, the Maryland Shock Trauma Center and the Greenebaum Cancer Center -- has the equivalent of 4,000 full-time employees, Chrencik said, but about 2,500 are in areas protected from cutbacks.

The staff cuts are expected to save $13 million a year, Chrencik said. Another $10 million is targeted in annual savings from nonsalary areas, such as rebidding for contracted services and consolidating purchases to get volume discounts. However, the cost cuts will only be in effect for about five months of this fiscal year.

Other hospitals are seeing similar problems and, overall, "it's a belt-tightening time," said Nancy Fiedler, senior vice president of the Maryland Hospital Association. Most are seeing smaller profits, but not slipping into the red.

For the first quarter of the fiscal year that began in July, hospital profits statewide were $29.6 million -- a margin of 2.3 percent -- compared with $46.7 million, or 3.7 percent, for the corresponding quarter a year earlier.

Tight finances are not a recent development. For several years, hospitals have been cutting staff and "re-engineering" as

pressure from managed-care insurers reduced the number of patients admitted and how long they stayed.

In November 1996, University eliminated 255 jobs. With patient counts down, the system cut staffing for 46 beds, closed a 20-bed unit in the Shock Trauma Center and a 16-bed surgical-oncology unit, and consolidated some intensive-care services.

Chrencik said UMMS has been profitable since it was created in 1984 (previously the hospital was run by the University of Maryland), with margins in recent years in the 3 percent to 4 percent range. Although it is a nonprofit institution, UMMS needs to generate surpluses to invest in new equipment, buildings and other capital improvements.

Other problems hospitals are facing, Sabatini and Chrencik said, include an effort by the state commission that sets hospital rates to hold rates down, because costs in Maryland have been increasing faster than the national average.

Pub Date: 1/14/98

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