UPDATED: At St. Vincent, Banko Wants to Cut Open Positions Before Layoffs

St. Vincent Health System said it would eliminate as many as 200 positions by June as the recession continues to affect the hospital system.

St. Vincent will cut open positions first and then layoff workers who aren't tied to patient care, said Peter Banko, the CEO of St. Vincent.

"I can't tell you the breakdown now because we still have work to do. Some of this work will happen in April, May and into June," Banko told ArkansasBusiness.com on Wednesday. "We're hoping there's more positions than people."

St. Vincent Infirmary Medical Center also announced it will close its psychiatric unit for older patients, its Medicare-exempt psychiatric program and eye-surgery program by April 1.

Banko said he tries to keep up the morale of the system's 3,000 workers by keeping them informed through e-mail updates and his blog.

"You can't make it all go away and you can't sugarcoat it, so you just need to tell it like it is," he said. "And understand that this is a tough time for us and for a lot of organizations around the country."

Banko sent a letter to employees on March 18 outlining the health system's plans. The full letter is available below.

Banko said Wednesday that some of the cuts being made now should have been made years ago.

"So now myself and my team are the 'lucky' folks that get to do it," said Banko, who came to St. Vincent as CEO in 2007.

He also added that St. Vincent still has about 20 openings for registered nurses and other clinical positions.

"I'm a firm believer that you can cut costs and improve quality and service at the same," Banko said.

On March 2, Arkansas Business published a cover story about hospital cuts in the face of recession . The story reported how hospitals were slashing employees' pay, freezing benefits or laying off workers.

In July, ArkansasBusiness.com reported that St. Vincent had cut 34 positions in its management and staff levels and has left other positions unfilled. Those cuts amounted to less than 1 percent of its work force, the hospital said.

In the March 18 letter, Banko said hourly workers have been asked to reduce their work week to 36 hours in March. Salaried employees were asked to use three paid time-off days during the month.

Banko's Full Letter to Employees

There were recent stories printed in the Arkansas Democrat-Gazette and Arkansas Business about the impact of the economy on hospitals in Central Arkansas.  As I communicate with my colleagues and friends within Catholic Health Initiatives and elsewhere around the country, they tell a similar story.  It is very clear that this once considered "recession proof" industry is being deeply impacted along with every other industry in our country (with the exception of shoe sole repair, heating/air conditioning/refrigeration, auto parts, and other fix-but-not-replace industries).

It is difficult to say whether the work we are doing today at St. Vincent and the personal sacrifices that we are asking you to make are a result of our overall economy or it is work that we should have been doing all along.  Over the past four months, we have seen a definite increase in our bad debt and charity care.  Over the past two months, we have seen a decrease in our profitable elective procedures (although volume in March has rebounded thus far).  Both of these factors combined have impacted our financial performance by $1.3 million per month.  Despite some recent positive outlooks on our economy, I think we should reasonably anticipate that these trends will continue for the next 12 to 24 months.

Over the last couple of weeks, you have been asked to either reduce your work week to 36 hours (if you are an hourly employee in support and service departments) or to use 3 days of PTO in the month of March (if you are a salaried/exempt employee).  Both of these measures combined will improve our performance by about $500,000 per month.  Although these requests did not come lightly or without considerable deliberation, they are temporary measures that will help strengthen our ministry while we implement more sustainable solutions.

It is, most certainly, unreasonable to all of us to maintain a reduced work week and/or consume PTO just to support the organization over a long period of time.  We are currently working on a plan to eliminate an additional 200 positions (both vacant and filled positions) by no later than June 1, 2009.  There isn't one date or time because this work requires detailed analysis, work evaluation, individual evaluation, dialogue, process change, and communication strategies.  Some positions will exit the organization sooner (in April) and some later (closer to June 1st) depending on the nature of the changes in the department and position(s).  Each position will be individually scrutinized and evaluated using our core values - reverence, integrity, compassion, and excellence - to minimize the impact on direct patient care and the organization as a whole.  Once this reduction has occurred, it is my intention to restore all employees back to their regular work hours.

It is important to note that these reductions are only one aspect of a multi-faceted effort under way to explore short- and long-term expense reduction.  As I mentioned in a previous communication, we are also turning over every stone with respect to vendor relationships, upfront cash collections, performance of our medical group, length of stay reduction, supply management & utilization, and other areas.  Additionally, we are engaged in an extensive review of all of our services and programs throughout the health system.  From this review and our strategic plan to focus on our key clinical services, we are closing our geriatric psychiatric unit, Medicare-exempt psychiatric program, and surgical ophthalmology program by April 1, 2009.  All of this work over the last 9 months has improved our overall financial performance by more than $1 million per month.

I am also working with our Board and leadership team to look at outside organizations to take a fresh look at our current work at St. Vincent and suggest new opportunities that we have not yet identified.  When we've been involved in this type of work over the last nine months rather intently, it is easy to get blinders on what can and can't be done or to go too far without recognizing it.  It is important to have others validate our work and help us tackle new endeavors.

There is no reason to panic or be concerned about the financial position or performance of St. Vincent Health System.  We are part of Catholic Health Initiatives - the second largest Catholic health system in the country and one of only 14 AA-rated health systems in the country.  We have a strong financial position that needs to be solidified going forward.  The challenges facing us in the financial arena require some short-term action and long-term thinking.  Many of these steps are very difficult and impact our friends & colleagues.  It is work that no one likes to do, but we have an obligation to preserve and carry forward the Ministry entrusted to us by the Sisters of Charity of Nazareth over 120 years ago.

I remain committed to transparency and candor about the work we are doing and the decisions we make going forward.  We shouldn't be ashamed of this work or hide behind it or think it will be better if we don't talk about it.  I'm going to tell you what is happening and when it is happening (when the work is done and the dates are firm) and, most importantly, why it is happening.  Yes, you can expect the good, the bad, and the ugly.

Our work around our tradition (quality/service), community (people), growth, and accountability/discipline doesn't go away during these difficult times.  We've made significant progress in each and every one of these strategic directions over the past year.  I'd ask you to stay focused on our ministry, our strategic direction, and supporting those impacted through the decisions that lie ahead.  That is how we live our core values and how we will make even more progress together in the days, weeks, and months ahead.

I appreciate all those who have reached out to me via e-mail, phone, and Ask the CEO.  Thank you for your support and understanding!  As always, if you have any questions or concerns about this work and how we are going about it, please do not hesitate to find me or a member of the executive team.

Sincerely,

Peter Banko