Catholic Healthcare West to reorganize, cut 350 jobs

Victoria Colliver

Friday, Feb. 9, 2001 | 11:35 a.m.

SAN FRANCISCO -- Catholic Healthcare West will cut about 350 jobs and change its organizational structure as part of a plan revealed Thursday to help the financially troubled hospital chain.

The San Francisco network, the largest Catholic hospital system in the western United States, suffered $317 million in losses from operations, specifically from providing patient care. Those losses, though, were narrowed to $42 million after factoring in income from investments and outside contributions.

CHW Chief Executive Lloyd Dean said the hospitals could not continue to operate with such heavy losses.

"This is a major reorganization for Catholic Healthcare West," said Dean, who took over last June. "The emphasis with this reorganization will be a leaner, meaner team, and a reduction in our overhead costs."

CHW has blamed many of its problems on issues hospitals are facing nationwide: low reimbursement rates from private and government health plans, anticipated costs of seismic upgrades, soaring pharmaceutical prices and the high cost of caring for the uninsured.

But Dean said the chain had an "overly complex and costly organizational structure" that included 10 regions in California, Arizona and Nevada, each with its own chief executive officer and board of directors. After the reorganization, there will be just four regions, each headed by a president who reports to Dean.

The restructuring is expected to save the company more than $100 million -- $26 million in salaries, $35 million in such areas as health benefits and workers' compensation, and an additional $40 million through aggressive collections of outstanding debt.

Dean said he does not expect any more job cuts or reductions in patient care. In fact, he said, he expects patient resources to increase as a result of the savings.

He was pleased with a four-year contract agreement reached late Tuesday with members of Service Employees International Union Local 250. Progress in those talks averted a three-day strike last week that affected Sutter Health's California Pacific Medical Center.

Aldrete said the company hasn't identified exactly what jobs will be cut, but the cuts will occur at the administrative and corporate level in the San Francisco and regional offices.

Walter Kopp, a San Francisco independent health care consultant, said the widely expected cutbacks were badly needed.

"The culture has not been as focused on the bottom line as it should have been," he said. "It's great that it's nonprofit, but it still has to make its (profit) margins to continue its mission. It just can't sit there and lose money."

Kopp said he was pleased the cuts do not appear to affect patient care. But to achieve long-term solvency, he said CHW needs to consolidate its power when it comes to negotiating reimbursement rates from health plans.

Dean said the system would not negotiate as one entity because different issues affect each region.

Ron Smith, spokesman for the Hospital Council of Northern and Central California, said CHW faces some additional costs because of its commitment to charity.

"They are committed to taking care of a lot folks who don't have any money. Obviously, when you have no margins to operate on, how do you pay for it?"

But Wanda Jones, an industry analyst with New Century Healthcare Institute in San Francisco, disagreed. "They don't do any more charity than anyone else. For one thing, they can't afford it."

Jones said CHW is under the same pressures as hospitals statewide. "All of the large systems are losing hundreds of millions of dollars. They (CHW) are in line with everyone else," she said.