In the second cost-cutting announcement in a week, John Muir Health -- which runs hospitals in Walnut Creek and Concord -- announced Thursday it is offering voluntary severance packages to its employees, hoping to save money by trimming about 200 full-time positions in anticipation of falling revenues once Obamacare takes effect.
"We're being paid less, and we either stick our head in the sand or make changes for the future so patients can continue to access us for their care," said John Muir Health spokesman Ben Drew.
With the Affordable Care Act coverage set to start next year, Drew said the nonprofit health care system expects a shift from government payments for each service to a set amount of overall care for a patient, which will lower revenues.
"We must take proactive steps to preserve our ability to deliver great care in the midst of growing patient concerns about health care costs and the most profound changes to health care in decades," said Cal Knight, president and CEO of John Muir Health, in a Tuesday letter to employees. "Given that responsibility, we will make decisions, sometimes difficult ones, to maintain our short- and long-term ability to fulfill our mission and serve the community."
Knight outlines a cost-saving plan that aims to cut $20 million this year and $32 million next year, including a total of $23 million in labor expenses. The voluntary buyout program will trim the nearly 5,000-member John Muir Health workforce by about 4 percent, although no doctors are being asked to leave, Drew said. They expect to get enough volunteers, but layoffs are possible if they do not reach the desired savings, Drew said.
"I hear concerns that John Muir Health's focus on affordability could have a negative impact on patient care," Knight wrote to workers. "These are challenging issues, but I want to assure you that our focus will always be on providing the absolute best possible care and patient experience."
The "voluntary separation" plan comes about a week after John Muir Health announced it is selling its MuirLab business and laying off 540 employees. The company, which will shutter MuirLab's main 56,000-square-foot Concord lab, expects about 150 of those workers to be rehired by MuirLab's buyer, Laboratory Corporation of America.
The last public tax return in 2011 shows John Muir Health's profit dropping from $132 million to $101 million. From 2008 to 2011, the nonprofit saw a $157 million increase in costs; however, during that same time period it realized a $302 million revenue increase, according to tax records.
In his letter, Knight said the nonprofit's staffing was higher than more than 75 percent of hospitals with "similar recognitions for quality."
"Our current costs are not sustainable in the long run," he said.
Contact Matthias Gafni at 925-952-5026. Follow him at Twitter.com/mgafni.