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Considering layoffs and employee cost sharing incentives for finding expense reduction ideas

CENTRAL OREGONIAN - Reductions to St. Charles Prineville will be determined at a later date by local hospital leadership.

This past spring, St. Charles Health System announced it was facing financial struggles and would make changes to cut expenses and boost revenue.

It turns out those efforts haven't done enough, and they will now look at other cost-cutting options, including possible layoffs, incentive programs for employees who offer effective expense reductions, and new nurse recruiting practices.

According to Jennifer Welander, chief financial officer, St. Charles currently has an operating expense budget of about $749 million, and they are asking each hospital, clinic and support business function in the St. Charles system to find $6 million in expense savings by the end of the calendar year.

"We are going to be taking additional steps, almost a phase two, so that we can achieve what we need to for 2017 from a cash flow generation, so we are able to invest in 2018 and people and facilities as we have planned," Welander said. "These are always challenging times because we need to get creative on what the financial solutions need to be. Our number one priority is the safety of our patients and the quality of care, so that's the lens through which we will be making any decisions that we need to make."

One effort already under way revolves around caregiver recruitment.

"We have had work going on around nurse recruiting to help stabilize our nursing workforce and rely less on contracted labor and ensure positions are filled so we are not using premium and overtime," Welander explained. "That work has gone very well. Taking that to the next level is really spreading those learning and models for recruiting across the organization."

St. Charles is also looking at all open positions and trying to find ways to avoid filling all of them if they are not needed.

"We have eliminated some positions a result of that," Welander noted. "It is the right work, but it is difficult."

Another idea that is not yet finalized would ask caregivers who are willing to give up their positions to participate in a voluntary buyout program. St. Charles is also considering the launch of an incentive gain sharing program.

"If a caregiver brings forward a cost-sharing idea or revenue generation idea that we are able to implement, we would share some of that with them to help align all of us," Welander explained.

While St. Charles leaders hope those programs will help, it still may not be enough to rectify financial struggles.

"Labor is our number one expense," Welander stated. "We have eliminated some positions this year (22 open position were not refilled), and our goal would be through the voluntary reduction program and renewing our focus on open positions … but layoffs may be necessary."

The St. Charles leadership team will be reviewing labor-specific initiatives the first week of September, Welander stated, and she expects employees to see the details of those reviews rolled midway through the month.

"I can't speak at this point to what the impact would be to Prineville," she added. "Over the next six to eight weeks that will become more solidified. I would say in general, though, that the smaller hospitals are already fairly lean in how they are staffed and the services they provide, so I would expect that some of the bigger facilities will carry a larger amount of the responsibility."

As St. Charles searches for ways to cut expenses, they continue to face a financial situation that will likely worsen in the days ahead.

"As the (state) legislative session drew to a close, there were actions that passed and are working their way to become law that will negatively affect hospitals," Welander said. "The Legislature passed a tax on nonprofit hospitals to help fund the gap in the Medicaid budget. The second item is the passing of a rate setting that the state has. It would be a rate cap on what they pay hospitals for our services."

Because of these changes and uncertainty surrounding health care at the federal level, St. Charles is not alone in its financial plight, Welander said.

"What St. Charles is facing is not unique to Central Oregon," she said. "It is being seen across our state and across the nation."

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