MISHAWAKA, Ind. (AP) — Franciscan Alliance will lay off 275 employees and cut 650 other full-time positions at its 11 hospitals across Indiana through retirements, other attrition and reduced hours, the Mishawaka-based health system announced Wednesday.
The latest in a series of restructurings at Indiana-based hospital groups will reduce Franciscan’s workforce by 1.4 percent.
The Catholic health care system cited economic pressures including reduced reimbursements, new payer models, the federal health care overhaul and shifts from inpatient to outpatient care.
“Franciscan Alliance has not been immune to such pressures and has found it necessary to align staffing levels to reflect lower patient volumes and reduced industry wide reimbursements brought on by reforms associated with the Affordable Care Act,” Kevin Leahy, Franciscan’s president and chief executive officer, said in a news release.
“Recent trends and the new law are challenging healthcare providers to manage the continuum of care for patients more efficiently and effectively to ensure the same quality outcomes at reduced reimbursement levels,” Leahy said. “Our challenge is to staff our campuses in line with the reduced inpatient volumes that are a byproduct of recent healthcare trends and the new law.”
Franciscan said it must cut its costs by 15-20 percent, or as much as $500 million, over the next three years to remain viable.
Franciscan’s remaining 19,000 employees will see cuts in benefits next year, including no salary increases for management, the elimination of a 1.5 percent employer match of their 403(b) retirement savings program, and higher employee contributions for health insurance, the system said. Employees not vested in the pension play by Jan. 1 will get a new defined-benefit pension program.
The Indianapolis Business Journal reported Franciscan’s 13 hospitals in Indiana and Illinois pulled in revenue of $2.5 billion in 2012, generating a net gain of $110 million, excluding a special accounting charge. However, its operating profit margin decreased to 4.5 percent from 5.2 percent the previous year. Franciscan ranks second in revenue among Indiana-based hospital systems, behind IU Health.
Indianapolis-based IU Health cut 935 positions, or 2.6 percent of its workforce, on Oct. 1. Indianapolis-based St. Vincent Health announced in June it was laying off about 865 workers, or 5 percent of its workforce.
Franciscan operates hospitals in Crown Point, Michigan City, Crawfordsville, Lafayette, Carmel, Indianapolis, Mooresville, Hammond, Dyer and Munster.