IN an effort to balance its budget, the University of Pennsylvania Health System has eliminated 1,100 positions and laid off 450 employees. Most of the layoffs are at the management level–in such departments as finance, human resources, public relations, marketing and facilities management–and nearly half of the eliminated positions were already vacant. None of the system’s 5,000 academic employees are affected.
The Health System, which employs a total of 18,000 people, ran an operating loss of $90 million in fiscal 1998, though that did not take into account nonoperating income from investments, which brought the deficit down to $20 million. It was expected to show another large deficit by the end of the 1999 fiscal year, which ended June 30.
“This is a very sad day for all of us” at the Health System, said Dr. William N. Kelley, CEO of the Medical Center and Health System and dean of the School of Medicine. He noted that the combination of government cutbacks; denied, delayed or reduced payments from insurers; and increased amounts of uncompensated care is “crippling hospitals and health systems nationwide.” But, he added, “we remain confident that the reductions will not have a negative impact on the quality of our patient care.”
By 2002, Penn will be receiving $175 million less each year from Medicare than it did in fiscal 1998, when the Balanced Budget Act began slashing Medicare payments. Ironically, said Kelley, “we’re experiencing a record volume of patients during these financially-turbulent times.”
Gavin Kerr, the Health System’s vice president for human resources and strategic planning, said that the underlying philosophy in making the cuts was to “protect patient care at all costs,” and added that the Health System was attempting to renegotiate contracts with vendors and “eliminate waste wherever we can.”
Although compensation packages to the laid-off employees will keep the short-term savings low, administrators say the cuts will eventually save the system $50 million a year. Kerr said the Health System had so far found new positions for 85 of the laid-off employees, some within the Health System and some in other fields and regions, and would continue to work hard to help the rest.
