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New London — Lawrence & Memorial Hospital on Thursday announced layoffs of 22 employees, an action it said it needed to take to close a $3.2 million budget gap.
The layoffs, effective immediately, will eliminate the jobs of 14 full-time and eight part-time employees in a variety of departments "from the director level on down," hospital spokesman Mike O'Farrell said.
Half the laid-off employees are members of one of the three hospital unions, and half are non-union. All of the affected employees were given severance packages, he added. The 22 layoffs account for less than 1 percent of the hospital's workforce.
Eric Bailey, spokesman for AFT Connecticut, said that of the 11 union members, two or three were members of the nurses' local and the rest were in the service and maintenance workers' local.
The budget gap is the result of a decline in inpatient volumes in the fiscal year that ended Sept. 30, cuts in Medicare and private insurance reimbursement income, the continuing need to invest in technology for an electronic medical records system, rising employee benefit costs, and other factors, O'Farrell said.
The Board of Directors approved a budget for the new fiscal year that began Oct. 1 that was based on a revenue-expense ratio $3.2 million short of the level it wanted to achieve, along with a plan to close the gap. Over the past six weeks, the hospital has worked to close the gap through cost savings on supplies, overtime and the elimination of vacant positions, but did not achieve enough savings, he said.
The board mandates that the hospital achieve at least a 3 percent margin of revenues over expenses. Total hospital revenues are about $320 million annually.
O'Farrell said the hospital ended the last fiscal year in the black, but the layoffs combined with other cost-cutting measures were needed put it back on track to reach the 3 percent margin in the new fiscal year.
"We had to do this to make sure we continue to be strong," he said.
He emphasized that no hospital services have been eliminated as a result of the layoffs.
The recent presidential election, which set the Affordable Care Act on a path toward full implementation, had no bearing on the decision to lay off employees, he added.
The layoffs come as L&M is involved in several major projects, including the $34.5 million Dana-Farber cancer center under construction in Waterford, a seven-year, $32 million investment in an electronic medical records system, the pending acquisition of The Westerly Hospital for $69 million in cash and other financial commitments, and the construction of a 14,000-square-foot medical office building in Old Lyme.
O'Farrell said the hospital needs to simultaneously cut costs and invest in expansion to continue to grow its market.
"It has to do with how the health care landscape is constantly changing and how we're finding ways to adapt," he said. "We have to find a way to increase revenues through investments and at the same time make the overall infrastructure stronger."
The layoffs, he said, were a painful but necessary step.
"This is the last thing that anyone wants to do," O'Farrell said. "We had to reach a number and we tried a variety of ways to get there, and the longer we waited, the more positions would have been affected."
With about 2,500 full-time employees, L&M is one of the region's largest employers.
In the fiscal year that ended Sept. 30, L&M cared for 14,942 inpatients, about 400 less than the previous year. At the same time, it saw increases in emergency department visits as well as in outpatient visits for same-day surgery, lab work and imaging, but the income from those sources did not offset the loss from inpatients and the increases in expenses, O'Farrell said.
Bailey said that under the union contracts, employees have "bumping rights," meaning that if they receive a layoff notice, they can move into the job of a less senior employee, and that person would instead be laid off.
"We'll just handle this contractually and make sure people get all the benefits they're entitled to," he said. "Obviously it's tough, especially with the holidays right around the corner."
The union will provide assistance to help those affected find new jobs and "make sure people end up back on their feet," he said.