Northeast Hospital Corp. has so far eliminated seven full-time jobs at Addison Gilbert Hospital, and may soon close two outpatient programs as part of the health care system's current $15 million cost cutting plan, CEO Ken Hanover has told Gloucester city councilors.
The job cuts in Gloucester are part of an ongoing round of 100 layoffs throughout the hospital chain — which includes Beverly Hospital and BayRidge Hospital in Lynn — to adjust to falling revenues and a rapidly evolving national health care system.
Asked by councilors during their Tuesday night meeting whether he expects this round of cuts at Addison Gilbert to be the last in the company's current downsizing, Hanover declined to discuss future plans, but said that, with the pace of change, more cuts are not unlikely.
"I wish I could say it is over," Hanover said, "but it probably isn't."
The seven "full-time equivalent" jobs being eliminated at Addison Gilbert will likely involve more than that number of actual workers, because some of them have part-time positions.
The layoffs in Gloucester compare with 47 full-time equivalent jobs eliminated so far at Beverly Hospital in the latest round of cutbacks.
Of the total $15 million budget gap Northeast identified in its fiscal 2011 budget, which begins in October, around $5 million of the cuts needed to fill it are expected to come from layoffs.
When the current round of layoffs is complete, Addison Gilbert will employ 334 people, compared the 347 workers it had in April.
Hanover would not say which outpatient programs Northeast is thinking of closing at Addison Gilbert, because they may still be kept open, but he said that both had seen diminishing usage by patients.
Overall, the need to cut costs has been driven by a drop in the number of patients admitted to Northeast's hospitals, on top of reductions in the amount the government and insurers reimburse health care providers.
Hanover said that total patient discharges at Addison Gilbert — a figure derived from the number of admissions, minus the number of deaths — are down 6.6 percent over last year.
The smaller reimbursements are part of a larger shift away from the traditional fee-for-service health care payment model and toward a value-based system.
These changes and increased competition from Partners HealthCare, the Massachusetts medical giant that recently opened a new outpatient center in Danvers, appear to have opened up a structural gap in Northeast's finances.
Despite shedding $15 million in spending, Hanover said Northeast would have just a 2 percent operating margin in next year's budget and expects to be running a deficit by 2013 without further changes.
The current round of layoffs at Northeast, which were first announced to employees at the end of April, comes after the company eliminated 22 middle managers in November of 2009.
To help the system navigate the rapid changes in the health care market, Northeast hired FTI Consulting to analyze its operations and recommend where and who to cut.
Northeast will not release the consultant's report, but Hanover said only some of the recommendations have been acted on so far.
Although the workforce at Addison Gilbert has shrunk, Hanover was adamant Tuesday night that core services at Cape Ann's only hospital, including surgery and emergency services, has not been diminished.
He said the cuts will not lead to more emergency patients being diverted to Beverly Hospital, a recurring fear among many in Gloucester who have watched services at Addison Gilbert shrink over the years.
Since he took over control of Northeast Health System last year, Hanover has said the most important factor in maintaining the future health of Addison Gilbert is having Cape Ann residents use the hospital.
"The future of the hospital relies on the community to utilize it," he said Tuesday night.
Last spring, he launched a campaign to bring six new primary care physicians to the hospital, the optimal number, he said, to serve the island's population and generate a healthy volume of referrals.
Hanover said Tuesday that, so far, Addison Gilbert has been able to attract one new primary care doctor.
Patrick Anderson can be reached at 978-283-7000, x3455, or firstname.lastname@example.org.