June 3, 2018
100 layoffs announced at Pikeville hospital
PIKEVILLE MEDICAL CENTER looking at placing facilities in Martin County, Whitesburg…
A little more than one year ago, Donovan Blackburn left his position as city manager of Pikeville to become the assistant CEO for Pikeville Medical Center. In January, it was announced that Walter E. May was leaving his position as president and CEO of the hospital and that Blackburn would be taking over as CEO.
Last week, the financial firm Moody’s Investors Service announced it had downgraded the hospital’s bond rating two levels, from A3 to Baa2, revising the outlook for the hospital’s bond performance to negative.
In making the decision, according to a statement, Moody’s took into account a “large and unexpected decline in operating performance in fiscal (year) 2017 and expectations for similar results in fiscal (year) 2018.”
However, Blackburn told the News-Express in an interview this week the bond rating downgrade has more to do with where the hospital has been than where it’s going. And, he said, the hospital’s outlook will ultimately be “good” as it adjusts to fulfill its mission of providing “world class health care in a Christian environment.”
“It’s a speed bump,” he said of the downgrade, adding other medical institutions nationwide are also facing challenges. “If we hadn’t made some of these decisions (under the past administration), we would be probably one of the few institutions that hadn’t lost anything. By correcting these practices and some of these past decisions, we will become financially stronger than we’ve ever been before.”
Part of that correction came down Friday in the form of layoffs of a total of 99 employees from the hospital. Blackburn said that number is combined with approximately 30 others who have left due to attrition over the past few months.
Various factors contribute to slide
Blackburn said that one thing happening at the national level is that there was a shift in healthcare that began impacting hospitals, particularly in rural areas, last year. The change, he said, is hospitals’ ability to get reimbursed through Medicaid became more difficult.
However, a bigger factor, he said, were business decisions made in the wake of a record financial year for the hospital.
“In 2016, the hospital had the best financially performing year that it ever had,” he said. “Part of the reason for that is we opened a new clinic at the end of 2014-2015. We had a phenomenal year in 2016, and then, all of a sudden in 2017, we had the worst year we’ve had in over 20-30 years.”
Blackburn said the hospital lost money in 2017, and is on target for the same trend in 2018, which had a “substantial impact” on the bond rating.
“Because of that percentage of increase (in 2016), the previous administration elected to hire as if that growth was going to continue the following year,” he said. “That growth never came. We still had growth, but it wasn’t of that magnitude.”
Not preparing for that slowdown led to costly decisions, Blackburn said.
“They ended up having to bring in traveling nurses, and you end up paying an exorbitant amount of money for travelers, and they had to bring in locum physicians,” he said. Locum physicians, Blackburn said, are temporary doctors who essentially work for-hire and are employed through a company.
Blackburn said when the hospital employs a locum physician, it is required to pay the doctor’s salary, which is usually set at a rate higher because it is based on those set in other areas. Also, he said, the hospital pays the company which recruits the doctor, as well as the doctor’s travel and other expenses.
Travel, temporary caregivers cost
Blackburn said the influx of traveling nurses led to the the previous administration becoming fearful of losing local staff and reacting.
“A large across-the-board increase in salaries took place, and that had a tremendous impact on the organization,” he said. “We have close to 900 nurses, so when you give 900 people an increase, you feel it on the bottom line.”
The practice of using travel nurses, Blackburn said, has several impacts.
“One: It costs you more,” he said. “Second: The continuity of care isn’t there.”
For those reasons, Blackburn said, the hospital has changed direction.
“We have no traveling nurses,” he said. “We have only locum physicians that we’re using for hospitalists (in-house doctors).”
Blackburn said, however, that the hospital does have several offers in to physicians in an attempt to replace the locum physicans
“So we’ve stopped a lot of that cost,” he said.
However, the hospital will still need nurses.
“Part of the problem that we have … is that there is a nursing shortfall nationally,” he said, adding that approximately 170 nurses left the hospital last year due to various reasons.
As a result, he said, the hospital has built up its relationships with local institutions of higher learning, including the University of Pikeville.
“In essence, we need more nurses to graduate,” he said.
One of the results of those talks, he said, was UPike’s decision to increase the size of its nursing program to accommodate 60 students, instead of the 30 it originally could serve.
That, combined with the nurses graduating from institutions such as Big Sandy Community and Technical College, will give the hospital a pool of 90 new, local nurses from which to hire each year.
“By consistency in policies and practices, we won’t need 170 nurses next year, we’ll need 90 nurses next year,” he said. “By bringing in new nurses, you create continuity of care, and you actually lower costs.”
Also, he said, the hospital is only using locum physicians as hospitalists, and has made offers which may fill those positions.
A change in focus
Another factor feeding into the loss the hospital saw in 2017, Blackburn said, was a decrease in the use of certain, smaller services. Certain services, due to the number of patients locally, are more heavily used and, as a result, have a greater impact on the hospital’s bottom line.
Oncology and cardiology, two of the hospital’s most heavily-used services, were heavily impacted by several factors under the previous administration.
“Last year … we, in essence, lost our entire oncology department,” he said. “So we’ve spent the last six to eight months building that program back up. Right now, we actually have more oncologists than we’ve ever had and the quality of our oncologists is phenomenal.”
Those patients who left PMC to go to outlying hospitals in the past, he said, are beginning to return to the hospital as they see the quality of care increase.
“We’ve got equipment that no other hospital in the state of Kentucky or any hospital in a five-state radius has,” he said.
The hospital, he said, is eyeing further expansion into communities, such as Whitesburg and Martin County.
“We’re growing services to offer because we are a feeder program, as the regional healthcare provider with over 22 services that nobody else offers. So the ARHs and Highlands, we work with one another, sending their patients to us so they don’t have to travel all the way to Lexington,” he said.
The hospital is undertaking a $27 million expansion, which was begun under the previous administration, in its cardiology program.
“The people will be able to stay home for the things that impact people in Eastern Kentucky — heart disease, cancer and pulmonary disease,” he said. “That’ll generate not only business, but better quality care for people in the region.”
However, he said, there was also a change to eliminate or reduce the “side” businesses the hospital had, including the closure of the Landmark Inn Restaurant and Mark II lounge.
“We were losing $600,000 a year just on those two service lines,” he said. “There is a need for the hotel. We’ve put a lot of money into it over the years and we have people who still travel for the hospital. We’ve cut the Medical Leader (newsletter), which saved us $300,000 a year. We don’t need to be in the hotel business. We don’t need to be in the newspaper business.”
Making different decisions
Blackburn said management is making decisions differently now, including reversing a decision the previous administration made to hire more than double the number employees it was estimated it would have needed to actually deal with the growth in 2016.
“Through attrition, we have trimmed about 210 employees,” he said Tuesday, adding that, last month alone, that trimming resulted in $680,000 in positive impact on the hospital’s bottom line.
Hiring, he said, is focused on patient care positions, and Friday’s layoffs were made up of approximately 90 percent non-clinical employees, many of whom may be brought back as allowable by expansion.
By Russ Cassady
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