HR Roundup: Sequestration Leads to Layoffs

Chelsea Rice, April 22, 2013

The effects of sequestration are becoming apparent with at least one health system announcing job cuts and reductions to executive salaries. Elsewhere this week, the legislative fight for nurse-to-patient staffing ratios is gathering steam.

DMC lays off 300 employees
Although healthcare continued its strong hiring trend last in March, sequestration cuts are beginning to catch up with hospitals. Last Tuesday, Joe Mullany, CEO of Detroit Medical Center sent a letter (PDF) to its 12,000 employees announcing hospital-wide cutbacks including the elimination of 300 jobs (2% of its workforce). Mullany cited sequestration's 2% cuts to Medicare funding as the reason.

"DMC needs to address the magnitude of these financial shortfalls this year and in the next several years, finding expense reductions equal to our anticipated revenue reductions," Mullany said in the letter released by DMC. "This work began with our leadership team working with all employees and physicians to identify cost reductions and efficiencies."

DMC, a 2,000-bed integrated academic hospital system, will also make cuts to corporate executive salaries, at the VP level and above in Q4, but details were not released.

These cuts are small in comparison to the $500 million DMC is investing in a construction project related to its 2011 purchase agreement with Vanguard Health Systems. DMC has already opened new facilities, such as a specialty center for Children's Hospital and neuroscience floor at the Rehabilitation Institute of Michigan. Mullany said he is "confident" that investments in these areas will soon bring in revenues that can compensate for the cuts in Medicare and Medicaid.

In the letter, Mullany urged employees to help the hospital further reduce costs by cutting back on photo copies and office supplies.

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