For a generation, hospital and
jobs were considered some of the safest in the economy, recessionproof.
Even during the latest downturn — the worst since the Great Depression — hospital employment remained relatively steady, particularly in Illinois. Between July 2008 and July 2012, as total employment in Illinois plunged by nearly 275,000 jobs, hospital employment remained virtually flat, state figures show.
But as health care enters a new era where federal overhauls are kicking in, the population is aging and states are under pressure to reduce budgets, hospitals are paring back too, upending conventional wisdom.
Like millions of Americans over the past five years, hospital workers are facing the bitter economic reality that no job is safe.
Hospitals of all sizes, from large academic medical centers in big cities to small community hospitals in rural areas, have cut hundreds of jobs in Illinois over the past year, including positions in at least nine facilities in northern Illinois.
The job cuts, affecting everyone from maintenance workers and food service employees to lab technicians and nurses, are coming ahead of the implementation of the 2010 health care overhaul law and represent the beginning of a massive cost-cutting campaign being waged by hospitals across the country.
With fewer patients expected to come through the door, as well as lower payments, health systems are seeking budget cuts of between 20 and 40 percent within the next five years — cuts so deep that reductions in labor, the largest single item in a hospital's cost structure, will be required.
"This is happening all over the country, and the cuts you're seeing now are likely to be the first salvo in what's going to be a very significant reduction in force by hospitals nationwide," said Jamie Orlikoff, a Chicago-based health care consultant.
At least some of the job cuts include front-line health care workers like nurses, raising concerns that patient care may suffer. But hospitals say the cuts are a byproduct of efforts to improve quality through more coordinated care, keeping patients healthier and out of the hospital.
Some hospital workers aren't buying that argument, especially as some 30 million more Americans may gain insurance in 2014 as part of the Affordable Care Act.
Jan Rodolfo, Midwest director for National Nurses United, the country's largest union of registered nurses, said profitable hospitals are behaving much like hospitals in dire financial straits.
"Hospitals that are very profitable are still aggressively pursuing cost-cutting measures," she said. "I think they see an opportunity right now to drive down costs and use the economic climate as the justification."
The United States is in the midst of a decadelong nursing shortage, which means that more registered nurses are needed, not fewer, Rodolfo said. And while the health care overhaul law will bring both challenges and benefits for hospitals, "on balance I think (hospitals) will come out ahead," she said.
Many of the pressures hospitals face are independent of the health care law:
The growing popularity of high-deductible health insurance plans coupled with a high level of unemployment has led many to defer medical care, particularly at hospitals.
In Illinois, most hospitals also face a 3.5 percent across-the-board cut in state payments for
patients this fiscal year, as part of a package of bills pushed by Gov. Pat Quinn.
Millions of aging baby boomers are beginning to shift into
, the government-run health care program for the elderly and disabled that pays hospitals lower rates than private insurers.
Enrollment in Medicare is expected to increase by nearly a third, to 64 million, by 2020, according to the 2012 annual report of Medicare's board of trustees.
Even without the other factors, that crush of new Medicare patients would severely strain hospital budgets without fundamental changes, primarily because most hospitals lose money on treating patients in the program, Orlikoff said.
"Hospitals must be able to break even on Medicare right now," he said. "If you cannot do that, you will not survive."
The government is using a combination of incentives and penalties to get hospitals to go along in driving costs out of the system.
The centerpiece of the Medicare changes is the shift to a system in which the government pays hospitals based on patient outcomes versus the type and number of services they provide.
In some instances, Medicare will allow hospitals to share in the savings they produce for a group of patients and receive bonus payments if they meet certain quality standards. The government also is levying penalties on hospitals that fall short in performance measures like unnecessary readmissions and hospital-acquired infection rates.
Many private insurers, under pressure from corporate clients, are following suit, imploring hospitals to reduce unnecessary procedures and treat more patients in less-expensive clinical and outpatient settings.
"We're all out there trying to drive inpatient volumes down," said Bruce Crowther, chief executive of Northwest Community Hospital in Arlington Heights. "When you do that, you've got to reduce costs to match the amount of work you have."
His northwest suburban hospital has laid off 188 employees this year through two rounds of cuts, including some nurses. In all, he said, he's cut about $20 million in costs in 2012. Crowther estimates he's still got $40 million to go.
Northwest Community, like other hospitals, is seeking to cut costs through a variety of methods, including implementing more standardization in how patients with certain conditions are treated and leveraging technology. But Crowther acknowledged that eliminating additional jobs is all but inevitable.
"First, we hate it. Nobody likes to cut people and we really value our workforce," he said. "But you have to respond, and you have to do it the right way. The first question is always, 'Are you (affecting) care?' We have to be able to say with absolute sincerity, absolutely not."
Among other hospitals cutting jobs are Chicago's largest by revenue,
Memorial HealthCare, and hospitals operated by Illinois' biggest health system, Advocate Health Care.
Northwestern, which cut 230 jobs over the summer, is seeking to reduce its costs by a quarter by 2017. Advocate Good Samaritan Hospital in
has eliminated about 170 positions since December, including about 50 job cuts over the summer as part of the organization's effort to cut about $350 million in costs over the next three years.
Bill Santulli, an executive vice president and the chief operating officer at Advocate, which operates 11 acute-care hospitals in Illinois, said the nonprofit must continue to reduce employment at each property in the years ahead.
"We're facing broad pressures on several levels," Santulli said. "But if we are proactive, which we've been for a long time, we can largely manage this through attrition and by redeploying people from one department to another or one hospital to another. We've had a pretty successful track record of trying to stay ahead of this thing without resorting to layoffs."
Vanguard Health Systems Inc., which laid off about 70 workers at two of its four Chicago-area hospitals in 2012, confirmed on Monday that it plans to cut an unspecified number of additional jobs in the weeks ahead.
The company, which declined to say when the cuts would take place, blamed the belt-tightening on fewer patients and "significant delays" in Medicaid payments from the state.
Similar scenarios are playing out nationwide. Major medical centers in Massachusetts, Michigan, Louisiana, North Carolina and California have announced budget-cutting initiatives in 2012 that include job cuts, all related to the changing dynamics in the industry.
The rash of cuts has prompted warnings from nurses groups and academics, who say hospitals must take care not to cut too deeply.
A 2007 study conducted by researchers at
School of Nursing in New York found that when the ratio of registered nurses to patients is high, patients have better outcomes.
The study found that higher ratios of registered nurses led to an 81 percent decreased risk of mortality and a lower risk for other conditions like bloodstream infections,
and bedsores, said Patricia Stone, director of the Center for Health Policy in Columbia's School of Nursing.
Significant reductions in nursing staff could lead to more medical complications and longer hospital stays, adding to hospital costs, she said.
"While I understand the need to make health care systems more efficient, hospitals need to be careful about cutting nursing budgets and laying off experienced nurses," Stone said.
Personnel costs have always been the biggest component of hospitals' expenditures, so it's not surprising that executives would consider staff reductions when trying to find ways to lower expenses, said Dr. Joel Shalowitz, director of the Health Industry Management program at Northwestern University's Kellogg School of Management.
Hospitals' perpetual challenge with cutting costs is finding the balance among profits, efficiencies, staffing and quality of care, he said.
"That's a problem because there is some evidence that putting more effort into one affects your ability to do the others, because you only have so many resources," Shalowitz said. "It's hard to do."