Health Care Costs and St. Vincent and Health Care & Life Sciences and Health Care & Insurance

St. Vincent gives big execs the ax; current job cuts just 'first pass'

July 1, 2013

The job cuts at St. Vincent Health last month were so extensive that even two of the hospital system’s C-suite executives got the ax. And one local hospital accountant predicts these cuts are just the first pass that St. Vincent—and all its hospital peers—will have to make.

St. Vincent laid off more than 850 workers, or about 5 percent of its work force. Based on its most recently reported financial data, a cut of that size will slash its labor expenses by about $55 million per year.

Dr. Jon Rahman, the chief medical officer for the 22-hospital system, was let go. Also getting a pink slip was Dr. Alan Snell, St. Vincent’s chief medical informatics officer, who oversaw the digitization of St. Vincent’s processes.

Neither Rahman nor Snell could be reached for comment. St. Vincent declined to make anyone available to comment on the dismissal of such high-ranking executives, or to disclose if any others were let go.

But it’s no surprise to Indianapolis hospital accountant Ed Abel.

“What they were trying to do was to minimize the impact on patient care. That means the first people to go are the non-patient-care folks,” said Abel, director of the health care practice at Blue & Co. He added, “As a general statement, that is going to be the area that is pared in all hospitals, not just St. V’s.”

Indeed, St. Vincent’s layoff is just the largest and most public to date among Indianapolis’ hospitals. All the other systems, Abel said, have also cut staff as they try to reduce expenses 15 percent to 25 percent.

“They’re all getting to the point where they don’t feel the reimbursement is going to be there,” he said.

Abel said he’s never seen a hospital system lay off its chief medical officer. On the other hand, it’s a recent phenomenon that hospital systems paid a doctor to hold that position as a full-time administrator—rather than as a job they do as an add-on to treating patients.

Rahman’s departure does save St. Vincent a chunk of money. In the 2011-2012 fiscal year, the most recent reported publicly, Rahman received total compensation of $480,621, according to documents filed with the Internal Revenue Service. St. Vincent does not report compensation information for Snell publicly.

But interestingly, that pay package doesn’t rank very high at St. Vincent. In 2011, he was one of seven full-time administrators receiving more than $480,000 in compensation. At the top of that heap was CEO Vince Caponi, who received total compensation of $2.5 million.

St. Vincent also got Caponi’s pay off its books last month, as he stepped down to take a position with Ascension Health Alliance, the parent organization of St. Vincent Health. St. Vincent is now looking for a new CEO.

Abel said letting executives go helps cut costs quickly. But he predicted that caregivers will be hit during St. Vincent’s next round of cost cuts. And he expects the same at Indianapolis’ other hospital systems.

“At some point, they’re going to hit the patient care areas,” he said. “I don’t think anybody has really fully realized it.”

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