Can Twin Cities hospitals afford a strike? That's the pressing question as 14 metro hospitals prepare for a potential walkout by 12,000 nurses next week.
In the short term, a strike would cost the hospitals millions of dollars for replacement nurses and millions more in lost revenue from lower patient volumes. In the longer term, there's the risk to their reputations, their profit margins and their credit ratings.
Yet they appear willing to pay that price.
"The strike itself will be very expensive for us," acknowledged Dr. David Abelson, chief executive of Park Nicollet, which owns Methodist Hospital in St. Louis Park.
But, he added: "What we can't afford is the nurses' contract proposal. We would have to shut down."
In contract talks that started weeks ago, the Minnesota Nurses Association has sought formal nurse-to-patient staffing ratios, arguing that they would improve patient care and safety, while trying to hold ground on benefits and make gains on pay.
Hospital executives, in interviews and messages to employees, have said they can't afford rigid staffing rules at a time when the entire health care system is under pressure to be more efficient.
The result, said University of Minnesota labor relations Prof. John Remington, is that the hospitals are playing "hardball'' in the latest round of contract talks. "It may be their perception that the nurses don't want to strike, and they are saying, 'We're going to call their bluff.'"
According to Abelson, giving the nurses everything they seek would add $45 million a year in costs for Park Nicollet, on top of the current $80 million in compensation for union nurses. That would more than wipe out the group's estimated $35 million profit margin. Park Nicollet has about $1 billion in annual revenue.
"We're no different from the rest of the hospitals," Abelson said in an interview. "We're talking about whether or not Park Nicollet and the other hospital systems will be viable in the next several years."
'Clearly a pressure tactic'
On Tuesday, the most recent day of talks, the hospitals handed nurse negotiators a last-minute compromise. Just before midnight, they withdrew their proposed cuts to nurse pensions and offered a letter promising to develop a collaborative plan with the union to address staffing concerns.
But they gave union negotiators only about an hour to accept or reject it, a "take it or leave it'' gambit that the union found unacceptable, according to union spokesman John Nemo.
"It's clearly a pressure tactic," said the university's Remington. The short deadline forced the bargaining committee to make a decision without feedback from the membership. In staunchly democratic unions like the MNA "most committees are not willing to do that," he said.
Whatever the motivation for each side, a report by Moody's Investors Service this week laid out clearly the risks for hospitals in the event of a strike.
"A prolonged strike will ultimately cause rating pressure on these health systems if they suffer declining margins because of the expense of using agency nurses, which usually cost much more than permanent nurses," wrote analyst Sarah Vennekotter. "Patient volumes and revenues could also weaken due to a prolonged decline in hospital census.''
Because the hospitals already have slim margins -- low to mid single digits for most -- even a small increase in costs will have a big impact on the bottom line. Crunching numbers for four of the six Twin Cities hospital groups, Vennekotter wrote that if revenues stay the same and expenses rise just 1 percent, operating income would drop by 24 percent.
At the core of the dispute is nurse staffing levels -- and who gets to decide them.
Nurses say they're stretched thin, to the point of endangering patients, and want to set formal, contractual limits on how many patients each nurse can be assigned. The hospitals say they already have among the highest quality care in the nation. They say formal staffing ratios would hamstring them at a time when they're adapting to a tough economy, cuts to reimbursements and federal health reform.
Some think there's something even deeper at stake.
Hospitals today are part of health systems that include clinics and physician groups. These systems -- responding to ongoing payment cuts and changes coming with President Obama's health legislation -- are reconfiguring teams of doctors, nurses and other health workers in ways they hope will save money, including reassigning responsibilities within the teams.
'Loss of control'
All of this has created uncertainty.
"Nurses as a group are concerned they will lose control over their profession. ... It comes out in the money ... but it's really a loss of control over professional standards and practices. It's playing out for physicians as well," said Daniel Zismer, an associate professor at the University of Minnesota's School of Public Health.
Meanwhile, hospitals want to stay as flexible as they can. "The hospitals' Number 1 concern would be that a union contract will interfere with innovation of care," Zismer said. "If a team with multiple types of licensed health care professionals all had constraints -- rigid ratios or work rules -- you may imagine how that may hinder care redesign," he said.
Dr. Kevin Graham, director of the Minneapolis Heart Institute at Abbott Northwestern Hospital, says that in the next few years both physicians and hospitals will see reductions in reimbursements. The nurses, he said, seem to be abdicating their role in that future "by advocating for themselves only."
In the face of those demands, he said, the hospitals have to take a strike. "Their financial viability is on the line."
Staff writers Maura Lerner and Josephine Marcotty contributed to this report. Chen May Yee • 612-673-7434