Discrepancies in pay rates from managed care companies, combined with rising operational costs, have prompted Peconic Bay Medical Center officials to consider firing as many as a dozen staffers to make up for a $2 million budget shortfall from last year.
The cuts will be made from management, nursing, administration and service positions at the Riverhead hospital. However, the number of eliminated positions might be reduced following negotiations with the medical center’s labor unions. Letters have been sent to 12 staff members, though the hospital expects that only eight or nine jobs will be trimmed, according to Tim Kelly, the medical center’s director of public relations.
Peconic Bay President and CEO Andrew Mitchell stressed this week that the cuts will not affect health care services. He noted that the staff cuts equate to less than a 1-percent reduction in overall staffing. “We’ll probably be cutting eight positions out of a total of 900 in the hospital,” Mr. Mitchell said.
The cuts, which are expected to be made this month, are intended to help the hospital operate in the black during the current fiscal year, as they’ll save the medical center about $2.1 million out of its $100 million operating budget. That rounds out to a 2-percent reduction in expenses, Mr. Mitchell said.
Mr. Mitchell explained that Peconic Bay ended 2006 with a surplus of almost $660,000. The 2007 audit is not yet completed, but preliminary numbers show that the hospital posted a $2 million loss last year. Peconic Bay’s revenue increased 2 percent in the past year, while overall expenses shot up 7 percent, contributing to the fiscal shortfall.
“In 2008, we’re hoping to break even by modulating expenses to match current revenue,” Mr. Mitchell said. “Now we’re getting more revenue than in 2007, but not as much as the expenses are increasing in the industry.”
One reason why Peconic Bay, Southampton Hospital and Eastern Long Island Hospital formed the Eastern Suffolk Health Network is to collectively negotiate with managed care companies to receive market rates for health services, explained Paul Connor, the president of Eastern Long Island Hospital. Most local hospitals are still struggling to make ends meet because of low reimbursement levels.
Peconic Bay is currently involved in a showdown with one of its largest insurers, Oxford Health Plans, over reimbursement rates. Oxford recently informed its clients by letter that the hospital will not provide in-network care after May 1 unless a new agreement is in place. Peconic Bay and the other East End hospitals are working together to negotiate better reimbursement rates from several insurers.
“If we had proper rates from managed care companies, it would benefit the hospital’s financial situation,” Mr. Connor said. “All the hospitals are running operating losses and are trying to stabilize by getting paid proper rates from managed care companies.”
Eastern Long Island Hospital, which is located in Greenport, has not ruled out cutting staff as a way to reduce expenses, Mr. Connor said.
Meanwhile, Peconic Bay is looking to save money by creating a team of staff members who will be “looking at ways to eliminate necessary weight in terms of paper and lights,” Mr. Mitchell said. The team will make sure lights are off in the hospital when not in use and make sure paper is not wasted. They will also study and implement other energy-conserving tactics, he explained.
“We’re working to achieve supply savings within the institution,” Mr. Mitchell said. “We hope come in with half a million in total expense savings with the team.”
Peconic Bay is in the midst of expanding, having completed construction on its new $8 million emergency center in February and recently breaking ground on its surgical pavilion. Work started on the surgical pavilion last summer and the facility is expected to open in early 2009. In all, the renovations are expected to cost $50 million.
“In 2008, we’re looking to reduce expenses and continue to grow our revenue so that we come out with a surplus in 2008,” Mr. Mitchell said. “This combined with the emergency center and the surgical pavilion puts us in a strong position coming out of 2008.”