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St. Mary's Innovis lays off 19 as more put off health care

The recent layoffs at St. Mary's Innovis in Detroit Lakes eliminated 19 jobs, with most of the cuts involving part-time positions.

St. Mary's Innovis CEO Tom Thompson said the cuts come from the effects of the recession that is also hitting the health-care industry.

"When I meet with community groups, a lot of folks don't realize that health care is not recession-proof," Thompson said.

Attrition worked for a while, Thompson said, but it wasn't enough.

"When you're down 10 percent across the board and it's going to stay there, and stay there for several months, you have to make changes," Thompson said.

Besides layoffs, many other employees will have their hours reduced for now.

The laid-off workers received one month's severance pay, extended benefits and employment support.

Of the 19, Thompson said that three of those were hired for other openings in the company and were given a preferential status for those jobs.

He said that several factors have come into play.

The big issue is that more and more people are putting off health care to save money. That's led to a 10 percent decrease in hospital utilization, Thompson said.

"If people could push off care, they would push off care," Thompson said.

Another issue is the never-ending battle over government reimbursement for Medicare and Medicaid services. That issue is nothing new for St. Mary's Innovis, Thompson said.

It still poses a problem, though, because Medicare and Medicaid patients provide more than half of St. Mary's Innovis' business.

Thompson said that St. Mary's Innovis is stuck in the middle of a situation of not being big enough or not small enough.

"We're a little bit too big to get preferential treatment from the government," Thompson said. "And we're a little bit too small to have the big bang services of the urban hospitals. It's a competitive disadvantage."

Rural hospitals get reimbursed for 1 percent more than their costs, while St. Mary's Innovis receives a set rate since it's a bit bigger, Thompson said.

St. Mary's Innovis has also suffered a multi-million dollar loss in the value of its investments in the eight months of the company's current fiscal year. Thompson said the loss is $7 million thus far.

The loss of investments hurts when it comes to financing the organization, whether that financing comes in short-term notes that are loans for cash needs that are repaid quickly, or longer-term debt for new construction.

"We need a strong organization balance sheet to get good lending rates," Thompson said.

In addition, St. Mary's Innovis took a $1 million loss for providing health care that does not get paid for. Thompson said that loss comes from those who are either uninsured or under-insured who receive health care at the hospital or the clinic.

Thompson said that the $1 million loss does not include charity care. He said that charity care is determined by income and asset requirements, and more people who haven't paid for care don't qualify for charity care.

Cutting back on capital expenses for newer medical equipment or other items that don't factor into patient safety is also part of cost-saving moves, Thompson said.

"In many instances, we're leasing things when in the past we may have acquired them," Thompson said. "Overall, we've pretty much held our capital purchasing to a minimum.

"If there is a patient care or patient safety issue, that's getting the capital. If there is something that could improve our business operations, that's going to have to wait."

A big push in the medical field to save money is electronic records. Thompson said that converting to electronic records could help. He said he's following the stimulus package closely because there is funding for electronic medical records in the law that includes incentives and penalties for converting to electronic records.

Thompson said that the merger of St. Mary's Regional Health Center and Dakota Clinic last year isn't a factor in the layoffs.

"The integration is essential to long-term sustainability of both organizations, period," Thompson said. "St. Mary's Regional Health Center could not have remained independent and viable because with integration, we are able to create our own plan for health care in this region."

Long-term, Thompson said that expansion of the St. Mary's Innovis campus is still on.

The campus is a big part of the redevelopment plan in Detroit Lakes.

However, since St. Mary's Innovis is part of Essentia Health, all capital decisions are made on a larger company-wide basis, Thompson said. He said that Essentia is working on a prioritization plan to determine when and if some projects will go forward.

"Capital is really tight, I'm not going to kid you," Thompson said.

The approval process is ongoing with the parent company, Thompson said.