Memorial Health’s recently announced decision to lay off several hundred employees appears to be related to economic stresses that the COVID-19 pandemic made worse.
The five-hospital health system, with 500-bed Springfield Memorial Hospital as its flagship, is reducing its workforce because of “national trends, such as the rising cost of supplies and equipment, high cost of labor and shifting trends in payer reimbursements,” Memorial Health President and Chief Executive Officer Ed Curtis said in an Aug. 8 statement.
“This is a difficult decision that was made after careful analysis of other cost-saving measures,” Curtis said. “We are committed to continuing to provide the highest quality of care for the communities we serve, and this action, while painful, enables us to focus on our core mission.”
The statement said the workforce reduction at Memorial Health, one of Springfield’s largest employers, will focus primarily on leadership, administrative and support positions.
“Several hundred colleagues are affected, including 20% of leadership positions across the organization,” the statement said, adding that the reductions overall represent 5% of Memorial Health’s spending on salary and benefits. In addition to Springfield Memorial, the system operates hospitals in Decatur, Jacksonville, Taylorville and Lincoln, a physician group and affiliates providing home care, medical equipment and mental health services.
Officials from the Springfield-based nonprofit said affected employees will receive a severance package, health insurance stipend and support resources, and some may be offered the opportunity to transfer to other jobs within the system.
Illinois Times asked Memorial officials questions that included when the layoffs will take effect, which leadership positions will be affected, how much the layoffs will save, and whether registered nurses and other workers providing direct patient care will be among those laid off.
Memorial officials declined to comment beyond their two-paragraph statement.
In an email to employees Aug. 8 that was obtained by Illinois Times, Curtis said Memorial Health has worked to stabilize its finances over the past several years while the health care industry remained “under tremendous pressure.”
“Over the past year,” Curtis wrote, “we’ve spent considerable time and effort to find opportunities to reduce expenses. While we have made progress, our expenses continue to exceed our revenue, and unfortunately, our cost-saving measures have not been enough.”
IT has learned the layoffs include attendants who help patients with mobility issues enter Springfield Memorial and provide free valet parking to those patients.
A posting on Memorial Health’s internal social-media platform said the layoff of attendants, which took effect Aug. 7, means that patients with mobility issues, when possible, “will need to bring a support person to help them exit the vehicle at the main entrance and park. There may also be times when colleagues at the main entrance will need to call the department/unit staff to help assist a patient from their vehicle.”
Earlier in the pandemic, Memorial and other health systems nationwide used federal relief dollars and federal loans based on expected future Medicare reimbursements to keep them operating. But those loans needed to be repaid, and the benefit of the federal funds has waned. As a result, many hospitals have been forced to lay off staff because of the same financial challenges cited by Memorial despite declines in patients sick with COVID-19.
Memorial Health lost $87 million in March 2020 alone but used layoffs of about 140 workers and attrition to reduce full-time equivalent employment of the system’s nonunion workforce by 10%, or 788 positions, Curtis said in March 2021. Those cuts put the new total full-time equivalent workforce at 6,834, he said.
If a 5% reduction in payroll represents a 5% total reduction in the system’s workforce, about 340 workers would be affected by the latest layoffs. Memorial officials wouldn’t say whether that estimate is correct, however.
Curtis told Illinois Times in January that financial results for Memorial Health from the first quarter of fiscal 2023, the period from October through December 2022, put the system in the black.
The quarterly bright spot followed fiscal 2022, which ended on Sept. 30, 2022, in which Memorial experienced a record loss of $107 million on operations and a total loss of $227 million when counting investment losses related to the downturn in the stock market. Memorial Health, which Curtis has said gets much of its revenue from Medicare and Medicaid, reported almost $1.5 billion in net revenues that year.
Losses at Springfield Memorial Hospital alone were $31.4 million based on $807 million in revenues for fiscal 2022.
Memorial Health’s fiscal 2022 performance followed a fiscal year in which Memorial was almost $53 million in the black on operations and $208 million in the black including investment income, representing a 13.4% positive margin.
The health system’s patient-care revenues rose 5.2% in fiscal 2022 compared with fiscal 2021. But expenses rose 17.3%, according to Memorial’s financial statements.
“No business can sustain itself over time if they let their expenses rise faster than their revenues,” Curtis said in January. He attributed the rise in expenses mainly to increases in the system’s use of highly paid temporary nurses and other professionals as stress from the pandemic prompted many longtime workers to leave hospitals and become traveling nurses themselves or work in other settings.
Memorial put in place a “strengthen-our-future improvement plan” to grow revenues and cut expenses, he said, adding in January that the system’s overall finances were “very stable.”
The results of the improvement plan are unknown, but Memorial Health’s losses on operations for the first six months of fiscal 2023 – through March 31 – totaled almost $12 million. Total expenses systemwide for that period were $806.6 million, while total revenues were $794.6 million.
Total revenues for the first six months of the fiscal year were up 7.5% compared with the prior fiscal year, while expenses were up 3.5%.
Hospital Sisters Health System, the Catholic system based near Riverton that operates HSHS St. John’s Hospital, reduced its workforce by 10% earlier in the pandemic. Since then, HSHS has experienced financial challenges similar to those Memorial faced, but a St. John’s spokesperson didn’t respond to requests for comment.
HSHS, a 14-hospital system in Illinois and Wisconsin, reported total revenues of $2.18 billion in the first six months of the fiscal year that ended June 30, 2023, and $2.27 billion in expenses, for a loss of more than $93 million.
