Beth Israel To Consider Staff Layoffs

Harvard affiliate Beth Israel Deaconess Medical Center announced last week that it will consider layoffs to cope with grim financial projections.

The hospital announced an anticipated $20 million operating loss for the fiscal year beginning next October, due in part to a projected decline in number of patients. The hospital hopes to break even, under best case scenario projections, for this fiscal year.

The announcement is a marked departure from previous predictions of Beth Israel’s CEO, Paul Levy, who said in an interview last month that “we have chosen not to do layoffs.”

Levy said then that Beth Israel was not as troubled as other Harvard institutions, such as the Dana-Farber Cancer Institute, which had already announced plans for layoffs at the time.

Levy wrote in a letter to staff last week that Beth Israel’s two percent, $18 million operating margin for fiscal year 2009 “has disappeared,” partly due to an unexpectedly $7 million cut in state-sponsored Medicaid, which accounted for nearly a third of Beth Israel’s operating budget.

Levy said that the hospital is prudently slowing down how quickly they spend their grants.

Furthermore, slowed spending of federal research grants has resulted in another $5 to $8 million in revenue shortfall for the hospital. Levy said that because researchers are stretching their grants into the first quarter of next year, the hospital has not received its indirect payments as quickly, resulting in less revenue on hand.

“That just shows you how things you would never anticipate—dozens of researchers all of the sudden being more prudent—affect the bottom line of the hospital,” Levy said.

He said that this loss might be counteracted by an increase in NIH funding, pledged as part of Obama’s stimulus package.

Levy attributed the remaining major losses to the operating budget to a decreased patient load because of the financial crisis.

Some of the decrease resulted from a new policy that no longer allows emergency room diversions to Beth Israel from Mass. General and Brigham and Womens’ hospitals, Levy said.

Levy added at the meeting that there has been a cultural shift in treatment as well, as workers insecure in their employment postpone taking time off for elective surgery out of the fear their job might not be there when they return.

After his announcement Wednesday, Levy held three town meetings Friday to solicit input from staff about creative solutions to decrease expenses. He said that the town meetings, and full disclosure of Beth Israel’s financial status, are part of his overall goal for transparency.

“You have a right to know this because you work here,” Levy told one of the groups. “I want to explore with you whether there are other options to obviate some of these layoffs.”

Levy said that employees will be surveyed to determine their preferred cuts, and final decisions about layoffs will be made by April 1.

—Staff writer Laura G. Mirviss can be reached at lmirviss@fas.harvard.edu.