Center City-based Hazelden has eliminated 57 jobs this year as the addiction treatment provider adjusts to discounted payment rates from health insurers plus cash-flow trouble related to a new system for electronic health records.
The job cuts, which took effect during the second and third quarters, amount to roughly 4 percent of the workforce at Hazelden, which has operations in Minnesota and eight other states. Minnesota is losing 40 of the jobs.
In a financial statement issued earlier this month, Hazelden officials said the transition from self-pay patients to those covered by health insurance happened faster than expected, resulting in significantly greater discounts.
“This more rapid shift placed extreme pressure on current year net revenue realization, prompting management to implement deep expense reductions,” the nonprofit group said in the financial statement. “Such reductions will begin to positively impact operating results during [the fourth quarter] and thereafter.”
Hazelden has been known as Hazelden Betty Ford Foundation since the Minnesota-based nonprofit merged in 2014 with the California-based Betty Ford Center. The shift from self-pay patients to those covered by insurance has been particularly fast this year on the West Coast, Hazelden said in the financial statement.
In August, Moody’s Investors Service cited the shift in payer mix as well as Hazelden’s “failure to resolve its electronic health records issue” when explaining why the agency downgraded its rating for Hazelden’s debt.
In 2016, Hazelden moved to a new electronic health record system, which captures information on a patient’s medical history including medications, allergies and health issues. While the systems primarily are thought of as tools for patient care, they also are part of the system for sending medical bills to patients and insurers.
Several health care organizations have had trouble collecting bills following the shift to a new electronic health record system, with Hazelden being the latest system to see an impact on its bond rating.
In a statement, Hazelden said the cash-flow problems have increased borrowing costs, but have not had a negative impact on patient care. The new computer record system “will certainly benefit our patients in the long run,” Hazelden said in its statement. “We are working closely with our vendor to resolve these issues as expeditiously as possible.”
Hazelden and Betty Ford have been big names in the addiction recovery business for many years, with Betty Ford known as a place for celebrities to rehabilitate. Since 2012, however, the California center has seen a shift from patients who pay their own way, to those covered by health insurers.
During the third quarter, Hazelden also saw costs related to the impact of Hurricane Irma at its operations in Naples, Fla. The hurricane did not cause flooding or storm-related physical damage, but prompted an evacuation of patients and staff plus a one-week shutdown.
“This negatively impacted budgeted revenue by $400,000 for September and is projected to result in additional revenue shortfalls of up to $500,000 until that site returns to pre-hurricane patient volume,” Hazelden officials said in the financial statement.
At the end of the third quarter, Hazelden Betty Ford Foundation employed the equivalent of 1,274 full-time workers. Through the first nine months of the year, the foundation posted a loss of $10.1 million on $135 million in revenue.