Mercy Healthcare Sacramento will become part of a 15-hospital system stretching from Redding to Merced in a restructuring to be completed by June 30 by its parent company, Catholic Healthcare West.
In Feb. 8 announcement, the San Francisco-based CHW, the largest Catholic hospital system in the western United States, also said it will cut about 350 jobs in an effort to recover from hundreds of millions in losses.
CHW has suffered $318 million in losses from operations in its fiscal year ended June 30 and continued losses the first quarter of fiscal 2001, specifically from providing patient care. Those losses were narrowed to $42 million after factoring in income from investments and outside contributions.
CHW officials in a prepared statement said streamlining operations will save $100 million annually and help the company get back in the black.
“Quite simply, CHW can no longer afford to operate as we have in the past if we are to remain true to our values and mission,” said Lloyd Dean, chief executive officer, who joined CHW in June 2000.
The health care system, which is owned by nine orders of women religious including the Sisters of Mercy of Auburn, will reorganize into four regional divisions, down from 10 now managing 47 hospitals in California, Nevada and Arizona. Each region will be headed by a president who reports to Dean and have its own chief executive officer and board of directors.
Mercy Healthcare Sacramento’s six hospitals—including Mercy General Hospital in Sacramento, Mercy San Juan Hospital in Carmichael and Mercy Hospital of Folsom—as well as Mercy Medical Centers in Mount Shasta and Redding and St. Elizabeth Community Hospital in Red Bluff, will become part of the new Northern California division.
Michael Erne, chief executive officer of Mercy Healthcare Sacramento, will be leaving his post for Phoenix, where he will head the new Arizona/Nevada division. Ed Schroeder, who is currently president and chief executive officer of St. Joseph’s Regional Health System in Stockton, was named to head the Northern California division.
Mercy Sister Sheila Browne, president of the Sisters of Mercy of Auburn, said she supports the restructuring effort “because the reason we’re doing it is to preserve our health care mission. It will enable CHW to compete more effectively in the health care environment today, which is changing rapidly.”
Sister Browne, who serves on CHW’s corporate board, added that the hospital system “has had a complex structure that has made timely decision-making difficult, if not impossible. Now we can act more as a system to make decisions more effectively and more timely for the good of our mission.”
She said that the Mercy Sisters’ relation to the six Mercy hospitals in Northern California as sponsor will remain the same.
CHW has blamed its problems on issues plaguing hospitals statewide, including low reimbursement rates from health plans and Medi-Cal, anticipated costs of seismic upgrades, rising pharmaceutical prices and the cost of caring for the uninsured.
In addition, Dean said, CHW has had “a complex organizational structure that has made decision-making less efficient for our core operation: acute hospital care.”
“The emphasis with this reorganization will be a leaner, meaner team, and a reduction in our overhead costs,” Dean said.
Bernita McTernan, senior vice president of sponsorship and mission services for CHW, noted that for 145 years, CHW hospitals “have been an integral part of the health care safety net in the communities in which we operate, delivering high-quality and affordable medical services with a special emphasis on caring for the poor and underserved.”
“This restructuring will ensure that CHW is on financially solid ground so that we can continue to deliver on our mission today, tomorrow and in the future,” she said.
The company expects to save more than $100 million through the restructuring, including $26 million in salaries; $35 million in health benefits, workers’ compensation and information management infrastructure; and $40 million by collecting outstanding debt.
“Ultimately, we expect the improved financial performance and cash flow will lead to an upgrading of our own bond ratings,” said Michael Blaszyk, executive vice president and chief financial officer for CHW. “This will give CHW access to capital at advantageous interest rates for capital improvements and future projects to benefit the communities in which we operate.”
CHW spokeswoman Lori Aldrete said the job cuts will occur at the administrative and corporate level in the San Francisco and regional offices and “will not affect the delivery of patient care.”
CHW currently employs nearly 40,000 health care professionals and support personnel in California, Nevada and Arizona. Officials have yet to disclose how many administrative and support jobs may be lost in the Sacramento region in the restructuring.
In an unrelated announcement Feb. 12, CHW and the California Nurses Association said they had reached an exclusive agreement setting forth a process for increased opportunities for CNA representation for thousands of unrepresented nurses in California, Nevada and Arizona.
The “organizing and recognition” agreement is also intended to “establish new mechanisms for addressing the serious issues confronting health care, particularly hospital services, the availability of registered nurses and the practice of the nursing profession,” according to a press release.
Key elements of the agreement include guidelines for behavior during organizing campaigns, assurances of registered nurses’ rights to representation regardless of citizenship or immigration status, and an expedited process for conducting private representation elections conducted by a neutral third party.
CNA, the largest organization of registered nurses in California with 35,000 members, already represents some 5,000 registered nurses currently working in CHW hospitals, the largest group of unionized CHW employees.
CNA executive director Rose Ann DeMoro called the agreement “unprecedented” in health care. “It is the first multi-state hospital pact in the nation that significantly changes the ground rules for registered nurses seeking representation while continuing their patient advocacy rights and obligations,” she said.