Layoffs to hit Skagit Regional Health as state health care industry struggles

Skagit Regional Health is preparing to cut 8 percent of its employment costs to help make up a multimillion dollar revenue shortfall, according to hospital administration.

Skagit Regional Health – comprised of Skagit Valley Hospital, Skagit Regional Clinics and Cascade Valley Hospital and Clinics – has about 2,600 employees.

Layoffs are expected to start by the end of the year.

CEO and President Mike Liepman said Skagit Regional Health lost $4 million in 2016.

Before that, Skagit Regional Health had seen healthy revenue and made investments into new services and programs.

“When you have good margins, the (extra money) goes to providing for the wants and needs of the health care systems,” he said. “We have a historical habit of succumbing to those. That’s all good, but that also means we have a short vision. We think it'll be good and then in two or three years economics change and … then it catches up to you.”

PeaceHealth United General Medical Center in Sedro-Woolley had about $2 million in profits in 2016, while Island Hospital in Anacortes had about $900,000 in losses.

Much of the recent financial losses were because of cutbacks in federal dollars received by the safety-net hospital, said Chief Financial Officer Tom Litaker. Skagit Regional Health gets about 70 percent of its revenue from Medicare and Medicaid.

It recently received another financial blow when a state program, the Certified Public Expenditure Program, announced it would cut between $2 million and $4 million of what it reimburses Skagit Regional Health per year.

Hospital Commissioner Bruce Lisser said the political environment has also created a heightened level of uncertainty for health care facilities throughout the country.

“Reimbursements could be reduced,” he said. “Insurance companies are getting nervous, which in turn creates more uninsured people which in turn has more costs for us because we have to provide care regardless of ability to pay.”

Skagit Regional Health isn’t alone in its financial struggles, Liepman said. The majority of health care facilities in the state posted declines in revenue in 2016, according to state Department of Health data.

Liepman said about 73 hospitals statewide are not at sustainable bottom lines. Among the biggest is Swedish, which posted a $67.6 million loss in 2016, and PeaceHealth, which had a $14 million loss.

“You can see the entire industry is trying to find a way through all this,” Liepman said. “If we are going to think long term, we have to act now and not act later.”

Other hospitals throughout the state have already made cuts, including the University of Washington Medicine. Walla Walla General Hospital is set to close in July.

Amid the layoffs, Skagit Regional Health is close to introducing a new $75 million electronic medical record system that will go live in October.

Though it may be construed as excess spending, the upgrade has been budgeted for and was a necessary improvement over Skagit Regional Health’s old system, Liepman said. The new system is much easier to use and will increase productivity.

“If we didn’t have a contemporary IT system, we would not be able to recruit physicians,” Liepman said. “We would be out of step with every other hospital in Washington.”

To make layoffs, Skagit Regional Health is evaluating its staffing against similarly sized hospitals and departments within the hospitals throughout the country. The goal is to make its staff size closer to the average.

Some departments have already done that by restructuring, Litaker said. Some cuts will be made by not re-hiring after an employee voluntarily leaves Skagit Regional Health.

Some programs could also be cut if they are deemed too far off the hospital’s core goals, Liepman said. He said administrative staff positions have been cut as well.

“There are no protected classes here,” Liepman said. “Cuts will be made across the clinic … I’ve been on the wrong end of staff reductions before. We are doing this with the utmost respect for everyone involved.”