Hospital administrators are taking a scalpel to Mary Washington Healthcare’s budget, hoping to excise about $30 million in expenses.
Officials say they hope that cutting costs now will better position the hospital system for the future.
Cost-saving measures include trimming positions and cutting pay for a few hundred employees who receive a bump in salary for working late-night, weekend and holiday shifts.
Cuts to the differential pay will take effect July 27, and would save the company about $1 million. Those cuts were announced at meetings held last week.
So far, positions have been lost only through attrition, said Eric Fletcher, senior vice president of strategy, marketing and business development for MWHC.
The company, which operates two hospitals—Mary Washington Hospital and Stafford Hospital—in the Fredericksburg area and which employs about 4,260 people, is looking to trim costs by about 5 percent.
Hospital officials are still exploring options for cuts, Fletcher said. Suggested trims focus on renegotiating contracts and finding cheaper ways to get supplies.
“As we make cuts, one of the guiding principles is that we’re not going to sacrifice the quality of care,” Fletcher said. “So we’re looking harder at administrative and support expenses.”
Three administrative positions—chief operating officer and two vice presidents—have been trimmed through attrition, Fletcher said.
The health care system is planning to replace Chief Executive Officer Fred Rankin when he retires later this year. A search committee has been looking for the new leader since January, Fletcher said.
The health care system started the cost-cutting initiative after losing $8.2 million in operating funds last year.
Sequestration, which reduced federal spending, and the Affordable Health Care Act both hurt the health system’s bottom line, said Chief Financial Officer Sean Barden. The ACA cut Medicare reimbursement rates, which left Mary Washington Healthcare providing the same services for about $14 million less.
The local health care system also lost about $3 million because of sequestration cuts, which trimmed the amount paid for federal reimbursements for health care services.
Medicaid expansion could help MWHC’s bottom line by about $14 million annually—enough to recoup the losses from Medicare reimbursement cuts. But Virginia legislators seem unlikely to expand Medicaid coverage to the 400,000 state residents who would qualify.
Hospitals throughout Virginia are dealing with similar financial struggles, said Katharine Webb, senior vice president of the Virginia Hospital & Healthcare Association in Richmond.
“I don’t know of any hospital or health system in the commonwealth that isn’t looking really hard at ways to balance their expenses and revenue,” Webb said. “And they have to make some tough decisions.”
And those decisions are part of a change in the health care industry, Fletcher said. Medicare and private insurance companies have been encouraging systems to provide less expensive care.
“The industry as a whole has been pressured to cut costs,” Fletcher said. “You could look at any hospital around the commonwealth and we’re all looking for ways to save money.”
But health care has always come at a premium, partly because hospitals treat patients without either insurance or money to pay for care.
Last year, Mary Washington Healthcare provided about $27 million worth of care to patients who were unable to pay.
Larger hospital systems are better able to absorb those costs and the cuts to federal reimbursements, but Fletcher said MWHC’s board was not looking to sell to a larger health care system.
“We think that health care delivered locally is the best option,” he said. “We’re looking at these cuts so that we can be a thriving, independent organization.”
Amy Umble: 540/735-1973