Mercy Hospital Cadillac is working to make up a $2.5 million budget deficit.
According to a memo released to employees, the hospital has reported a loss every month of the 2014 fiscal year. They are anticipating to end the fiscal year on June 30 with a $2.5 million loss.
Hospital officials cite many reasons for the loss including Medicare payment reductions, increased charity case and shifts from inpatient care to outpatient care. They say these forces are affecting the entire medical field in the U.S., not just Mercy Hospital Cadillac.
"Healthcare reform changes the payment methodology with the intention of forcing the industry to change the way care is delivered," the memo reads. "Mercy Hospital Cadillac, like all hospitals across the country, must redesign itself to survive the transition from payment based on illness and volume to payment based on wellness, quality and low cost."
The payment methodology the memo is referring to is the shift from inpatient care, which currently brings the hospital $0.59 for every $1 billed, to outpatient care which brings the hospital just $0.34 for every $1 billed. This means, the memo says, the hospital needs to reduce expenses by $1.75 for everyone $1 shift from inpatient to outpatient in order to stay even.
The hospital claims it is the first time in 14 years that they have reported a loss from operations.
"The good news is that our solid financial performance over the years coupled with prudent spending for capital purchases has enabled us to build a strong balance sheet," the memo reads. "We are financially viable."
The hospital says the leadership team is looking at any and all options to close the financial gap, including the option of lay offs.
"We are well aware of how difficult good-paying jobs are to find in Northern Michigan," the memo reads. "We understand the impact that losing a job can have on our co-workers. The decision to lay anyone off will not be made without a tremendous amount of dialogue, brain-storming and discussion."
At this time, no services are being closed, but hospital officials say that may happen if they cannot close the gap. They do say, however, that the hospital as a whole will "definitely not" close.
"The forces of healthcare reform may cause changes in some of the services we offer, but the hospital is too important to the community to close," the memo reads. "Our hospital is very stable financially. Today, we have a strong balance sheet with cash reserves to carry our expenses and we have very little debt, but to ensure our viability in the future, changes will be necessary."
Several northern Michigan hospitals have laid off employees in the recent weeks. Mackinac Straits Health System cited "state and federal mandates" as the reason to lay off 15 employees. McLaren Northern Michigan also cut 43 jobs, blaming the Affordable Care Act and the new provisions the CEO claims are hurting the hospital's bottom line.