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A Dozen Hospitals Are Laying Off Staff and Blaming Obamacare. Don’t Believe Them.

Hospitals tend to be among the largest employers in their communities — which means that any individual decision to lay off staff can have an outsized local impact. And taken together, a dozen recent announcements seem to paint an especially dire picture for hospitals (and their communities) around the nation.

For example, NorthShore in Illinois says it will lay off 1% of its workforce. The staffing cuts “ensure NorthShore remains well positioned to deal with the unprecedented changes brought on by the Affordable Care Act,” according to a memo from the health system’s chief human resources executive.

And California’s John Muir Health is offering staff voluntary buyouts ahead of ACA implementation. “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,” according to John Muir spokesperson Ben Drew.

When Obamacare was being debated in Congress, its opponents tried to tar it with a deadly label: “the job-killing health law.” So is the ACA finally living down to its sobriquet?

Not exactly. While the recent news makes for provocative headlines, the devil’s in the details — and the financial reports.

A Closer Look at Industry Pressures

It’s clear that something is shifting in the hospital market. After years of employment growth, hospitals’ hiring patterns have largely leveled off. Collectively, organizations shed 9,000 jobs in May — the worst single month for the hospital sector in a decade.

Some of those decisions reflect industry-wide belt-tightening, as Medicare moves to rein in health spending by moving away from fee-for-service reimbursement and penalizing hospitals that perform poorly on certain quality measures.

And uncertainty around ACA implementation is trickling down to hospital staffing decisions, economists told  me. Many organizations still aren’t sure how the pending wave of newly insured patients will affect their profit margins, given that many of these individuals may be sicker and will be covered by Medicaid, which reimburses hospitals at lower rates than Medicare and private payers.

But the ACA is just one factor affecting hospital finances, and its impact isn’t consistently negative for providers. In some cases, hospitals have even staffed up in hopes of capturing new patient volumes from the ACA’s insurance marketplaces or receiving added revenue through the law’s accountable care organizations and other pilots.

And as I’ve previously detailed, when accounting for all of the law’s disparate effects — the flow of new dollars into health care sector, which leads to direct and indirect hiring; the financial relief for millions of low-income families, who can decouple their employment decisions from health insurance — some economists argue that the ACA is a job-boosting health law.


Law May Be Providing Cover

However, another set of headlines suggest a different story could be written. Some hospitals are laying off staff — or even closing their doors — because they say their states aren’t doing enough toimplement the Affordable Care Act.

The Huffington Post‘s Jeffrey Young reports on one North Carolina hospital that recently shuttered because the state refused to opt into the ACA’s Medicaid expansion; according to Vidant Pungo Hospital officials, expanding coverage would have cut their uncompensated care bill and boosted revenues.

But looking at the health system’s balance sheet reveals that Vidant Pungo’s financial concerns went well beyond the ACA; for example, the aging facility likely needed a capital infusion to renovate its aging physical plant. Meanwhile, some of the hospitals that are blaming the ACA for their recent staffing decisions have had longstanding financial challenges. (Covenant in Texas, for example, shed hundreds of workers in 2008 and 2009, well before the ACA was even being debated in Congress.)

Since its passage four years ago, Obamacare has been many things to many groups: a rallying point for liberals, a stalking point for conservatives, a transformative package of reforms for the health care industry.

This time around, Obamacare may be playing a new role: convenient scapegoat for hospitals’ relatively normal staffing decisions.

Dan Diamond (@ddiamond) is Managing Editor of the Daily Briefing, a CaliforniaHealthline columnist, and a Forbes contributor. This  post originally appeared in California Healthline.

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19 replies »

  1. My wife is going through the same thing because of the ACA. Here is the pertinent section:

    The Employer Mandate Fee / Employer Shared Responsibility Payment

    The annual employer mandate fee (officially called an Employer Shared Responsibility Payment) is a per employee fee for employers with over 50 full-time equivalent employees who don’t offer health coverage to full-time employees.
    • The employer mandate is based on full-time equivalent employees, not just full-time employees.

