Springfield, Ill.-based Memorial Health CEO Ed Curtis pointed to ballooning labor costs as the main reason for what he described as a "painful but responsible" decision to lay off 20 percent of the hospital's leadership in early August.
According to Mr. Curtis, the health system's payroll has increased 39.7 percent from August 2020 to August 2023. Like many other health systems across the country, Memorial is feeling the lingering effects of the COVID-19 pandemic. "Healthcare is the first one in the pandemic and last one out," said Mr. Curtis.
In fiscal year 2022, the hospital reported a record loss of $107 million on operations and a total loss of $227 million, Illinois Times reported Aug. 10. To get back in the black, the health system created a plan to get $175 million of improvements either growing revenue or reducing expenses this year.
The August layoffs were a 5 percent cut of Memorial's total salary and benefits expenditures. According to Memorial, the layoffs affected the leadership, administrative and support sectors within the system.
"People that are in support roles, like me, is where we made the reductions," said Mr. Curtis. "These are difficult decisions; these are people's lives. But here's the point. We're not going to kick the can down the road forever. We need to get back to making sure we have at least a breakeven operation."
Mr. Curtis said that the cost-cutting measure will help ensure the health system keeps its services operating.
"We've not cut back any services to the communities we serve. We're all in on behavioral health. Quite honestly, there are not a lot of people in our market that are in behavioral health. We lose $15 million a year on behavioral health inpatients."
Jacksonville (Ill.) Memorial Hospital did shutter its transitional care unit Aug. 31.
"It just doesn't work. We're not in the long-term care business. We were down to just a few patients in that facility," said Mr. Curtis when asked about closing the unit. "We're not going to run nursing home beds out of one of our critical access hospitals. That's more of a business decision."
Mr. Curtis expects the health system to break even in the next fiscal year as the cost-cutting measures take effect and the health system gets a Medicaid base rate increase.