A Dozen Hospitals Are Laying Off Staff and Blaming Obamacare; Don't Believe Them

By Dan Diamond, California Healthline's Road to Reform

Hospitals tend to be among the largest employers in their communities -- which means that any individual decision to lay off staff can have an outsized local impact. And taken together, a dozen recent announcements seem to paint an especially dire picture for hospitals (and their communities) around the nation.

In Contra Costa County John Muir Health is offering staff voluntary buyouts ahead of ACA implementation. "We're being paid less, and we either stick our head in the sand or make changes for the future so patients can continue to access us for their care," according to John Muir spokesperson Ben Drew.

NorthShore in Illinois says it will lay off 1 percent of its workforce. The staffing cuts "ensure NorthShore remains well positioned to deal with the unprecedented changes brought on by the Affordable Care Act," according to a memo from the health system's chief human resources executive.

When Obamacare was being debated in Congress, its opponents tried to tar it with a deadly label: "the job-killing health law." So is the ACA finally living down to its sobriquet?

Not exactly. While the recent news makes for provocative headlines, the devil's in the details -- and the financial reports.

A Closer Look at Industry Pressures

It's clear that something is shifting in the hospital market. After years of employment growth, hospitals' hiring patterns have largely leveled off. Collectively, organizations shed 9,000 jobs in May -- the worst single month for the hospital sector in a decade.

Some of those decisions reflect industry-wide belt-tightening, as Medicare moves to rein in health spending by moving away from fee-for-service reimbursement and penalizing hospitals that perform poorly on certain quality measures.

And uncertainty around ACA implementation is trickling down to hospital staffing decisions, economists told Road to Reform. Many organizations still aren't sure how the pending wave of newly insured patients will affect their profit margins, given that many of these individuals may be sicker and will be covered by Medicaid, which reimburses hospitals at lower rates than Medicare and private payers.

But the ACA is just one factor affecting hospital finances, and its impact isn't consistently negative for providers. In some cases, hospitals have even staffed up in hopes of capturing new patient volumes from the ACA's insurance marketplaces or receiving added revenue through the law's accountable care organizations and other pilots.

And as "Road to Reform" has previously detailed, when accounting for all of the law's disparate effects -- the flow of new dollars into health care sector, which leads to direct and indirect hiring; the financial relief for millions of low-income families, who can decouple their employment decisions from health insurance -- some economists argue that the ACA is a job-boosting health law.

A Closer Look at Who's Writing the Headlines

In some cases, it's not hospital officials casting blame on the law, but opportunistic lawmakers -- and even ambitious headline writers.

When Emory Healthcare recently announced plans to lay off 100 staff members, local media chalked the cuts up to the Affordable Care Act. (That spin on the story attracted national attention.)

But when The Atlantic's Ford Vox dug deeper, he found that the decision was based less on the ACA and more on local market realities. In fact, Emory officials stressed that "these changes have nothing do with Obamacare," Vox writes, but reflect the organization's decision to reallocate resources away from the inpatient psychiatric program, where the layoffs are concentrated.

Local reporters in Texas also seized on Covenant Health's recent announcement that it would lay off 49 employees. While the CEO explained that the staff reduction reflected pending declines in hospital reimbursement -- partly brought on by the ACA -- Rep. Randy Neugebauer (R-Texas) went further. "This is likely to happen at more and more hospitals under Obamacare," Neugebauer told one TV station. "We need to repeal [the ACA] now before it creates any more problems."

Law May Be Providing Cover

However, another set of headlines suggest a different story could be written. Some hospitals are laying off staff -- or even closing their doors -- because they say their states aren't doing enough to implement the Affordable Care Act.

The Huffington Post's Jeffrey Young reports on one North Carolina hospital, Vidant Pungo, that recently shuttered because the state refused to opt into the ACA's Medicaid expansion; according to hospital officials, expanding coverage would have cut their uncompensated care bill and boosted revenues.

But looking at the health system's balance sheet reveals that Vidant Pungo's financial concerns went well beyond the ACA; for example, the aging facility likely needed a capital infusion to renovate its aging physical plant. Meanwhile, some of the hospitals that are blaming the ACA for their recent staffing decisions have had longstanding financial challenges. (Covenant in Texas, for example, shed hundreds of workers in 2008 and 2009, well before the ACA was even being debated in Congress.)

Since its passage four years ago, Obamacare has been many things to many groups: a rallying point for liberals, a stalking point for conservatives, a transformative package of reforms for the health care industry.

This time around, Obamacare may be playing a new role: convenient scapegoat for hospitals' relatively normal staffing decisions.