The first sign of financial problems for some staff at Holy Cross hospital came last fall when their paychecks were late. The first sign for patients might have been when some comforting extras, such as foot massages and aromatherapy abruptly stopped.
The hospital laid off five employees before Thanksgiving, but those layoffs weren't publicly announced as the hospital wrestled with a hefty and rapidly growing gap between revenues and expenses.
When Holy Cross Hospital laid off 12 more employees Friday (Jan. 12), including the marketing director, a radiologist, two medical transcriptionists and three administrative assistants, hospital CEO Bill Patten quickly let the public know right after informing staff. Patten also released the hospital's financial statement to back up the cash crisis the hospital is in.
The employees who were to be laid were notified Thursday (Jan. 11) and the rest of the staff was notified Friday. They had been forewarned in December that layoffs were imminent but would occur after the Christmas holiday, according to Patten, chief executive officer of Taos Health Systems, which manages the hospital.
On that same day, the hospital's nurse practitioners and physician assistants voted to join the hospital workers union District 1199.
Lorie MacIver, a nurse at the University of New Mexico Hospital and the District 1199 representative, said while financial problems haunt many rural hospitals, Holy Cross seems to have more than its share of ongoing financial problems. "The community needs to seriously talk to the hospital board and the county commissioners about exactly what is going on at the hospital," MacIver said. "Ultimately it is the community's hospital."
Patten said he met with employees in six meetings over two days in December to explain the financial situation and the likelihood of staff reductions, but promised not to lay anyone off until after the Christmas holiday.
Patten said Holy Cross has struggled with the gap between revenues and expenses for nine months due to a variety of problems, including a delay in payments from Medicaid. The hospital shifted to a new Medicare payment model, Critical Access, in July hoping to make up some of the revenues through higher reimbursements for care. But the hospital wasn't able to officially start billing Medicare under the new system until October.
"We were hoping Critical Access would blunt some of this," Patten said. "It didn't happen as quickly as we would have liked."
In addition, the hospital installed a new electronic records management software program to replace a 22-year-old one. Patten said the rollout of the new software had problems as most new systems do.
Unfortunately, the software problems set back billing and collections. By December, the hospital was looking at $30 million in money it was owed by insurance companies and patients for services, a backlog almost double what it normally had in receivables.
In the fall, the hospital pushed off payments to vendors and shifted funds as best it could to cover salaries. Patten said Centinel Bank of Taos helped the hospital set up a $2 million line of credit, so they could cover salaries. "Of all our priorities, we have to take care of our employees," he said. "That's number one on the list."
But it wasn't enough and the hospital was behind on payments.
Making matters worse, the cost to renew the hospital's malpractice insurance this year increased more than $600,000. In addition, Medicare said it had overpaid the hospital by $691,000 in 2013 and is now requiring the hospital to repay the funds, Patten said. "That's an additional hit on our revenues at the exact same time we could least afford it," he said.
In other cost-saving measures, the hospital:
• Eliminated mammogram pads in the imaging department, a savings of $14,000 a year.
• Canceled a contract with the Studer Group, which was helping the hospital reorganize and meet new patient care goals, Patten said. Cost savings to the hospital: $40,000.
• Didn't give the 450 remaining staff at the hospital their annual $25 Thanksgiving gift certificate, a savings of more than $11,000.
• Renegotiated a contract with Rural Radiology, reducing the fee by $15,000.
• Stopped paying lab staff to provide foot massages and other extra patient services a few hours a week, for which the hospital wasn't reimbursed. Savings to the hospital: about $30,000 a year.
Some of the employees laid off have already applied for other jobs at the hospital. Others have a few more weeks before their jobs end.
Tom Blankenhorn, a Taos County Commissioner who also is part of a community health group that meets to discuss the hospital's challenges, said Holy Cross finances had improved in recent years. "But we always knew it was a razor-thin margin," he said. "When you have a few things go wrong on a razor-thin margin, you know there will be problems."
"Every day it's a battle," Blankenhorn said. "They call vendors and ask for forbearance. Then they call insurance companies and patients to ask for payments."