Cuts at Kaweah Health include 200 jobs and 150 contract-labor positions
-January 19,2023-
Visalia-based Kaweah Health officials and supporters are literally begging the state to help keep the good ship Kaweah Health afloat after 3 years of Covid-caused losses. In a recent letter to the governor, district CEO Gary Herbst laid out a grim picture.
“We’re going on three years of uninterrupted strain on the organization and it’s taken its toll, there’s no doubt about it,” Herbst told public radio’s KVPR recently.
“ Our people are exhausted. Our leaders are exhausted.”
But the district can’t rest or simply wait for relief. As of January 17 they have announced cuts to stem the red ink tide and right size their pandemic-impacted budget. With cuts in their credit rating, leaders are launching a strategy called “ Back in the Black” Here is the challenge as they describe it to the governor.
“Kaweah Health, the largest of the 33 district hospitals still operating in California, has experienced dramatic challenges during the pandemic.
•Cumulative operating losses of $133 million from pandemic start to Oct. 31, offset in part by federal Provider Relief Funds of $61 million.
•State mandates to cease all elective surgeries during COVID surges, forcing huge losses locally.
•Soaring costs of contract labor due to the labor shortage caused by COVID-19 — $80 million in traveling nurses and $16 million in staff bonuses. •52,274 COVID-19 outpatient cases — 11% of Tulare County population.
•5,591 COVID-19 positive inpatients
•Increased average length of stay from 5.3 days before COVID-19 to 10.2 days from pandemic beginning to current time.”
The letter to the public concludes: “We ask you to join us in voicing these concerns and email Governor Newsom today, urging him to consider a one-time allocation to help district hospitals recover their financial health and to reform Medi-Cal reimbursement for lasting change.”
Cuts in jobs
Now Kaweah Health says they will make cuts, particularly in staffing costs. The district has already reduced employee numbers by 106 and eliminated 90 open positions that had not been filled when staff find was short. Now in January and early February the hospital will cut an additional 94 positions bringing the job cuts to 200.
In a report to the district finance committee this week administration said the cuts should have an annualized positive impact of $21 million.
Dramatic cuts are also underway in the hospital’s bulging contract labor numbers that had been necessary during the pandemic when so many staff were out sick.
The district had hired up to 229 full-time-equivalent positions that has been gradually pared down to 110 with 70 more scheduled to be reduced. The goal will be to use no more than 40 contract labor staffers by the end of the year.Today contract labor expense is less than half it was last May.
Administration says that should mean $55 million in annual savings.
Other labor savings categories include a reduction in overtime that will save $5.2 million on an annual basis and cuts in shift-bonuses that should save $6.2 million in this fiscal year. The hospital has also stopped contributing to employees’ 401K plans. – about a $10 million savings.
All these cuts add up to around $98 million annually- a major step toward fiscal health although likely not popular of course with those who are laid off. But, you could argue – the hospital lives to provide care another day.They also closed their Neurosciences Center and a diabetes education clinic.
Herbst adds that all staff levels have seen cuts.”All of the leaders have taken pay cuts between 10-20 percent.I remain hopeful as gut-wrenching as some of the decisions that we are having to make. We’re going to get back on our feet.”
Credit rating downgraded
“In the meantime our credit rating was downgraded to a Ba1, we’re down to 76 days cash on hand, so yeah, it is dire, but we see improvement. We definitely are seeing our dependence on contract labor decline significantly and so we expect that will start showing some bottom line improvement. I’m confident that the things we’re doing and the additional things we will do will stem the tide so to speak. It’s going to be a long road to recovery without a doubt. It’s going to take several years to get back to where we were pre-pandemic.”
Herbst recently told public radio that the hospital had a plan in November to secure a line of credit with a bank. He sent out roughly 50 requests for proposals to lenders, but says a recent downgrade to the hospital’s Moody’s credit rating made that virtually impossible. He said the new rating “spooked off” lenders.
The hospital needs to borrow money to cushion against long wait times for reimbursement. Fixing that credit rating is job one.
Besides the initiative, the district has closed their transitional care unit discharging patients under Kaweah’s obligation to others. A memo says the ramp down represents approximately $245K less in net patient revenue and $332K less in direct costs, which is a $87K positive net bottom line impact for December and a $180K impact for November and December. Apparently, the hospitali was losing around $1 million a year on this service.
Then there is the length-of-stay issue for patients. In nutshell the pandemic forced those patients who were sicker for longer to stay an average of 10 days – about double the length of time they used to. Since the worst of the pandemic, the length of stay at the Visalia hospital has been heading lower but is still around 6 days compared to under 5 as a nationwide average.
According to the American Hospital Association, delays in discharge result in hospitals and health systems undergoing additional pressure on an already overwhelmed workforce and reduce overall community access to care.
Additional costs for hospitals are also associated with delays in discharge, as they do not receive reimbursement for any costs associated with the extra days caring for patients in the hospital while patients wait to be discharged.
Unnecessary days in hospital may also increase hospital-acquired patient complications (e.g., healthcare-associated infections, falls).
Because the hospital provides service in a large low income area with a significant population (about 14%) that suffers from chronic diseases like diabetes,and an obesity epidemic, Kaweah Health has additional challenges some hospitals don’t have.
Herbst told public radio they are also exploring getting money from medical claims in advance. It’s a model that worked during the pandemic with Medicare. Medicare pre-paid $90 million worth of claims to Kaweah, which the hospital was able to pay back, according to Herbst. He says, this may be something the hospital can arrange with private insurance companies, such as Aetna or Blue Cross, to give the hospital some breathing room.
More Medi-cal patients
” Herbst adds that “we really do need the legislature to address the whole Medi-Cal program because we continue to expand Medi-Cal eligibility to more and more populations I think the governor has now expanded it to the entire undocumented immigrant population are now eligible for Medi-Cal which has certainly increased the utilization of hospitals and clinics and so forth but we are already losing tens of millions of dollars a year taking care of the Medi-Cal population and so as you add to the eligibility it just makes matters worse so going forward we really need that to be addressed. That needs to be a permanent fix.”
Herbst says the hospital is on a financial path forward that could balance its deficit by March. But the hospital, still facing debt, would continue to lose money. They say they still need help from Sacramento and that the state has yet to answer their pleas.