'Bad debt' leads to Calif. hospital layoffs

by Brendon Nafziger, DOTmed News Associate Editor | August 16, 2010
Hospitals facing layoffs.
(Image courtesy El Camino Hospital)
A Northern California hospital is sacking nearly 140 employees as it becomes the latest hospital to take a hit from declining volumes and millions of dollars in "bad debt."

The El Camino Hospital informed 195 of its nearly 3,000 workers last week at its 399-bed Mountain View and 143-bed Los Gatos campuses that they could be affected by the layoffs in the coming months, the hospital said. California law requires a 60-day notice be given for layoffs affecting more than 50 people.

The cuts will affect around 30 nurses, although through restructuring around 10 new nursing jobs will be created, so ultimately 20 to 21 nursing jobs will be lost, according to the hospital.

The hospital said its "bad debt" - the amount of money patients owe but aren't paying for services - has grown from around $25 million in fiscal year 2009 to about $34 million in fiscal 2010. The hospital is also suffering from a 3 to 6 percent year over year decline in procedural volumes.

"Even though your volumes are going down, that's one thing. But if you're being paid less for those services, that's another condition we need to respond to," hospital spokeswoman Chris Ernst told DOTmed News.

Discharges have fallen 3 to 4 percent and obstetrics has fallen 6 percent, while surgical cases are basically flat, she said. At the same time, the hospital is seeing a shift in its payer mix: an increase in Medicare, Medical and self-paying patients.

The result is an upward creep of bad debt from 1.3 percent of growth last fiscal year to 1.7 percent for 2010, about 30 percent higher than the hospital's initial projections, Ernst said.

In the spring, the hospital started a hospital-wide belt-tightening program. Last month, it announced a salary freeze for all employees.

While initially the hospital projected a nearly $8 million loss for this fiscal year, the hospital now expects a profit of around $4 million for the hospital itself and around $37 million for the whole system, which includes investments from its foundation and other sources, Ernst said.

El Camino isn't alone facing off "bad debt." A June American Hospital Association survey found nearly 87 percent of hospitals reported an increase of bad debt or so-called charity care - services provided with no expectation of reimbursement - as a percent of total revenue.