ELKTON — Union Hospital announced Thursday that it was laying off 32 employees, many of whom were senior management-level staff, as leaders attempt to reorganize its operations after a failed merger bid.
Union Hospital President and CEO Dr. Richard Szumel informed all of the hospital’s staff of the layoffs via an email Thursday afternoon, noting that they are “designed to have minimal effect on bedside care.”
“We do not take this lightly. Even though these changes are necessary, it is extremely difficult to lose 32 valued members of our team,” Szumel wrote. “Our employees are the heart and soul of Union Hospital and always will be.”
Szumel told the Whig on Thursday that the layoffs affected employees all the way up to the interim chief operating officer, a senior vice president position last held by Nick Balagurchik Jr. As of Thursday afternoon, Union Hospital listed a five-member executive team, including Szumel, and 30 directors in its staff directory on its website.
“This was from the executive team on down, including a number of directors and managers,” he said. “We need to redirect our funds to providing safe, high-quality health care.”
All of the affected employees will receive severance packages and access to outplacement services and emotional support programs, as needed, Szumel said. They may also apply for open positions in the hospital as qualified, and Szumel noted that those administrators with proper credentials would be considered for medical positions.
“The changes that are taking place were necessary to right-size our organization,” he told the Whig on Thursday afternoon. “We’ve noticed for some time that we needed to do a better job with expense management. We’ve devised a revitalization plan, and unfortunately the first part of that was a workforce reduction today.”
Szumel said the executive team examined each department and its positions to try to identify where responsibilities or duties may overlap with others.
“Over time organizations grow, and pruning positions is probably long overdue in our organization,” he said, emphasizing that positions, and not employees, were being eliminated.
On Thursday, Szumel was meeting with affected employees as well as leadership committees in the hospital to explain the changes and how they were decided upon. On Friday, forums would be hosted for all employees to learn more about the staff changes.
The decision to cut some of the upper positions at the hospital was supported by the executive administrative team as well as the hospital’s board of directors, Szumel said.
“The board has been pushing for some change and we needed a little time to put together a plan. It’s always easy to put together a knee-jerk response, but that’s not what this is,” he said, noting he informed the board of directors at their Jan. 2 meeting of the workforce reduction decisions.
In Szumel’s written message to staff, he said “additional restructuring of our clinical services and workforce will be necessary to position Union Hospital for the future.” He told the Whig that he wanted to avoid any future layoffs.
“If I never have to do this again, I would be very happy,” he said. “On the positive side of this is that we have the opportunity and need to build the Union Hospital that will serve the county for the long term.”
“All health care systems have to adapt to the new environment and small community hospitals are sometimes slower to change, but we have the opportunity now, with the workforce reduction and taking a look at our services that we provide, to make sure that we can meet our mission.”
While there may not be more layoffs on the horizon, the hospital is working through another change to occur this summer.
While Union has written contracts with University of Maryland Medical System to continue to staff the hospital’s radiation and oncology center through June 2020, they have verbally agreed to terminate the agreement this June, Szumel reported. Since then, Union has been actively negotiating with other health care systems to ensure there is not a lapse in services at the highly-sought-after center.
“I fully expect that we will have an oncology program operating in the county come June 30,” he said.
The news of Thursday’s layoffs comes less than a month after Union Hospital and LifeBridge Health announced that they were ending their attempt at a merger after about a year.
The merger was scuttled when the Maryland Health Services Cost Review Commission (HSCRC) began a review of Union Hospital’s total cost of care, which has led to uncertainty about future revenue.
For decades, Maryland operated the nation’s only all-payer hospital rate regulation system, overseen by the HSCRC, which is allowed under a decades-old Medicare waiver from the federal system. Under the state’s waiver, all third-party payers — Medicare, Medicaid or private insurance — pay the same rate.
A new 10-year state Medicare waiver passed in 2014, split into five-year blocks, has been updating the state’s regulation and reimbursement system with the Global Budget Revenue (GBR) model.
According to the HSCRC, the GBR model is a revenue constraint and quality improvement system that aims to provide hospitals with strong financial incentives to manage their resources efficiently and effectively, in order to slow the rate of increase in health care costs and improve health care delivery processes and outcomes.
While the model notably seeks to dissuade hospitals from running up services for fees by placing an annual cap on revenues, in Union Hospital’s case it is having a different effect. As a low-volume, high-cost provider, HSCRC regulators are reviewing whether to reduce the hospital’s reimbursement rate.
Since then, Union leaders have been actively negotiating the hospital’s rates with regulators and have begun working on ways to increase patient volume, including recruiting more surgeons and physicians, and working to shore up community referrals from private practices, Szumel said.
“As our volume goes down, and because revenue and costs are fixed, the price per case goes up and that’s what the HSCRC is looking at,” Szumel explained last month.
On Thursday, Szumel told the Whig that the workforce reduction was one way to help address the hospital’s total cost of care, but it wasn’t the most important factor.
“Expense reduction is important, but what is most important is volume growth in the hospital, and we’re working with our community to address that,” he said.