Bozeman Health had a problem, one that health system officials with hospitals and clinics in southwestern Montana said had been building for months.
It had passed the toughest tests of the Covid-19 pandemic, but lost employees and paid a premium for commuting workers to fill the void. Inflation had also raised operating costs.
The system, which serves one of the wealthiest and fastest-growing areas of the state, was losing money. It spent nearly $15 million more than it took in from January to June of this year, Chairman and CEO John Hill said. On August 2, Hill announced that Bozeman Health had laid off 28 people in leadership positions and would not fill 25 vacant leadership positions. The system has a workforce of about 2,400 and a budget of about $450 million for the year.
The pandemic has intensified a long-running shortage of health care workers that has hit big rural states like Montana especially hard, which have few candidates to replace departing workers. Expensive interim resources, including traveling nurses, caused hospitals rising costs. Staff shortages have also left patients with longer waits for treatment or fewer providers to take care of them.
In addition to Montana, hospitals in California, Mississippi, New York, Oregon and elsewhere laid off workers and reduced services this summer. Health systems have pointed to low surgery volumes, high equipment prices, sick patientsand distressed investments. Parallel to those problems, hospitals’ biggest expense, payroll, skyrocketed.
“If you talk to any hospital leader across the country, they would put the workforce as their first, second and third priority,” said Akin Demehin, senior director of patient safety and quality policy at the American Hospital Association.
workers left the health care industry en masse during the pandemic, citing low wages and burnout. Across the country, hospitals competed for contract workers to fill the void, which drove up prices. That left hospitals with an awkward balancing act: keeping existing employees and filling essential roles while cutting costs.
Bozeman Health CFO Brad Ludford said the system went from spending less than $100,000 a month on short-term workers before the pandemic to $1.2 million a week last fall. That number is now closer to $1.4 million per month. Overall, system labor costs are approximately $20 million per month, an increase of about 12% compared to last year.
Hill said the health system took other steps before cutting jobs: It stopped all out-of-state business travel, cut executive compensation and readjusted workloads. Simultaneously, he attempted to convert contract workers to full-time employees and retain existing staff through an increase in the minimum wage. Hill said the hospital system has had some success, but it’s slow. As of mid-August, it had 487 openings for essential workers.
“It still hasn’t been enough,” Hill said.
vicky, a registered nurse and executive director of the Montana Nurses Association, said the nationwide shortage means nurses are being asked to do more with less help. She wants to see more hospitals offer long-time employees the kind of incentives they have used for recruiting, like giving nurses higher pay for picking up extra shifts or longevity bonuses.
“It’s not just about recruiting, you can get anyone in for a $20,000 bonus,” Byrd said. “But how are you going to keep them there for 10 or 20 years?”
Hospitals’ financial challenges have evolved since early in the pandemic, when concerns centered around the costs of responding to Covid and revenues that didn’t come through because people delayed other care. In 2020, thanks to federal aid and a return to more normal service levels, many of the nation’s wealthiest hospitals made money.
But hospital officials have said the financial landscape changed in early 2022. Some hospitals were hard hit by the wave of omicronas well as rising inflation and staffing challenges.
Hospitals received millions of dollars in pandemic aid from the government, but industry officials said that has dwindled. Bozeman Health, for example, received about $20 million in federal aid in 2020. It received $2.5 million last year and about $100,000 in 2022.
John Romley, a health economist and senior fellow at the Schaeffer Center for Health Economics and Policy at the University of Southern California, said that with federal aid drying up and inflation taking off, some hospitals may now be losing money. But he cautioned that more data is needed to determine how hospitals have fared overall compared to previous years.
Providencia, a health system with 52 hospitals throughout the westreports a net operating loss of $510 million for the first three months of the year. In July, Providence announced that it was launching a “lean executive team.” The system operates one of the largest providers in Montana, Providence St. Patrick Hospital in Missoula.
Kirk Bodlovic, Providence Montana’s chief operating officer, said the new structure hasn’t yet affected local positions, though he said hospital leaders are looking at open positions that aren’t essential to patient care. He said the hospital is trying to reduce its reliance on contract workers.
“Recruitment efforts are not keeping up with the demand,” Bodlovic said.
Job cuts at hospitals across the country have pushed out some health care professionals who had stayed in their jobs during the stress of the pandemic. And the cutbacks have meant some patients have had to travel farther for treatment.
Confronted in Coos Bay, Oregon, the Bay Area Hospital community reaction after it announced it would cut the contracts of 56 travel workers and end their inpatient behavioral health services. hospital officials cited the high cost of filling vacant positions quickly.
Bend, Oregon-based St. Charles Health System laid off 105 workers and eliminated 76 open positions in May. The CEO of the system at the time, Joe Sluka, said in a press release that labor costs had “skyrocketed” in large part due to the need to hire clinical workers. He said the hospital ended April with a loss of $21.8 million.
“It has taken us two years of the pandemic to get us to this situation, and it will take us at least two years to recover,” Sluka said in the statement.
In Montana, Bozeman Health has been unable to offer inpatient dialysis at its largest hospital for months, so patients in need of that service have been sent elsewhere. Hill said she expects some delays in services outside of critical care, like lab tests. Ludford said the hope is that the system will begin to balance out in the second half of this year.
About 100 miles away, Shodair Children’s Hospital in Helena halved the number of patients it accepted due to staff shortages. It is the only children’s psychiatric hospital in Montana and is building a $66 million facility to expand the capacity of the bed.
Chief Executive Officer Craig Aasved said the 74-bed hospital was downsized about two years ago rather than adding contract workers so it could make room for patients to quarantine in case of Covid outbreaks. Aasved said that he is struggling to open another unit. Shodair, which has not historically relied on travel workers, has hired four travel workers in recent months, he said.
“It’s a double whammy: We lost revenue because we closed beds, and on top of that you have the added expense for travelers,” Aasved said. “The objective is that there are no layoffs, no licenses, but we cannot stay in what we have been doing forever.”
He said the hospital increased the pay of some employees and opened a nurse residency program about six months ago to attract new people. But those steps have not provided immediate help.
Nearby, St. Peter’s Health CEO Wade Johnson said the hospital has closed part of its inpatient unit and reduced hours for some services due to staffing shortages. Some beds remain out of use.
Administrators are exploring automating more services, such as having patients order food via iPad instead of through a hospital employee. They are also allowing more flexible hours to retain existing employees.
“Now that we have adjusted to life with Covid in many ways in the clinical setting, we are dealing with the repercussions of how the pandemic has affected our staff and our communities as a whole,” Johnson said.
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