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."
Scanlon says Pennsylvania's hospitals have already made "every effort" to reduce expenses and find savings, which means that the only place left to cut is staff. "Hospitals are running out of options," she says. "With hospital total margins solidly in negative territory, reducing staff is moving from the last resort to the only option remaining. This will be devastating for hospitals, their employees, their patients, and the communities they serve."
Pennsylvania isn't the only state that faces the potential for layoffs in the hospital sector because of state-level budget cuts. The Washington-based Center on Budget and Policy Priorities says that at least 48 of the 50 states have had to deal with or are facing budget shortfalls. California is struggling with an unthinkable $24 billion shortfall, and has issued IOUs to creditors.
Looking ahead to 2010, it doesn't get much better. Tax revenues will be down because there is no indication yet that the economy is on the uptick. An anticipated third straight year of declines in state and local sales, income, and property taxes means that something will have to be cut. The cuts will have to come from somewhere, and healthcare—usually in the form of Medicaid funding—is often one of the biggest targets in states' budgets. Brace yourselves.
Note: You can sign up to receive HealthLeaders Media HR, a free weekly e-newsletter that provides up-to-date information on effective HR strategies, recruitment and compensation, physician staffing, and ongoing organizational development.