Income Decline Forces St. Jude to Lay Off 121

Falling revenue and cuts in government funding will force the layoffs of 121 employees at St. Jude Medical Center in Fullerton, officials announced Thursday.

The layoffs are expected to help the 333-bed hospital recover from the low HMO reimbursements and rising medical costs that contributed to a $3.5-million drop in revenue so far this fiscal year, said Alain Jourdier, a spokesman for Orange-based St. Joseph Health System, which is St. Jude’s parent company.

“It’s a difficult time, but we are hopeful these and other changes will help us persevere and move forward,” Jourdier said Thursday. “We have to stay strong.”

The St. Joseph system includes three area hospitals and hundreds of affiliated doctors, with St. Jude seen as the chain’s premier north Orange County site. Staff reductions will focus on management, supervisors, administrative support and clerical positions, with officials making “every effort . . . to place affected individuals in other positions” within the system, said St. Joseph President Robert J. Fraschetti.

The layoffs represent less than 6% of the medical center’s work force.

Under the restructuring, several services at St. Jude will be handled by other companies, including the hospital’s managed care physical therapy and outpatient managed care laboratory services. The inpatient behavioral medicine unit and partial hospitalization program will close Dec. 1, but officials said the hospital will continue to provide low-cost outpatient support groups, community education and outpatient chemical dependency services.

Hoping to deal with what officials call inadequate reimbursement from health care providers, St. Joseph has already dropped several contracts and indicated Thursday that it will “aggressively negotiate” its contracts with other health plans, including those with Cigna and Health Net.

“We believe we’re taking the long view on meeting our commitment to the community,” Fraschetti said of the restructuring plan. “Our decisions are not just focused on the next quarter.”

Officials said St. Jude faces other challenges that are consistent throughout the industry, including a reduction of Medicare funding by $10 million over the next five years.