Reform, shrinking intake force hospital to shift

Herald Staff Writer

JASPER — The process of deciding what to cut — and by how much — began more than a year ago, when it became clear to executives at Memorial Hospital that the economics of health care were changing.

Expenses would be reined in, business procedures re-evaluated and labor costs more closely scrutinized.

Earlier this week, after months of planning, the hospital announced it would make $3.6 million in cuts, a development that just a few years ago would have seemed unthinkable.

About 50 rank-and-file workers from several departments have had their hours cut, from 40 a week to 36, and in some cases to 32.

The hospital’s six executives took a 5 percent pay cut, and about 30 department heads will make 2 percent less than they did last year.

“We started to look in the mirror at ourselves,” said Ray Snowden, the hospital’s CEO, president and chairman.

“Other industries have done it,” he added. “It’s time for the health care industry to do it as well.”
The move, hospital executives say, was spurred by shrinking Medicare reimbursements and declining hospital admissions.

As sweeping health care reform draws closer, the entire industry faces mounting pressure to reduce medical costs, which some argue have spiraled out of control.

But the real wake-up call came this spring, when across-the-board federal cuts triggered a 2 percent reduction in Medicare repayments, costing Memorial Hospital an estimated $1 million a year.

Executives say the changes weren’t made because of financial trouble. The hospital, they argue, still has a strong balance sheet.

Its overall budget grew this year by $28 million, or 18 percent, to $180.7 million. And it has hired more than 100 workers in the last year, employing 1,525 people in all.

Administrators say they were also careful not to sacrifice quality of care. Still,they knew that the organization had to tighten its belt.

Hospital admissions fell 3.6 percent last year, to 6,963, a trend that is expected to continue as government and private payers become more rigid about hospital stays. Outpatient visits, though, rose 5.9 percent, to 245,221.

“That’s the way the whole industry is moving — trying to do things on the outpatient side,” said Kyle Bennett, the hospital’s chief operating officer.

As part of the cuts, six positions will be eliminated, though some of those workers, several of whom are nurses, may be reabsorbed into the organization.

Despite the cuts, the hospital is still hiring. But executives say they’re trying to be more strategic in terms of which jobs, and how many, they add. About 30 positions will be left unfilled.
Other health organizations have had to make even larger cuts.

Indiana University Health, the state’s largest health system, announced Thursday that it would cut 800 jobs by Dec. 1. It has about 36,000 employees across the state.

Earlier this year, St. Mary’s Health, which has hospitals in Evansville and Boonville, said it would eliminate 73 of its 3,600 positions.

“Everybody that I know of is in the mode of trying to reduce costs and at the same time improve quality,” Snowden said.

In another cost-cutting move, the hours of Memorial Hospital’s third-floor observation unit, which provides around-the-clock outpatient treatment, will be shortened.

Beginning Oct. 1, it will be open from 7 a.m. to 7 p.m. Mondays through Saturdays. It will be renamed the outpatient center.

Contact Tony Raap at

More on