The Seton Healthcare Family has told employees that it intends to make a $350 million shift in resources – cutting some services and expanding others – over the next four years because its hospitals are seeing fewer patients and its revenue predictions were off.
Jesús Garza, who officially becomes Seton’s president and CEO on July 1, says in a March 28 memo to employees obtained by the Statesman that patient volumes this year haven’t met projections, and “we did not ‘flex down’ expenses quickly enough” to “avoid tough decisions.”
As a result, Seton is consolidating some services, such as moving all sleep studies to Dell Children’s Medical Center and Seton Medical Center Hays, while putting more emphasis on moneymaking services, such as cardiology, neuroscience, oncology, children’s services and childbirth, Garza’s memo says.
Additionally, Seton is eliminating jobs, holding open vacancies in nonpatient-care jobs through June 30 and not paying bonuses to employees in the fall. It is limiting spending on employee education and travel, as well as minor equipment, repairs and maintenance, Garza’s memo says.
Seton spokeswoman Adrienne Lallo said it isn’t clear yet how many jobs will be cut or reassigned during the shift.
The memo provides greater elaboration on Seton’s budget plans, first covered in the Statesman in mid-April, as it grapples with declining revenues amid changes in health care nationally. As Garza notes, government health coverage programs, such as Medicare and Medicaid, are starting to change how they pay providers, aiming to give consumers more value for their dollar. Medicare is cutting payments by 2 percent this year, and, Garza wrote, fewer patients are being covered by employer-funded, commercial insurance plans.
Seton has an annual budget of $1.7 billion and 12,950 employees, making it the second-largest private employer in the Austin area behind Dell Inc.
The health system plans to improve Seton Northwest’s appearance, build a hub for breast cancer care at Seton Medical Center Austin and expand maternity and emergency services at Seton Southwest, Garza wrote.
Officials say the memo demonstrates a commitment to transparency. It was followed by a barrage of comments on Seton’s intranet from employees, mostly anonymous, who expressed frustration with the cuts, Seton’s leadership and spending they see as wasteful.
While cutting bonuses, reducing staff and eliminating weekend-incentive pay, Seton’s management expects them to improve scores on patient satisfaction surveys, they said. “Thank you for setting us up for failure on a daily basis,” one anonymous employee wrote.
Several who posted said Seton is overstaffed and spends too much on expansion projects, including building a new teaching hospital. Instead, they said, Seton could save money in other ways, such as ending its practice of providing free food to doctors, scrapping retreats in France and reducing salaries to top executives. Garza’s predecessor, Charles Barnett, was paid nearly $2 million in the 2010-2011 fiscal year. Seton wouldn’t reveal Garza’s current salary.
Lallo said top executives won’t get short-term bonuses, only long-term bonuses for meeting goals between 2011 and 2013. She wouldn’t give bonus amounts, although they can exceed base pay, which was the case for Barnett in 2010-2011. His base pay then was $670,648.
The free meals and snacks for doctors are expected by them “and (are) the way to build community with physicians,” Lallo said. And the retreats, called the Seton Heritage Pilgrimage, are spiritual and educational trips that happen every two years, when financially possible, involving about 40 Seton leaders and four staff members, she said. Lallo declined to say how much the trips cost, but she said “the leaders pay the giant’s share of their own costs.”
“Unfortunately, what are being focused on here are expenses that are part of doing business,” she said. “What we are ultimately trying to do is change the delivery model for care so that it is sustainable in the new era of health care reform and improves care for patients. When we get into these line items, we are taking the focus off of the important nature of this work.”
Many of the changes occurring at Seton and at other hospitals nationally are the result of the federal health care law, Lallo said. Other hospitals around the nation also are experiencing declines in hospitalized patients, according to published reports.
“We recognize this is extremely uncomfortable and something people find challenging,” Lallo said.
Seton Healthcare Family
• Affiliated with Ascension Health, the nation’s largest Catholic and nonprofit health system.
• Operates 14 hospitals, either on its own or with partners, including a psychiatric hospital and a rehabilitation hospital.
• Runs three clinics for the poor and uninsured.
• Has 12,950 employees.
• Has an annual operating budget of $1.7 billion.
• Reported total revenue of $1.7 billion and total expenses of $1.5 billion, netting $228.3 million.*
*Based on most recent IRS report, 2010-2011