Southwest Health System lays off 9.5 percent of staff

Wednesday, Aug. 15, 2018 10:47 PM
Southwest Memorial Hospital recently completed a $32 million upgrade. Financial problems caused in part by over staffing issues led to layoffs on Tuesday.

Management for Southwest Memorial Hospital announced layoffs Tuesday of 40 employees as part of a reorganization plan to bolster the hospital’s struggling financial position and improve efficiencies.

The move came a day after top hospital officials reported to the Montezuma County Board of Commissioners that a previous plan to boost revenues through a Medicaid rebilling effort had failed to produce results.

Tony Sudduth, Interim CEO for Southwest Health System, said in a press release that the SHS board of directors decided the reduction in staff was necessary.

“We do not take this lightly. Our employees are the heart and soul of our hospital, and this was a tough decision,” Sudduth said. “These organizational changes are unfortunately necessary in order to improve productivity and create greater efficiency in how we provide care to our community. Our board is confident that we will be better positioned to serve our hospital and its path to financial health for years to come.”

The layoffs will not affect medical services for patients, he said, and no programs have been cut. The majority of the layoffs were nonclinical administrative and support roles. Employees were generally aware that layoffs were a potential as part of the hospital’s financial turnaround process, but individuals who lost their jobs Tuesday did not have advance notice. The layoffs began in the morning and continued into the afternoon.

Layoffs included severance packages, and staff are eligible to reapply if positions reopen in the future.

Sudduth said a recent review of the hospital’s labor force revealed that staffing levels exceeded productivity standards and best practices when compared with more than 300 critical access hospitals in the country or similar hospitals in Colorado. Southwest staffing has shown a significant upward trend in hiring in recent years, but revenues could not justify it.

“This change brings us closer to best productivity practices,” Sudduth said.

The hospital now has 382 employees. Wage savings from the layoffs are estimated to be $5.4 million per year, Sudduth said. The layoffs represent a 9.5 percent reduction in staff.

He added that the move upholds SHS’s obligations “to maintain a healthy financial condition by controlling costs and increasing market share, while anticipating changes in managed care reimbursement and health care reform.”

SHS has communicated to employees that no further organizational changes are planned for the near future, according to the press release.

The changes will have “minimal impact” to positions involved in hands-on patient care, Sudduth said, and will have no effect on the medical-surgical and intensive care units.

Officials said Southwest is among many hospitals across the country that face challenges posed by health reform, reductions in reimbursement and the significant shift from inpatient to outpatient utilization.

As part of the turnaround plan, SHS is focusing on strengthening several areas, including the revenue cycle, charge capture, materials management and other areas that will grow revenues.

A productivity tool will also be implemented and standards set for greater efficiency and accountability.

“Though change can be difficult, our actions prepare Southwest Health System for the changes occurring with health care reform, while enabling us to continue to provide quality care for the community,” Sudduth said. “We have a way to go, but we will always focus on doing the right thing while operating the hospital as efficiently as possible.”

In April, SHS terminated three of its top executives, including former CEO Kent Rogers. Community Hospital Consulting has since took over management of Southwest Health System. The group specializes in operations of smaller, community-based hospitals across the country.

In May, the hospital’s management arm, Southwest Health System, reported to the Montezuma County Board of Commissioners about financial challenges, including falling out of compliance with bonding covenants that funded a $32 million expansion. Bond payments are on track, and a forbearance agreement is being negotiated that outlines corrective actions.

The main bond violation was insufficient cash on hand. It takes $165,000 per day to operate the hospital.

The bond agreement requires that 81 days’ worth of cash be on hand, or $13.3 million. Currently, the hospital has 18 days’ worth of cash on hand, or about $3 million.

To try and remedy the shortfall, the hospital conducted a Medicaid rebilling effort of 11,000 claims. Officials believed the hospital was shorted on Medicaid reimbursement because of outdated and erroneous coding inputs.

But the rebilling effort, completed last week, did not produce the results officials had hoped for.

“Unfortunately, the results were extremely disappointing, with minimal returns,” Sudduth told the commissioners Monday. He added Tuesday that there has been an uptick in patient volume, and that every bed is filled in the new patient wing.

Fred DeWitt, of the Montezuma County Hospital District board, said the financial struggles and layoffs have been difficult, but felt the new management team “has been working hard to turn the situation around and put us back on the upswing.”

He said in their role as landlords of the hospital campus, the district board is not directly involved in SHS’s operations, but they do have an oversight role.

Both boards will be meeting together soon to further discuss the turnaround plan and next steps, he said.

“We’re not trying to hide it or sweep it under the rug, but getting back on track is a work in progress, and we will get there,” DeWitt said.