    • The fee is based on whether or not you offer affordable health insurance to your employees that provides minimum value (explained below).

    • The annual fee is $2,000 per employee if insurance isn’t offered (the first 30 full-time employees are exempt).

    • If at least one full-time employee receives a premium tax credit because coverage is either unaffordable or does not cover 60 percent of total costs, the employer must pay the lesser of $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees total.
    • The fee is a per month fee due annually on employer federal tax returns starting in 2015. So the per month fee is 1/12 of the $2,000 or $3,000 per employee.

    • Unlike employer contributions to employee premiums, the Employer Shared Responsibility Payment is not tax deductible.

    So hospitals and nursing staff agencies who use “per diem” employees have to make healthcare available to any employee who works over 30 hours a week or face pay a monthly fee (ie: a fine). The hospital she is at is limiting PRN nurses to 24 hours a week to keep a 6-hour cushion from accidentally triggering this clause.

    It’s going to be really interesting if a PRN is in the middle of a coding patient, and they hit their limit. What are they supposed to do, drop everything and walk away?

  2. Thanks to Obama care. I and many other nurses I know as a PRN nurse that works 3 twelve hr shift a week and our spouses carry our insurance are niw being forced to cut our hrs as PRN or go fulltime for less pay and pay for insurance we don’t need all for a big pay cut. As a nurse for over 20 years this and forced flu shots (for only 3 strains of flu that may not even be going around or mutate before they get to you when there are over 200 out thread increase your risk for cancer and other long term side effects every year so hospitals can get $$$ from medicare/medicaid) makes me wonder why I even work. So yes thanks Obama for the loss in wages, hurting the economy and causing so much hardship on me and many other nurses. I beginning to think I need to do like so many of my ER patients and get on drugs and not work so I can get free housing, free ambulance rides (used as free taxi service), free medical care, free food, free cell phone and much more. But I became a productive member of society so this is my punishment. I pay for all of that for them with a large amount of my paycheck that he is taking away. I have to take a drug screen to work for it so they can stay on drugs, get there hair and nails done and buy new clothes. I see this every day. Leave my job alone. Drug test and finger print people before they pick up there welfare checks. Criminals need to be farming to grow there food and for the people on welfare then serve our country in the military. If you get welfare for more than 3 years then they should be given jobskeeping the cities beautiful yard care, washing buildings, picking up trash growing community gardens, helping the elderly and child care for the ones going to school and bus drivers to get them there. Thanks from the working class for the punishment for trying!

  3. Thanks you for this, Jeff.

    Some people have argued, out of the same mouth (and brain?) that ObamaCare had nothing to do with the decline in the growth of health spending and hospitals admissions, which started in 2002, but that ObamaCare is to blame for hospital lay offs.

    I think financial crises can cause brain damage.

  4. Many corporations including hospitals are now opting to hire foreign workers where you can get 3-4 for the price of one American worker, pay no benefits, and hold the threat of deportation of the heads of their new found slaves…just like Microsoft, Honeywell, and so many others…the ACA is just their escape goat..I have friend that has been a Respiratory Therapist almost 30 yrs that just train a foreign worker with less that 2 yrs experience….GUESS WHICH ON THE HOSPITAL KEPT AND WHICH ONE THEY LET GO…this is wrong, scary and dangerous at the same time

  5. You probably don’t deal with young people as much as I do, but you might be surprised how many of them watch old classic movies (say, on TCM) or listen to music of decades ago.

    Next, you may not receive employment based health insurance; but those of us who do get a menu of two ort three insurers each with several options from which to pick our insurer. Health Affairs had several articles pointing out that in many smaller companies employees have a choice of one or two insurers.

    And if you have never heard of wellness programs, read Vic Khanna’s writings on this blog.

    Employment-based health insurance is very p(m)aternalistic.

    My incorrect spelling of Nurse Ratched is, of course, completely unforgiveable. I agree with you on that. I have actually never seen it spelled in print and was working from sound, which, of course, is also unforgiveable.

