Advocate Health Care preps $200M cuts amid financial pressure
- Advocate Health Care is prepping to make $200 million in cuts, Crain's Chicago Business reported.
- The cuts stem from financial pressures including a rise in uncompensated care, according to the system's chief operating officer. The news follows the reveal from last month that the system has entered a hiring freeze until at least July.
- In March, the system put the idea of a merger with Northshore University HealthSystem to bed. Advocate CEO Jim Skogsbergh stated cuts were not related to court battles over the attempted merger.
While it is not clear which services or jobs may be affected, all seem to be on the chopping block.
Hospital systems overall have been feeling the pain of rising expenses and declining revenues/admissions. The healthcare industry has continually been adding jobs to the sector over the years. Last month, the sector added 14,000 jobs and it generated an average of 32,000 jobs per month in 2016. With some estimates showing 16 non-clinical healthcare workers for every physician, there is bound to be some redundancy or room to reduce.
In fact, Advocate's annual growth rates of employee compensation surpassed revenue growth by 8% in 2016, Axios found.
The failed Northshore merger could have sparked new life into Advocate as mergers tend to happen when hospitals are feeling financial pressures. The Advocate-Northshore merger would have created the largest nonprofit health system in Illinois with 16 hospitals, 4,000 beds and 45,000 employees treating more than 3 million patients annually, which could have in turn helped with negotiating prices with insurers.
Still, a potential merger is not currently off the table for Advocate.
The cuts should be a splash of cold water to healthcare systems as Advocate is Illinois' largest hospital network. Even big regional players need to take a realistic look at their budgets and financial outlook.
- Healthcare Dive Advocate-NorthShore merger is off
- Healthcare Dive Advocate Health pays whopping $5.55M to settle alleged HIPAA violations
- Healthcare Dive The care delivery times are 'a-changin': The need for competition in a consolidating hospital industry
- Crain's Chicago Business Advocate plans $200 million in cuts
- The New York Times Our costly addiction to health care jobs
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