Franciscan hospitals to eliminate 925 full-time positions

The state’s second-largest hospital system, Franciscan Alliance, announced Wednesday that it is eliminating 925 full-time positions through a mix of layoffs, reduced hours, retirements and attrition.

The Mishawaka-based Catholic organization, which operates three hospitals in the Indianapolis area, said it is trying to cut expenses by as much as $500 million, or 20 percent. Most other hospitals around Indiana are doing the same.

To reach that goal, Franciscan will also cut benefits for its remaining 19,000 employees. Franciscan will freeze managers’ salaries next year, institute higher employee contributions for health insurance, eliminate its match of employee retirement savings, and place its more recent hires on a defined contribution retirement plan, rather than the hospital’s traditional pension.

Of the 925 positions cut, 275 will come through layoffs. Most of those employees, including 83 in the Indianapolis-area, were both notified and dismissed today, according to a Franciscan spokesman. The hospital chain is providing severance, including benefits continuation, and outplacement counseling. A few of the laid-off employees will be offered a new position or changed hours.

Franciscan CEO Kevin Leahy said the nearly 5-percent cut in staffing was forced by fewer patient visits and by the Patient Protection and Affordable Care Act, which is also called Obamacare.

“Recent trends and the new law are challenging health care 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 in a prepared statement. “Our challenge is to staff our campuses in line with the reduced inpatient volumes that are a byproduct of recent health care trends and the new law.”

In 2012, Franciscan’s 13 hospitals in Indiana and Illinois pulled in revenue of $2.5 billion, generating a net gain of $110 million, excluding a special accounting charge. However, the hospital chain’s 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 Indiana University Health. On Oct. 1, Indianapolis-based IU Health cut 935 positions out of its work force of 36,000, also citing fewer patient visits and stagnant reimbursement rates from health insurance plans.

In late June, Indianapolis-based St. Vincent Health cited the same factors when it announced it was laying of about 865 workers, or 5 percent of its work force.