Allegheny Health lays off 1,200

Faced with reduced insurance payments, intense competition and increased debt, the Allegheny University Health System -- the largest hospital network in the region -- fired 1,200 people, 6 percent of its work force, last week in a cost-cutting move. Penn's Health System -- one of Allegheny's chief competitors -- is experiencing similar financial difficulties, including a projected $78 million operating loss in fiscal year 1998. But University officials insist they will not be forced to take such drastic measures as Allegheny's recent firings. "Although we expect operating losses in FY 1998, we have a positive outlook on our financial situation," Health System spokesperson Lori Doyle said. "We don't anticipate any layoffs in the near future." Rather than laying off workers, Penn's Health System plans to turn its operating losses into gains by the year 2000 by cutting administrative costs and increasing the number of patients who visit its network of 200 Clinical Care Associates. But Allegheny's financial difficulties may give Penn's Health System a competitive edge in the region's tumultuous health care market, experts said. "If Allegheny is reducing the size of its operation, that provides an opportunity for Penn to move in and take a larger piece of the Philadelphia health care market," Health Care Systems Professor Mark Pauly said. He added that Penn's Health System "has not gone as far out on a limb as Allegheny, so it shouldn't face such a serious situation." Allegheny, which is based in Pittsburgh, has rapidly expanded to create a statewide network since first acquiring the Medical College of Pennsylvania in 1987. The system currently owns 10 area hospitals. "Allegheny basically came into town and bought every hospital that went up for sale, while Penn has been much more conservative," Pauly said. Allegheny's financial difficulties stem from its strategy of purchasing local hospitals out of line with its financial resources. Although its patient revenues increased 2.7 percent in 1996 to $1.03 billion, its expenses climbed 5 percent to $1.1 billion -- leading to losses of $69 million last year. The recent downsizing included trimming executive salaries by an average of over 20 percent and implementing a program linking the salaries of professors at Allegheny's University of the Health Sciences to how many patients they bring to the system and their level of research. In a written release, Allegheny President Sharif Abdelhak called the layoffs "extraordinarily difficult for each individual involved," but stressed that they were necessary to maintain a high level of patient care. "We have taken these actions at this time to maintain the strength of the organization and to ensure the provision of high-quality care throughout," he said in the release. But many Allegheny personnel said the layoffs were made abruptly. David Hamilton, who works in the dietary department of Allegheny's Hahnemann division at Broad and Vine streets, said seven of his 75 co-workers were fired last week. "The bosses, they don't know how it is out here," he said. "They just rearrange things without consulting their workers." At the former Medical College of Pennsylvania, nurses said they were concerned about how the downsizing will impact patient care. "The managers actually told us that we have to do what we're doing now, but we have to do it cheaper," one nurse in the Intensive Care Unit said. The hospital workers' union is holding a rally at 5 p.m. today at the Hahnemann facility to protest the layoffs, according to Henry Nicholas, head of the 17,000 member District 1199C of the National Union of Hospital and Health Care Employees.

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