National Medical Plans Review of Its Corporate Staffing : Health care: The hospital operator has hired a consulting firm to help streamline the organization and layoffs are expected.
After selling off 85 of its 135 hospitals and clinics during the past year, National Medical Enterprises said Tuesday that it’s time to trim costs at its overstaffed corporate headquarters in Santa Monica.
The fast-shrinking hospital operator said it hired management consultant McKinsey & Co. to conduct a “bottom-up” review of the organization. That review is expected to result in an undetermined number of layoffs among its 900 corporate office employees and, possibly, the relocation of its Santa Monica headquarters.
Like many hospital firms, National Medical expanded quickly during the 1980s, a decade of rapid growth for the health care industry. More recently, however, the industry has been consolidating rapidly in response to the prospect of national health care reform and intense pressure from employers and health insurers to reduce medical costs.
“In a period of heavy growth, you do develop a lot of overhead and you stop analyzing whether what you’re doing is necessary,” said Christi Sulzbach, senior vice president and associate general counsel. “Now we are being asked to deliver health care in a method that has never been required before--in a very cost-effective manner.”
In January, NME sold 27 physical rehabilitation hospitals and clinics to HealthSouth Rehabilitation Corp.
And, last month, it reached a final agreement to sell 47 psychiatric facilities to Charter Medical Corp. It has sold several other facilities to other buyers.
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Chairman Jeffrey C. Barbakow said the corporate review is part of a previously announced strategy to focus resources on its core business: general acute-care hospitals. The company operates 35 general hospitals, which provided more than 70% of its $3.8 billion in revenue--and most of its operating profit--last year.
NME’s rapid divestiture of assets also has been prompted by significant legal problems, mostly involving activities at its psychiatric hospitals. Since September, the company has paid about $230 million to settle various lawsuits brought by insurers and patients.
Still unresolved is a federal criminal investigation--disclosed last September after FBI agents raided NME facilities nationwide--into alleged insurance fraud and illegal payments to doctors.
Sulzbach said the company’s legal problems are a factor in the decision to streamline its corporate structure. “In light of some of our past problems, we need to be very aggressive and very trend-setting,” she said.
Sulzbach said the 300,000-square-foot headquarters has more room than the company needs, especially after the expected layoffs. NME is considering leasing part of the building or relocating to other sites in the Santa Monica area or the San Fernando Valley.
