LMH leaders say rumors of ‘wholesale layoffs’ are untrue, but financial losses continue; eastern Lawrence clinic to open
photo by: Chris Conde
Amid continuing financial losses, leaders of LMH Health are now combating — and denying — rumors that the nonprofit hospital will turn to large-scale layoffs to improve the business’s bottom line.
At a Wednesday evening meeting of the hospital’s board of trustees, board member Bob Moody said he had become aware that some hospital staff members were under the impression that “wholesale layoffs” would soon happen at LMH in response to a year where the hospital has seen its financial performance turn to the negative.
Russ Johnson, president and CEO of LMH Health, said he also had heard those rumors from staff and was doing his best to help people understand they are not true.
“We have come out categorically and said that isn’t going to happen,” Johnson said. “But they are worried.”
The Journal-World reported earlier this summer that LMH Health during the first six months of the year posted a $4.2 million operating loss. It has been a shock to the system at LMH, which in recent years has had revenues exceed expenses by millions of dollars. For example, in 2018, the hospital had posted a $3.3 million operating profit during the first six months of 2018. That means the hospital has seen a negative swing of more than $7 million in the year.
The latest financial numbers won’t do anything to ease worry at LMH. The August financial report shows the hospital had an operating loss of $2.7 million for the month. For the year-to-date, LMH Health has posted a $9.2 million operating loss.
With those numbers, hospital staff members may continue to be on edge, but Moody said LMH leaders need to make sure employees understand major layoffs and other such tactics aren’t what the hospital plans to do to improve finances.
“We need to do a better job of making the staff feel better about the situation,” Moody said.
Some hospital employees, though, will feel financial cuts at the hospital pretty directly. Johnson did confirm that LMH is in the process of changing its retirement plan. The changes will result in the hospital making a smaller contribution to the retirement accounts of many employees.
Johnson confirmed the changes after the Journal-World asked about a tip it received that cutbacks were coming to the LMH retirement system. The information the Journal-World received, though, said the cut focused on the retirement plans of nurses. Johnson said that was inaccurate. The changes apply to all employees of LMH, he said.
The amount the hospital will reduce its contribution to an employee’s retirement plan varies by employee, based on how long the employee has worked for LMH. In a few cases, the new system will cause some newer employees to actually get a larger contribution from LMH than what the current system allows.
Johnson said that was done because a review found the retirement plan did not stack up well to what some competitors were offering newer employees. Conversely, the review also found that the maximum amount the hospital contributes to the retirement plans of longer-serving employees was above what the market generally offered. In response, LMH plans to reduce its maximum contribution from a 6% level to a 4% level. The changes are scheduled to begin in 2020.
Johnson acknowledge the change is partly driven by the financial challenges the hospital is facing.
“I would be disingenuous to say otherwise,” Johnson said. “We are looking at every area of the hospital, and that was one of the areas we reviewed.”
Johnson, though, said the hospital also has made a midyear increase in wages of about 525 positions at the hospital. He said those increases were made because reviews found the hospital needed to improve its compensation to attract and retain employees in several hard-to-fill positions. Many of those positions included nurses, housekeepers and other front-line employees, he said.
Despite the angst, hospital leaders at Wednesday’s meeting were looking to remind people that LMH is still in a relatively good position. LMH still has just over $100 million in cash and investments on its balance sheet, and its $9 million in operating losses has been partially offset by more than $4 million in investment gains that LMH has gotten through the stock, bond and money markets.
“There are a lot of hospitals in Kansas that wish they were in the position you are right now,” said Andy Ramirez, the hospital’s chief counsel, who follows the statewide industry closely.
LMH leaders, though, said it was clear the hospital needed to improve its operating performance. Board members were given an update on six major areas that have contributed to the downturn in finances. One of the largest drivers is changes in LMH’s relationship with Blue Cross Blue Shield of Kansas, the state’s largest health insurance provider.
Johnson said the size of discounts Blue Cross Blue Shield of Kansas is insisting upon for service that LMH provides to its members has grown significantly. Two years ago, Blue Cross Blue Shield of Kansas was paying about 42% of the base cost of services the hospital provided to its members. (It is common for health insurance companies to get a significant discount off of the base price of a service.) But now Blue Cross Blue Shield of Kansas is paying about 31% of base costs.
Johnson confirmed the hospital and the health insurer are in negotiations over what the proper discounts should be.
LMH also is nearly $5 million over budget on outside professional fees it has paid in 2019. The bulk of that is for a consulting firm that is seeking efficiencies in how LMH conducts its operations. The hospital is projecting that changes recommended by that firm will result in $15 million in savings in 2020.
Board members on Wednesday expressed confidence that the hospital would get its financials turned around.
“We knew at some point the waves would come,” said Rob Chestnut, chair of the board. “I’ve said when they do come, they would come hard. But I’m confident in our strategy and what we are doing. We have an engaged group of people who will do the right things for this hospital.
Wednesday’s meeting was the last for Chestnut and fellow board member Gina Pacumbaba-Watson. Both had served two consecutive four-year terms on the board. Lawrence Mayor Lisa Larsen will appoint two new members to take their places.
In other news from the meeting:
• Eastern Lawrence soon will have a new primary care doctor’s office. LMH announced its new East Heights Family Care center will open on Monday along Haskell Avenue in eastern Lawrence.
The center is in the same space as Independence Inc. — a nonprofit that provides services to people with disabilities — near the intersection of 20th Street and Haskell Avenue. We reported about a year ago that LMH was moving ahead with the project. It originally was scheduled to be open in early 2019, but construction delays pushed the project back.
Dr. Ashley Bloom, who previously was at the Mt. Oread clinic, will be the doctor overseeing the center, said Janice Early, vice president of marketing and communications for LMH. Bloom is bilingual, speaking both English and Spanish, which Early said would better serve the diverse population of the area.
The center, which largely was funded through private donations, will offer a full array family care services ranging from checkups to general diagnosis of ailments.
• It looks like an urgent care center will be coming to south Iowa Street. We reported in January that LMH had struck a deal to locate a doctor’s office in the former Pier 1 building at 3211 Iowa St., in front of the Target store.
But hospital officials on Wednesday confirmed their plans are for more than just a primary care doctor’s office. Early said LMH planned to provide urgent care at the location. That means patients will be able to use the center for care of minor emergencies ranging from broken bones to treatment of flu symptoms. It also means that the center will be open for walk-in patients and will have hours that are more extended than a traditional doctor’s office.
Early, though, said plans called for the facility to also have a traditional primary care doctor’s office that takes patients via appointment.
An opening date hasn’t been set for the south Iowa Street center, but Early said it likely would be in the first half of 2020.