Downers Grove, Ill.-based Advocate Health Care will make $200 million in cuts, as the 11-hospital system faces declining reimbursement rates from payers and payment delays caused by operating in a state with significant budget challenges.
Although Advocate is still evaluating where cuts will be made, President and CEO Jim Skogsbergh sent a memo to employees this week that said the cuts "will undoubtedly impact programs, services and jobs," according to The Chicago Tribune.
Mr. Skogsbergh said in the memo the organization's financial performance in the first quarter of this year "brought into sharp focus what we know to be true … our existing cost structure is not sustainable," according to The Chicago Tribune.
Although Advocate's revenue was up year over year in the first quarter of 2017, its first quarter revenue of $1.56 billion fell $70 million shy of what was budgeted.
The system is now taking proactive steps to keep its financial performance from suffering as reimbursement from government and commercial payers continues to decline.
"Like many healthcare organizations across the country, we have identified a need to redesign our healthcare delivery system to better serve our patients by continuing to make healthcare more affordable," Advocate said in an emailed statement. "This transformation will undoubtedly involve difficult decisions, but we will be guided by our mission, values and philosophy as we maintain our commitment to provide the safest and best possible outcomes for our patients."
News of the cuts comes after Advocate recently instituted a hiring freeze until July 1.
More articles on healthcare finance:
Tenet sees net loss narrow to $53M, inks deal to sell 3 hospitals to HCA
OIG: Mount Sinai Hospital overbilled Medicare by $41.9M
LifePoint eyes new acquisitions as profit rises