Loyola University Chicago

Office of the President

Important LUHS News to Share

May 12, 2009

Loyola Community,

I wanted to update you on the current situation at the Loyola University Health System (LUHS) and share what it means for the University. Since last fall, LUHS has taken several actions in response to its financial condition. Given that the situation has not lessened, LUHS finds itself in a difficult financial circumstance that must be immediately addressed by working to increase revenue and reduce the cost of providing health care services.

Today, LUHS announced that it reducing its workforce by 372 staff positions from its Medical Center. In addition, due to reduced clinical revenue, the number of employees at the Stritch School of Medicine (SSOM) will be reduced by 71. Also, approximately 150 staff positions from SSOM will be transferred to the Medical Center.

The LUHS announcement does not impact the jobs of University faculty and staff members on the lakeside campuses or those at the Marcella Niehoff School of Nursing.

As I told you at this spring’s State of the University address, the University’s financial condition remains stable. We have met our May 1 recruitment goals but we continue to watch enrollments very closely. We will maintain our conservative approach to budgeting and other financial policies that prepare the University and our students to face future economic challenges. As I said in the address, we won’t really know the size of the new class until school begins in August. If needed, we are prepared to implement a contingency budget for Fiscal Year 2010 to make sure we meet our financial obligations and support our academic mission. Meeting the needs of our students and the entire Loyola community continues to be our top priority.

I hope this information is helpful. Please read the memo from Dr. Whelton that was sent to LUHS employees below.

Dear Colleagues,

All of us came to Loyola for a reason. Some of you came because you were impressed by Loyola’s reputation for excellence or its mission of service. Some of you came to establish a career in nursing or medicine or research. For others, maybe it was just the right job at the right time.

No matter why you came to Loyola, it cannot have taken long to recognize that this is a health system with a unique strength of spirit. Early in my tenure I began the work of developing a strategic plan. I knew then, as I know now, that your commitment to our vision and mission and our strength of spirit would lead us to great success in the future.

We are at our strongest when our spirit and resilience are tested. I am asking you to be strong now, because this is one of those times.

You recall that beginning last fall, when we were faced with some harsh economic realities, we had to steel our resolve and make some difficult decisions so that LUHS would end the year in the black. In December, we eliminated 200 positions (97 people, 103 vacancies), curtailed the use of contract/agency labor and dramatically reduced our reliance on overtime. That was no easy task for any of us. In January, we asked you to volunteer for time off without pay and many of you responded to that request. In March, we instituted mandatory time off without pay, believing fully that this would help us meet the economic challenges facing our system and help us end the year in the black. We believed firmly, based on the information we had at that time, that we had finally overcome the financial challenges facing LUHS.

Since then our new interim chief financial officer has brought new information to light - and, frankly, it is not good. We face the prospect of more than a $50 million loss from operations at year’s end if no action is taken. Our interim CFO is using more stringent forecasting models that more accurately estimate collectable revenue, or in other words, that do not overstate revenue. This is important because uncollectable revenue becomes bad debt. Almost all of our financial challenges this year can be ascribed to unanticipated bad debt -- some of which is held over from previous years. The strategies we have already put in place to overcome our financial challenges - cost cutting, voluntary time off and mandatory time off without pay, and increased clinic hours - have had a very positive impact. However, they will not be enough for us to climb out of the situation in which we now find ourselves. Right now, we are projecting a close to break even position for the month of June, but will still end the year with a loss of more than $50 million, if we take no further action. Likewise, assuming that volume is flat next year, we would probably end FY 2010 with a loss in excess of $30 million, if we take no further action. Given this, we have no alternative but to continue our task of securing our mission and ensuring our future. We simply cannot continue to have expenses exceed revenue.

There are several areas where we can reduce our costs and improve efficiency. Regretfully, we must turn to further workforce reductions as a part of the overall strategy to regain our financial footing. Compared to institutions of similar size and complexity we have more staff than is usual. As a result, our labor costs as a percent of revenue exceeds that of our peers. In order to achieve a better and more sustainable size we will reduce our LUHS workforce by a total of 372 positions this week. Concurrently, the number of positions at Stritch will be reduced by 71.

We have worked hard to avoid the need for additional layoffs. I recognize the heartbreak of losing a job -- especially in the current economic environment. However, there is no alternative but to include a reduction in force as one component of our approach to cost management. The previously mentioned reduction in staff positions will save LUHS $21 million in FY10 (because of the money paid out in severance, the reduction in costs will not be recognized during the current fiscal year). In addition, we have other financial initiatives underway to reduce expenses. These include:

  • Reducing our supply costs by working with our physicians to improve ordering efficiency, saving a minimum of $10 million.
  • Creating a more streamlined process for hospital stays and discharges, for an estimated savings of $7 million annually.
  • Consolidating and transferring 150 positions that support physicians from SSOM into the medical center so that physician revenues and expenses are aligned.
  • Reducing the number of rejected insurance claims by activating a more precise coding process.
  • A proposal to consolidate some of our basic science departments in Stritch, pending Loyola University Chicago approval.

These efforts and others will allow us to finish FY10 in the black, enabling us to reinvest in the institution, continue our mission and make progress on our strategic plan.

We know we can be successful because of what we have already accomplished this year. More importantly, we know we will be successful because of our dedicated employees. You have every reason to be optimistic about the future. During the last five quarters we have raised our patient-satisfaction scores steeply. Volumes are trending up thanks to the physicians and nurses who have extended their clinic hours. We have successfully integrated with our physicians to create a clinical partnership that positions us extremely well for making educated, thoughtful decisions. We have more than doubled our development fund-raising over last year. We can be successful. We will be successful.

I thank you again for your commitment to excellence, our mission goals, and the spirit of Loyola.

Paul K. Whelton, MB, MD, MSc
President & CEO,
Loyola University Health System

 

We support LUHS and the difficult decisions they have had to make, and we will keep those affected by the layoffs in our prayers.

Sincerely,

Michael J. Garanzini, S.J.
President, Loyola University Chicago