Health System expects massive layoffs shortly

Some top execs may lose their jobs as the troubled system faces major cuts. The University of Pennsylvania Health System is preparing for another series of layoffs that could reach into every corner of the financially troubled institution. All Health System employees received an e-mail Monday evening from Health System Chief Executive Officer William Kelley informing them of what he called the "very painful but necessary actions" that will be taken soon. The Philadelphia Inquirer reported yesterday that as many as 1,000 out of the 6,500 employees at the Hospital of the University of Pennsylvania alone could lose their jobs in the coming weeks. Though Health System spokesperson Lori Doyle would not confirm that number, she acknowledged that there will be system-wide cuts from each of Penn's four wholly owned hospitals. Besides HUP, the Health System owns Presbyterian Medical Center, Pennsylvania Hospital and Phoenixville Hospital, and is affiliated with several more. The Health System has made several major acquisitions over the past five years, a decision Kelley has strongly defended as necessary in spite of the current fiscal crisis. The Health System, which constitutes about 55 percent of the total University budget, reportedly lost between $150 million and $200 million in the fiscal year that ended June 30, 1999. Kelley recently said he would be willing to eliminate entire departments and programs to save money and has pledged to have the budget in balance this fiscal year. He also has long maintained that no cuts will affect the quality of patient care, and he did so again in his e-mail. "The reputation of our health system is unsurpassed in patient care, in education and in research," he wrote. "Our fundamental purpose is to maintain and protect that high quality, and we will do so." Although business was carrying on yesterday, HUP employees were generally anxious and concerned over their job prospects. "I think we all should be to some degree [scared]," one employee said. The cuts come out of initial recommendations made by the Hunter Group, a consulting firm known for taking extreme measures to help hospitals cut costs. Hired in July, the Florida-based firm is expected to release a formal report later this fall which could include recommendations to dismiss top-level Health System executives, in addition to massive lower-level layoffs. "The Hunter Group's initial findings make clear that we must further reduce our costs significantly in order for UPHS to remain financially viable in today's volatile health care market," Kelley wrote in his e-mail. The forthcoming layoffs mark the second major wave of cuts to the Health System in the last five months. In May, the Health System eliminated 1,100 positions and laid off 450 employees, most of whom were in administrative positions. The Health System's deficits have been increasing regularly in recent years. It lost more than $90 million in Fiscal Year 1998, the last year for which exact numbers are available. As part of a "comprehensive remediation plan" aimed at helping the Health System cut its costs, Kelly's e-mail also mentions plans to save money in the purchasing of "supplies, equipment and services" and calls for executive pay cuts. He already announced that he would not take a salary increase this year. Health System officials have repeatedly insisted that their financial problems are no different than the ones suffered by academic teaching hospitals nationwide, caused mainly by decreased federal funding and reduced payments from insurance companies. "We're having to grapple with the realities of all these external forces that are having these devastating impacts on us," Health System spokesperson Rebecca Harmon said. But yesterday, gathered in front of the hospital's main entrance on their lunch breaks, several HUP employees expressed frustration with the way in which Kelley and his team have run the $2 billion system. "I think management is the No. 1 issue here," one employee said. "They went out and bought up all these different facilities and they just didn't have the money to manage it. Every time you turn around, they're buying something else." But in an interview with The Daily Pennsylvanian earlier this month, Kelley vigorously defended that decision. "I don't think we'd exist if we hadn't done what we did," he said of the Health System's expansion. Employees were generally skeptical that anyone -- no matter how senior their position --Ehad any job security. "I think it's going to affect everybody," said one employee, while another noted that "top management has just as likely a chance of getting laid off, if not more so." There might be other ways besides massive layoffs for UPHS to cut its losses, according to Health Care Systems Department Chairperson Mark Pauly. Pauly said that Penn has the chance now to renegotiate the amount of money it receives from insurance providers since the Health System's financial status has worsened. "Losing money lends credibility to the threat of, 'If you don't pay me more, I'm not going to be here,'" Pauly said.