Slow business and bad debt are taking a toll on an industry once thought to be "recession proof."
It was a bad day for Twin Cities hospitals.
Park Nicollet Health Services and North Memorial Health Care said Monday they will cut more than 600 jobs. They cited falling business and rising bad debt as more patients lose their health benefits in the bad economy.
By the end of the week, St. Louis Park-based Park Nicollet will cut 233 employees, or almost 3 percent of its workforce, while North Memorial Health Care in Robbinsdale is eliminating 380 jobs, or 7 percent of its employees.
Monday's announcements from the independent groups came two months after market leaders Allina Hospitals and Clinics and Fairview Health Services announced hundreds of layoffs.
"My colleagues thought health care was recession proof," said Lawrence Massa, president of the Minnesota Hospital Association. "We're seeing that's not the case."
Health care is one of the state's biggest employers, covering 320,000 jobs, or 11 percent of the workforce in Minnesota. Until recently, the industry's biggest worry was how to fill open positions.
"Health care was one of the remaining growth areas" in October, said Kirsten Morell, a spokeswoman for the Minnesota Department of Employment and Economic Development. Whether that trend has since reversed, she said, "we really don't know." November job figures are due out Dec. 18.
Cuts follow building boom
Hospitals and clinics went through a building boom in recent years, anticipating an influx of aging baby boomers. Now the recession is forcing a period of cost-cutting instead. To make things worse, the tanking stock market hurt many hospitals' investment portfolios and the tight credit market made it much more expensive for them to borrow.
Park Nicollet, which owns Methodist Hospital in St. Louis Park, said it will close one of 25 clinics. The clinic, located close to Minneapolis-St. Paul International Airport, provides mostly occupational health services such as drug screenings and employee physicals directly to employers.
Park Nicollet also will cut the number of sites at which it offers specialty services. Many specialists such as cardiologists currently travel to see patients at primary care clinics once a week or so. It also is exploring options for its wellness consulting arm, Park Nicollet HealthSource, including a possible sale.
"We had to make these difficult changes to adjust to the national economic downturn and lower demand for health care services, which we expect to continue to decline in 2009," Chief Executive David Wessner said in a statement. Wessner had said last week that the group could lose $20 million next year if it didn't take immediate action.
Wessner said people who had lost their health insurance or are facing higher out-of-pocket costs were deferring treatment. At the same time, Park Nicollet has become more dependent on patients who are on public programs such as Medicare, which pay lower reimbursements than do private insurance.
Unpaid care soared
North Memorial said its job cuts will occur at all levels of the organization.
In addition to fewer patients, North Memorial said uncompensated care grew by 25 percent compared to last year. Through October, North Memorial incurred $41 million in bad debt, charity care and discounts for the uninsured.
The group also saw a spike in unpaid medical bills among patients with insurance, which jumped to $8 million through October, from $1 million in all of 2007. Chief Executive David Cress called the current economic challenges "unprecedented."
North Memorial declined to answer questions Monday on whether any clinics would be closed. However, a spokesman said the Maple Grove Hospital project, a joint-venture between North Memorial and Fairview, will go ahead and is scheduled to open at the end of 2009.
Both groups stressed that they would keep up the quality of care. Cress said the changes "will not compromise patient safety," while Park Nicollet said there would be no reduction in "direct patient bedside nursing care hours."
In October, Allina said it was cutting 250 to 350 jobs. Fairview said it was cutting up to 200 jobs. Those hospital and clinic chains are much larger, however, and the cuts at North Memorial and Park Nicollet are likely to be felt more keenly.
Chen May Yee • 612-673-7434