By JOSH JANNEY The Winchester Star
Dec 12, 2018
WINCHESTER — Faced with financial challenges, Valley Health plans to lay off 20 employees.
Valley Health President and CEO Mark Merrill sent an internal memo last week to the regional health system’s approximately 6,000 employees informing them of the situation. The memo, which was sent to The Star anonymously, says Valley Health is “experiencing financial headwinds” in the current fiscal year that have resulted in an operating loss of $4.2 million through November. In October, Valley Health identified the need to improve financial performance by $18 million on an annual basis.
“These headwinds, though prevalent throughout the health care industry, are affecting Valley Health more significantly than many peers,” Merrill wrote in the Dec. 3 memo, which had the subject line “Valley Health Financial Improvement Plan.”
Valley Health, a nonprofit organization, is parent company of Winchester Medical Center and five other regional hospitals.
In a statement to The Star on Tuesday, Valley Health said it remains “financially strong” but is being adversely impacted by rising costs and several “unfavorable revenue trends,” including flat and/or declining volumes, an increase in charity care and bad debt expense, rising costs for labor and supplies and external factors such as delayed Medicaid expansion in Virginia.
Merrill noted that Valley Health reported favorable financial results for fiscal years 2014-17. But in 2017 expense growth outpaced revenue growth for the first time in five years. “This trend has continued into 2018 with revenue growth of 1.8 percent while expenses have increased 6.3 percent,” he said in the memo.
Valley Health said in its statement that these trends are prevalent across the industry, as payment constraints and expense growth are challenging hospitals and health systems nationally.
According to IRS Form 990 filings, Valley Health had revenues of $986,757,666 and expenditures of $927,685,312 in 2016. In 2017, revenues were $1,035,467,293 and expenditures $989,125,698.
As part of a financial improvement plan, Valley Health leaders did a systematic review of operating costs, staffing patterns, revenue opportunities and efficiency improvements, which resulted in “difficult decisions to adjust the number of positions or hours worked for a combination of 20 full-time, part-time, and per diem positions in a variety of roles throughout the organization,” Tuesday’s statement said. “Valley Health is working with the individuals affected by these decisions during a transition period between now and February, when the changes will be completed. Valley Health anticipates that a majority of individuals affected will find opportunities in other roles within the organization.”
The affected workers have been notified.
Valley Health did not say what jobs are being eliminated or their salaries, but three are at Winchester Medical Center in administrative and support roles, according to a hospital spokesperson.
“Each of our team members are important to Valley Health’s success, but regrettably, we have to make tough decisions to remain sustainable,” Merrill said in his memo. “These decisions are not easy, but they are crucial. Our community expects us to keep costs down while still providing great care and service.”
Valley Health will continue to look at ways to use less expensive products that still provide quality patient care, Merrill’s memo said, as well as seek ways to work more efficiently with fewer employees and routinely seek ways to reduce costs.
While the base compensation for Valley Health’s 16 highest-paid employees increased from 2016 to 2017, there has been a decrease in other reportable compensation and benefits.
According to IRS Form 990 filings, the top 16 employees received a combined $8,944,911 in 2016. In 2017, that number dipped to $8,122,124. Merrill was compensated with $2.3 million in 2016 and $1.7 million in 2017.
The Valley Health Board of Trustees has a plan in place that places a portion of each executive’s compensation “at risk” based upon attaining certain quality, safety, service and operating performance targets, according to a hospital spokesperson. The differences in compensation from 2016 to 2017 “represent different performance levels of the leaders in attaining goals set for the plan year.”
In 2013, Valley Health laid off 17 employees, reduced the hours of eight workers and eliminated about 100 vacant positions. In 2014, it laid off 33 employees.
Merrill noted in his memo that Valley Health experienced similar challenges five years ago but was able to reverse them and achieve financial improvement.
“To mitigate the financial impact of these factors — and others — it will be critical that ALL members of the Valley Health team adopt a new fiscally conscious mindset,” Merrill told Valley Health employees in his memo.
