Citing reduced reimbursements from Medicare and Medicaid and other financial pressures, Mercy announced Thursday it would be going through "restructuring" that includes layoffs.

The health system issued a statement saying less than 1 percent of its 45,000 workers would be affected.

Sonya Kullmann, spokeswoman for Mercy Springfield Communities, confirmed that the restructuring spans Mercy's four-state health care service area. Mercy is headquartered in the St. Louis region.

It's not clear where jobs were being eliminated. On Thursday, Mercy would not release the number of Springfield employees affected or describe the types of roles they served. KFSM in Fort Smith, Arkansas reported that Mercy plans to lay off 20 employees in that area.

The statement said the hospital, one of Springfield's biggest employers, will be "reducing targeted positions" and moving some employees to new roles.

Employees who lose their jobs will be given severance packages according to their position and length of time with Mercy, and they'll get help finding new jobs.

Kullmann said Mercy is not implementing a hiring freeze. The number of positions on Mercy's careers website — some 2,300 listings — declined slightly from Wednesday, when word of layoffs began circulating around Springfield, to Thursday.

The change in job listings "does not directly correlate to the reductions," Kullmann said by email. "That number fluctuates daily because we are always filling positions and posting openings. However, some of our current co-workers may be taking some open positions. We always hope the new position they find can be within Mercy."

Mercy has more than 12,000 employees, according to a count the organization provided the Springfield Business Journal last fall. Kullmann said that Mercy's total headcount fluctuates on an almost daily basis, much like its job listings.

Mercy's financial pressures are not unique, said Dave Dillon, a spokesman for the Missouri Hospital Association.

"This is not something that affects one hospital or one hospital system," Dillon said, commenting generally because the association serves all Missouri hospitals. "There is tremendous financial pressure on hospitals."

Margins are "very tight," Dillon said, and a "significant portion" of Missouri hospitals operate with negative margins.

Dillon said that a consumer website published by the association, FocusOnHospitals.com, records that Mercy, a not-for-profit organization, has faced more than $125 million in unreimbursed Medicare and Medicaid costs.

The Affordable Care Act, passed into law in 2010, made cuts to Medicare payments. That money was supposed to help fund the expanded coverage in the law.

But like several other states, Missouri has chosen not to expand Medicaid, a part of the ACA that the U.S. Supreme Court made optional in 2012.

"Without Medicaid expansion, Missouri has taken cuts without reaping the benefits of additional covered lives through the Medicaid program," Dillon said.

Meanwhile, Medicare, the federal health insurance program for Americans ages 65 and older, has its own problems.

"Medicare also took a hit in budget negotiations during the end of the Obama administration," Dillon said.

When Congress and the administration couldn't make a deal, federal payments for Medicare were sequestered, meaning the payments owed by the government to hospitals — already low — were cut by 2 percent more than the level authorized by the program.

Those costs to hospitals pile up on top of "uncompensated care costs" — in other words, bad debt owed to the hospital — along with charity care.

Mercy's most recent system-wide financial report, covering the six months ending Dec. 31, 2018, put the level of bad debt at $89.6 million. Charity care cost $64.8 million.

Health care labor markets are also "very competitive" when it comes to credentialed workers like RNs and physicians, Dillon said.

"Hospitals need more of these workers, not less," Dillon said. There's a shortage of professionals like nurses, therapists and technicians, all of which are high-vacancy, high-turnover fields, according to MHA research.

Credentialed health care workers have more leverage in a salary negotiation than most other workers in the economy, Dillon said. Wage pressure — more than half of a hospital's cost base — creates pressure elsewhere. When vacancies have to be filled by temporary staff or traveling nurses, Dillon said it costs double what it would cost to hire a permanent worker.

"A majority of the costs isn't Band-Aids and aspirin," Dillon said. Supplies are expensive, but not as expensive as necessary front-line caregivers.

Other layoffs, closings and openings

Mercy has had several layoffs in recent years. In March 2010, it reduced 226 positions, according to a report by the St. Louis Post-Dispatch.

In June 2014, Mercy laid off 220 workers, 42 of them in the Springfield area, the News-Leader reported. The following June, the Mercy system had 300 to 350 layoffs.

Late last year, Mercy closed small hospitals in Fort Scott, Kansas and El Reno, Oklahoma, according to reports by the Post-Dispatch and KWTV.

But it broke ground on new facilities in Springfield and Republic in December 2018 after opening "phase I" of a new heart hospital the month before.

Mercy also plans to open a new facility in Columbia, Illinois, the St. Louis Business Journal recently reported.

Mercy's full statement from Thursday

"Mercy, along with other health care providers, continues to be challenged by reduced reimbursement for the services we provide, especially from Medicare and Medicaid which do not fully cover the costs of care. At the same time, we are experiencing increased expenses for labor in an increasingly competitive job market, as well as rising costs for drugs and supplies.

"While we will not compromise the outstanding quality of care we provide to our patients, we must work as efficiently as possible. That is why are restructuring this week, reducing targeted positions and moving some co-workers into new roles. The changes affect less than 1% of Mercy’s 45,000-member workforce.

"Our transition plan for co-workers who are impacted reflects Mercy’s commitment to dignity and compassion. Our hearts and prayers go out to our affected co-workers and their families. They will receive help finding new jobs and a severance package including compensation and benefits based on their position and length of service."

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