Redding, California-based Mercy Medical Center workers had planned to picket outside the facility as they hope to sign a new contract before their parent company, Dignity Health, merges with Catholic Health Initiatives (CHI). The protest was canceled Tuesday afternoon and contract negotiations continue, according to the Record Searchlight.
About 760 employees, including housekeepers, surgical technicians and licensed vocational nurses represented by SEIU-United Healthcare Workers, are hoping to keep their jobs after the merger, which is slated to be completed at the end of June.
Dignity Health in a statement said it’s doing what it can to reach an agreement “that is fair to our employees, our patients and our organization.”
The Dignity Health/CHI deal signed in December will create the second largest nonprofit system in the U.S. The combined company will form a system with $28.4 billion in combined revenue across 139 hospitals in 28 states. The company will also employ 159,000 employees; Mercy Medical Center employees want to make sure they’re included in that number.
CHI recently reported encouraging numbers for Q2 of fiscal 2018. The Englewood, Colorado-based health system said reduced labor and supply chain costs, lower restructuring expenses and insurance payouts from Hurricane Harvey damage helped the quarter’s numbers.
Hospital and health system M&A activity has never been hotter. A recent Kaufman Hall report said 115 transactions totaled $63.2 billion in 2017, which was up from 102 deals and $31.3 billion in 2016. Don’t expect that to slow. Kaufman Hall predicts more megadeals in 2018.
Mergers often involve cutting costs, and labor expenses are some of the biggest drivers for hospitals. Rising labor costs have caused health systems to lay off staff, including 1,300 jobs at Tenet Healthcare. Labor costs may become a larger problem as the so-called incoming silver tsunami and physician and nursing shortages hit health systems.
It’s understandable that workers at this California hospital think their jobs may be on the line after the merger when the system looks for efficiencies. While health system M&A activity may lead to lower costs, a recent Center for Economic and Policy Research report said that M&A may hurt employees. The report said savings enjoyed through these deals have not gone back into staff training or improved wages. Instead, they’ve helped healthcare organizations’ finances.
The report found hospital worker wages are stagnant, and outpatient center worker wages dropped 6% over the past decade.
And mergers may make things worse: Health systems with more market share can create lower wage structures.
“While vertical integration of hospitals and other health providers can improve coordination and the quality of patient care, horizontal consolidation of hospitals into a relatively few healthcare systems in a local or regional market may decrease competition and increase anti-competitive practices that raise prices and revenues,” according to the report.