INDIANAPOLIS (AP) — Indiana’s largest hospital system said Thursday it will cut about 800 jobs and realign some services as part of a nationwide trend by large-scale providers to cut expenses and adapt to changing trends in health care.
The cutbacks at Indiana University Health officials will go into effect by Dec. 1, company officials said at a news conference. Cuts will be felt at seven hospitals, including the system’s Indianapolis-area hospitals and those in Muncie and Tipton.
“This is going to affect every part of the organization. We don’t know who exactly is going to be affected by this,” said James Terwilliger, president of IU Health Methodist Hospital and IU Health University Hospital in downtown Indianapolis.
Officials said the system is trying to save $1 billion over five years.
IU Health’s website said the 19-hospital system, with facilities throughout the state, has more than 24,000 full-time employees. The system will offer some employees early retirement, and those employees must make their decision by Sept. 22, officials said.
Terwilliger said the cuts, along with a related realignment in how IU Heath delivers services, reflect declining reimbursement rates and decreases in hospital admissions as patients increasingly seek alternative care.
“These things are happening across the country,” he said.
IU Health spokesman Gene Ford said the system has seen lower reimbursement rates from all payers but largely by Medicare and commercial insurers.
Hospitals, especially emergency rooms, are among the most expensive places to receive care, in part because of staffing a wide array of equipment and remaining open around the clock. With the high cost in mind, insurers and employers have been steering people when possible to alternatives, such as outpatient care centers or home care.
“We’re seeing a migration of patients from inpatient facilities to outpatient services,” said Jennifer Lynch, an analyst with BFO Capital Markets-US.
The main driving force, she said, is cost. Hospitals cost more to run than specialty clinics and similar targeted services.
The trend isn’t new. Patients began to cut back on or delay elective procedures like knee surgeries to cut expenses after the recession started in 2008. Many industry observers say those patients have been slow to return.
“Patients are making decisions to not come to hospitals the way they did,” said Dr. Jeff Sperring, president and CEO of Riley Hospital for Children at IU Health.
Federal funding cuts and growing populations of uninsured patients also have pressured profitability.
Lynch said hospitals have begun to adapt by offering acute care services at lower-cost settings, and technology is aiding the shift.
IU Health officials said the changes did not mean the health care industry was in decline, but just that it was changing. Sperring said IU Health will be looking for new ways to treat patients that don’t involve hospital admission, and he did not believe the cuts would affect patient care.
“This is all about patient care,” he said. “This is about delivering care where they need it now.”
St. Vincent Health, an Indianapolis-based network of 22 hospitals, announced in June it was making similar cuts.
Associated Press Business Writer Tom Murphy contributed from Indianapolis.
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