About 25 Trios Health employees have lost their jobs as Kennewick’s public hospital district grapples to fix a financial crisis.
The series of layoffs that took effect April 1 are expected to save more than $2 million.
But facing net losses of more than $29 million since 2013, including about $17 million last year, as well as a crushing debt load that’s crippling cash availability, Trios has more difficult choices ahead.
“Trios Health has been in financial distress for some time,” said Interim CEO Craig Cudworth, who arrived in Kennewick on Feb. 1 to lead the turnaround project.
In January, longtime CEO Glen Marshall announced his retirement, effective June 30.
To address the problems, the Kennewick Public Hospital District board last year hired Quorum Health Resources, a Tennessee-based management consultant firm, to review Trios’ financial health.
The $395,000 contract with Quorum is for one year, and there is an option to renew another one to two years.
Cudworth, an employee of Quorum, is not compensated directly by Trios Health, but rather from the fees paid to Quorum. He is earning $250,000 a year, plus payment of reasonable expenses and two trips home to Virginia a month.
What Quorum’s ensuing 400-page report showed was clear: “Trios would not be viable unless we made some significant and difficult changes,” Cudworth said.
The report recommended the elimination of 115 full-time equivalent, or FTE, jobs.
With Trios’ work force restructuring, the layoffs eliminated 95 FTEs within the hospital and clinic groups.
The reductions were realized through attrition, or not rehiring positions when possible, changes to shift scheduling and hours worked, voluntary layoffs and layoffs.
Of the 95 FTEs, 21.8 FTEs, or 23 percent, were involuntary layoffs.
Trios has a total of about 925 FTEs. An FTE equals 2,080 hours worked in a calendar year.
The cuts to the remaining 20 FTEs to reach Quorum’s suggested reduction of 115 FTEs are expected to be made over the next several months through additional attrition, hourly adjustments relative to patient volumes/need, and additional opportunities identified by employees.
“We can be more efficient in providing care while preserving the quality and breadth of our services. I need to be very clear here: we will not cut corners when providing quality patient care and we will not cut corners when it comes to providing for the well-being of our patients and also our staff,” Cudworth said.
Nevertheless, the layoffs were difficult, Cudworth said.
“There’s nothing easy about this kind of work. There’s nothing good about this kind of work. It hurts. It is, however, necessary,” he said.
No patient services have been discontinued as a result of work force restructuring. Positions affected range from management and supervisory roles to nursing, technician and clerical jobs.
“Our employees are sad, fearful and some may be angry. We all feel this on a personal level. These are our friends, our neighbors and sometimes even our family members. One thing we can agree on is we want to stay here to serve the Tri-Cities for decades to come and to do that we must make some changes,” he said.
Affected hospital departments include ambulatory care unit/pre-operative services, central sterile, clinical engineering, foundation, health information management, laboratory, materials management, nutrition services, patient access, patient financial services, pharmacy, therapy services and volunteers.
Affected areas within the Trios Medical Group include administration, medical staff services, oncology, pediatrics, physician recruitment, primary care, sleep center, urgent care and women’s health.
So how did Trios get to this point?
The Quorum report points to four areas adversely affecting performance: debt, aggressive market competition, provider productivity and work force efficiency.
Trios is making $1.2 million a month in lease payments and has less than two days of cash on hand, when the industry standard is 120 days, according to Trios officials.
The $1.2 million per month is for the 30-year lease for the new hospital and Trios Care Center at Southridge. Trios leases the hospital from Wisconsin-based C.D. Smith for about $800,000 per month. Trios has been in default of those payments since Jan. 1.
The care center was financed via a separate lease with a payment of $390,000 per month. The lease holder is Physicians Realty Trust, also based in Wisconsin. Trios has no obligation to buy the facility after the lease term.
A meeting is planned with C.D. Smith and Trios’ other major lease holders in the near future to work on forbearance.
Cudworth called it a “perfect storm” with no one single person or thing responsible.
To address the financial crisis, changes currently in the works include negotiating acquisition/merger offers from four different organizations.
Signed confidentiality agreements with the companies means Trios can’t comment on who they are, Cudworth said. Trios has assembled a merger/acquisition steering committee to pursue this.
Filing for bankruptcy also is another real possibility, Cudworth said.
The Quorum report said the financial crisis followed the construction of the new hospital and care center. The original hospital opened in 1952.
More than 65 percent of hospital district voters rejected a 2007 proposal to build a new hospital. Trios maintains the facility is “much needed” in the community.
“The Quorum report concluded that our operations were not sustainable without significant financial and operational adjustments,” said Marv Kinney, hospital district board president, in a statement. “We are actively course correcting as it is our intention to continue to serve the Tri-Cities.”
Trios also is pursuing a $150 million loan from the federal Department of Housing and Urban Development to restructure its debt, but first must show six to nine months of financial improvement.
“This is an extreme situation for a very important community asset. The board has taken what I think is a courageous view in saying this is a problem and how do we fix it. We start with understanding where we are and where we need to go and how we get through,” Cudworth said.
Trios Health is the hospital district’s system of care which operates two hospitals: Trios Women’s and Children’s Hospital at its downtown Kennewick location and at Southridge.
Trios Medical Group, with nearly 100 employed physicians and providers, includes practices and services at eight Care Centers and three Urgent Care Centers.
The Trios Urgent Care Center at 3000 W. Kennewick Ave. closed April 9 to address intermittent staffing challenges there.
Trios officials say the closure is unrelated to Trios Health’s current efforts to restore the organization to financial health.
Over the past several months, this location has been without provider coverage sporadically due to illness and other absences, and could not accept patients during what would otherwise be normal business hours, according to a release.
The temporary closure is intended to help avoid any further unforeseen inconveniences to patients, as well as curb inefficiencies in facility operations as Trios continues recruiting efforts for additional providers at multiple urgent care locations.
“The timing of our staffing and recruiting challenges for urgent care services is unfortunate,” said Lorie Orozco, operations director for Trios Medical Group, in a release. “But at the end of the day we decided that it was in the best interest of our patients that we temporarily consolidate our urgent care operations while we continue on with provider recruitment. This is not a permanent closure nor elimination of services.”
Current providers at Trios Urgent Care Center—Central Kennewick, Dr. Sergio Flores and Susan Harp, ARNP, temporarily moved to the Trios Urgent Care Center—Columbia Center, at 7201 W. Grandridge Blvd., Suite 100 in Kennewick.
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