    Not enough reason to retire, however.

  6. Seriously Mr. Reinhardt, it may be time for you to hang it up or at least restrict yourself to the ivory tower. Otherwise, please have an intern or teaching assistant help you out with references less than twenty years old:

    1) Nurse Ratched (spelling) from a book from 1962? Even the movie is almost 40 years old.

    2) Can you name one corporation that even employs a nurse in a personnel department (no corporation has had a personnel department in twenty years) much less allow the “nurse” to decide what insurance policies are offered to the employees.

    I think you are losing or have lost it.

  7. And you believe that having Nurse Ratched in the personnel department of the ABC Corporation selecting for you the menu of health insurance policies from which she lets you pick and what kind of food and health behavior is good for you is “freedom”?

    Mazel tov! Enjoy!

  8. Ed Schultz, an msnbc talk show and radio show host said on his radio show today, that corporations dropping employees insurance is a good thing because it will force people to buy from the exchange and the more people that do that we’ll explode into universal health care, eluding to a government take over of 6% of the US economy.

    The socialists are here America, and you’re letting them do this. Wake up and take your freedom back!

  9. I agree with Jeff Goldsmith. Profits going to capital represents only a fairly small fraction of total health spending. Most of health spending is translated into employment.

    Blaming Obamacare for layoffs at hospitals reminds me of an old trick in business accounting: Every time there is some sort of national calamity on which stuff can be blamed, have a balance sheet laundry — write of assets and expense stuff with credits to reserve accounts.

    Hospital executives are hired in part for their ability to cry crocodile tears. I imagine that they book potential candidates for CEO jobs in hospitals into the Presidential suite at some Ritz, stock it with caviar, champagne and a lover and then ask next morning how it was. If the answer is “great,” the candidate fails. If (s)he kvetches that the caviar was Icelandic and not Russian, the champagne the wrong temperature and that they are bisexual but there was only one lover, then they get hired.

    I dreamt that once after testifying before Congress next to some hospital executives. It may not actually be true.

  10. So true, Bobby. The biggest problem with the hospital industry is that it is filled with people who have a deeply engrained sense of entitlement, which is what happens when you grow up in an industry enfattened and made lazy by decades of feeding at the taxpayer’s trough.

    Hospital administration is unfortunately a study in sharp contrasts. Leadership dullards driving $75,000 cars but with $5 brains who think that the two most important phrases in life are: “optimize payer mix” and “maximize reimbursement.”

  11. Not even sure what to say about this one. I worked at John Muir. They just got done with a massive physical renovation with a gorgeous marble lobby, and beautiful bamboo trees. They also have significant funds to pay their administrative and surgical staff. They also have several affiliated hospitals that they draw cases from. Sure, all hospitals are being impacted by decreasing margins but JM is absolutely not working on a shoe string budget…

  12. Hospital inpatient utilization is plummeting nationwide, while OP utilization essentially remains flat. Earnings in most places, including some of the dominant places cited in this article, have evaporated and topline revenue is not growing.

    It has ABSOLUTELY nothing to do with ACA, as the author suggests, but is the product of secular trends that began a decade ago, and have accelerated in the past five years. It is responsible policy for hospitals to rationalize their spending, starting with the C-suite, supervisory personnel, non-essential spending on all sorts of things (advertising, ACO consulting services, etc).

    There’s a lot of denial about the need to lower the cost of hospital care, and you cannot do that without trimming your staffing costs.

  13. Every time I see those hospital “wellness” brochures with the smiling faces and offers for Shiatsu classes I want to puke. They just built a big
    spanking new hospital near me with a “pavilion” and the staff
    parking lot is several hundred feet away. Imagine walking in bad
    weather.

  14. They should be blaming the expensive and meaningfully useless HIT and EHR devices that they deployed, just as in the UK NHS NPfIT.

  15. I don’t believe you. The hospital I work for had a great year and they announced this morning layoffs plus early retirement offerings.
    Guess why? Get in a long line for your care.

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