Practice Management News

Brigham and Women’s Offers Buyouts to Lower Healthcare Costs

About 1,600 Brigham and Women’s employees received a buyout offer as the hospital continues to reduce healthcare costs.

Brigham and Women's Hospital in Boston aims to lower healthcare costs via employee buyouts, a local news source reported

Source: Thinkstock

By Jacqueline LaPointe

- Boston-based Brigham and Women’s Hospital recently presented 1,600 employees with a voluntary buyout option in an effort to control the facility’s healthcare costs, a local news source reported.

Hospital officials reassured reporters at The Boston Globe that Brigham and Women’s was still profitable, collecting about $2.7 billion in revenue and $93 million in operations during the fiscal year that ended on Sept. 30, 2016.

However, lower claims reimbursement rates under healthcare payment reforms and higher labor and operational costs caused officials to offer the voluntary buyout.

The hospital is also managing debt from several recent projects, including a $510 million new building that opened last year and a $335 million EHR implementation project from 2015. The Epic EHR implementation initiative notably came up $53 million short of its $121 million surplus expectation in 2015.

“This is a challenging time for the healthcare industry,” a Brigham and Women’s spokesperson stated in an email to RevCycleIntelligence.com. “Our expenses continue to rise while constraints by government and payers are keeping our revenues flat. This is negatively affecting our financial health, and we need to work differently in order to sustain our mission for the future. Alongside ongoing efforts to create efficiencies, we are at a point where we also need to right-size our workforce.”

With their sights set on reducing healthcare costs, the hospital offered voluntary buyouts to workers 60 years or older. The buyout also includes one year of base pay.

About 5,300 physicians, researchers, and other staff holding MD or PhD degrees will not be eligible for the buyout, the report added. Boston Globe reporters noted that reducing the number of physicians employed would disrupt patient access to care. Research staff tend to receive compensation via outside grants and do not add to the hospital’s payroll costs.

The buyout option aims to reduce labor costs that currently make up 66 percent of the Brigham and Women’s costs.

“This will help us to reduce our full-time employee count, respect and honor those whose careers are winding down and create opportunities for emerging leaders within the organization,” the spokesperson added. “We owe it to our current patients – and those who will need our care in the future – to tackle the unprecedented financial challenges we are facing so that Brigham Health is here to care for patients, transform medicine and educate future healthcare professionals for generations to come.”

In addition to the buyout plan, officials also told the local news source that they have also made efforts in other areas to decrease healthcare costs. The hospital has left open positions vacant, standardized their healthcare supply chain, and redirected some patients to their lower-cost Faulkner Hospital when appropriate.

Hospital leaders plan to further cut healthcare costs in the future through potential layoffs. Although they do not know exactly how many workers could be laid off later this year. The number will largely depend on how many employees accept the voluntary buyout offer.

Other hospitals have also recently turned to staff reductions as a key method for lowering healthcare costs.

Mercy Hospital in Portland, Maine also offered employees a similar buyout option in July 2016, according to a Portland Press Herald report. The hospital of 1,500 full-time workers at the time gave the option to 99 nurses and other employees except for physicians, nurse practitioners, physician assistants, nurse anesthetists, managers, and employees who work with patients with eating disorders.

The small Maine hospital went on to lay off 31 employees about two months after the voluntary buyout offer, the news source reported.

Buyouts at smaller hospitals are not uncommon. But Boston Globe reporters pointed out that the Brigham and Women’s offer showed that even large, high-quality hospitals are feeling the pressure from healthcare payment reform and other market forces.