St. Vincent Health said late Friday afternoon that it has made cuts that will reduce its labor costs by 5 percent—a move that will eliminate about 865 jobs in the state.
St. Vincent employs about 17,300 at its 22 hospitals across Indiana. It was not clear how many workers were losing their jobs within the Indianapolis area. However, people familiar with the cuts said the reductions were heavy in the administrative ranks, and many of those jobs are on the city's north side.
The reductions are meant to save money as Obamacare and Congressional budget cuts promise to take a bite out of hospital reimbursement rates. At the same time, St. Vincent’s parent organization, St. Louis-based Ascension Health Alliance, is pushing to boost operating profit margins across its national chain of Catholic hospitals.
All hospitals are trying to cut expenses drastically, by as much as 25 percent, in order to prepare for a future they expect to be far more austere than the past. With personnel typically accounting for 60 percent of hospital expenses, staff reductions are an inevitable part of that process.
But St. Vincent’s layoff announcement is the largest single reduction to date among Indiana’s largest hospitals.
"We know the lives of many people have been affected by our decisions, and we made it a priority to treat all employed and contracted associates with kindness and respect," Vince Caponi, the outgoing CEO of St. Vincent Health, said in a statement.
"As these decisions were difficult, we are confident that our ministry will be positioned to continue to lead in the areas of quality, safety and patient experience in service to our communities across the state. We are praying for all associates and their families."
Indianapolis-based St. Vincent, which is the second-largest hospital system in Indiana, signaled the cuts were coming in May. It is the sixth-largest employer in the state.
In the 12 months ended June 30, 2012, St. Vincent had revenue from operations of $2.3 billion. Its income from operations was $158 million. It has yet to release financial results for its fiscal year, which will end Sunday.
The 2010 Patient Protection and Affordable Care Act, also known as Obamacare, called for $155 billion in cuts to hospitals’ Medicare payments over 10 years. Then the fiscal-cliff deal on Jan. 1 of this year chopped out another $15 billion. And the budget sequester, which hit March 1, looked ready to sap another $10 billion.