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Cleveland Clinic the latest hospital to announce budget cuts in the thick of healthcare reform

6:23 pm by | 1 Comments

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Even the Cleveland Clinic, one of the top-ranked health systems in the U.S., can’t escape the blow of cuts in reimbursements to hospitals.

A statement from the clinic today said the health system would cut $330 million from its 2014 budget as it works toward “driving efficiencies, lowering costs, reducing duplication in services and enhancing quality to make healthcare affordable to patients.”

How will it do that? Here’s what the clinic says:

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Some of the initiatives include offering early retirement to 3,000 eligible employees, reducing operational costs, stricter review of filling vacant positions, and lastly workforce reductions.

Layoffs wouldn’t be surprising, considering that 60 percent of the clinic’s budget is devoted to personnel. Spokeswoman Eileen Shiel pointed out to NewsNet 5 that such cuts aren’t exclusive to Cleveland Clinic; they’re happening to hospitals across the nation.

Indeed, earlier this summer Western Connecticut Health Network announced job cuts, as did NorthShore University HealthSystem in the greater Chicago area.

Caroline Steinberg, vice president of the American Hospital Association, agreed that the association is seeing a lot more budget cutting among hospitals this year in light of deep cuts to Medicare reimbursements, the biggest of which, sequestration, went into effect in April.

“Medicare and Medicaid represent about half of what hospitals do, so generally hospitals respond by making cutbacks,” she said.

Meanwhile, as healthcare reform measures extend insurance to millions of uninsured Americans, the volume of patients visiting these hospitals will presumably increase, although that hasn’t played out in data yet. Steinberg said an increase in patient volume might help offset the reimbursement reductions in some places, but not enough.

John Borsos, secretary-treasurer of the National Union of Healthcare Workers, who hadn’t yet seen the news on the clinic’s budget cuts, said it’s interesting that healthcare organizations, which for the most part seemed to weather the recession better than most other industries, are cutting jobs now.

“There’s not a decline in patients, there’s not a decline in revenue, and most of these systems I think are making a continued effort to maximize profit,” he said. Even Kaiser Permanente, which saw a bump in profits last year, said last fall it would cut jobs at its operations in Southern California, he pointed out.

The clinic, which brought in about $6 billion in revenue last year, last made headlines in August when it announced it would partner with Community Health Systems to acquire Akron General Health Systems.

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Deanna Pogorelc

By Deanna Pogorelc MedCity News

Deanna Pogorelc is a Cleveland-based reporter who writes obsessively about life science startups across the country, looking to technology transfer offices, startup incubators and investment funds to see what’s next in healthcare. She has a bachelor’s degree in journalism from Ball State University and previously covered business and education for a northeast Indiana newspaper.
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1 comments
Polyphemus
Polyphemus

It is amazing that hospital professional staffs and union members are surprised that the ACA is affecting them and the delivery of care.  Apparently these groups thought that the ACA would affect everyone else but them.  I presume that these groups will be even more surprised when the feds propose in the future that 501(c)3 healthcare providers be subject to profit controls and possibly pay restrictions.  This is already done due to a different business/social model in the UK and Europe, where the governments own the hospitals (though not private clinics) and professional/medical staff and support personnel are government employees, and hospitals are operated as cost centers (not as profit centers).

Now the grumbling begins....

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