Hospitals' Cuts May Grow as States' Budget Woes Linger

HealthLeaders Media Staff, July 6, 2009

We're half way through 2009 and there is little indication that the last six months of the year are going to be better for hospital employment than the first six months.

In fact, there is a chance that things could get a lot worse well into 2010 as the recession that officially began in December 2007 continues to squeeze the nation. Hospitals already are in the second year of learning to live with tanking portfolios, soft patient volumes, and negative overall margins. Many have already cut staff as a last resort this year. How much longer can they operate before even more widespread and larger layoffs become unavoidable? What happens when they're forced to cut budgets that are already lean?

That's what they're contemplating in Pennsylvania, where Gov. Ed Rendell and the state Senate are at loggerheads over how to cover a $3 billion budget gap. Rendell, in his budget, has proposed cutting $78 million for hospitals. The Senate wants to cut about $280 million in hospital payments, which hospital advocates say would threaten more than 13,000 hospital jobs, directly and indirectly, in affected communities.

"Job cuts of this magnitude will translate into reduced access to hospital care for Pennsylvania's citizens as funding is eliminated for trauma centers, burn centers, obstetrical and neonatal services, medical and health professional education, small and rural hospitals, and hospital services for uninsured adults," says Carolyn F. Scanlan, president and CEO of The Hospital & Healthsystem Association of Pennsylvania.

HAP, which represents about 250 acute- and specialty-care hospitals in the Keystone State, estimates that as many as 4,000 hospital workers have already been laid off statewide since last September in anticipation of the current budget woes.

"Hospitals have already taken significant steps in response to the ongoing recession," Scanlan says. "Before the state budget cuts were proposed, half of all hospitals were already facing challenges in meeting their day-to-day financial obligations; more than eight of 10 hospitals had, or were considering, reducing staff; and nine of 10 hospitals had reduced capital spending for building improvements, renovations, or new medical equipment."

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