Jack Dew, Berkshire Eagle, June 18, 2009

Pittsfield - Confronted with a major drop in reimbursements and a decline in patient visits, Berkshire Health Systems on Wednesday told employees it will cut the equivalent of 65 full-time positions.

The nonprofit company said 46 of the cuts will come from Berkshire Medical Center, and 19 will come from the ranks of management. In total, 79 full- and part-time employees will lose their jobs effective July 3, more than 2 percent of Berkshire Health's roughly 3,000 employees. Fairview Hospital in Great Barrington was not affected by the reductions.

"Even when we have good years, the health industry in Massachusetts operates on pretty thin margins," said David Phelps, president of Berkshire Health Systems. "In a good year, we operate on a 2 percent margin, so it doesn't take a lot to go from being reasonably successful to having problems."

In the fiscal year that ended on September 30, Berkshire Health had an $8.5 million surplus on revenues of $387 million - a 2.2 percent margin. But Phelps said cuts to Medicaid and Medicare, which combined represent about 70 percent of the company's patient population, have drained $3 million from the bottom line this year.

At the same time, patient volume is declining as people hard hit by the recession have avoided elective surgery and non-emergency care, further sapping revenue. Diagnostic care - like CT scans and MRIs - has been particularly hard hit, officials said. Consequently, several radiology technicians are among those being let go, along with clerical staff and the cuts from management.

Arthur Milano, Berkshire Health's vice president of human resources, said hourly employees will receive a severance package equal to three weeks of pay plus another day's pay for every year of service, along with a flat, after-tax payment of $1,000. All will be able to continue their health insurance for nine months at a cost of 35 percent of the premium.

Salaried employees, meanwhile, will be given eight weeks of severance, along with the other benefits, which reflects the expectation that they will have a harder time finding jobs with equivalent salaries, Milano said. All those being laid off will be provided free career counseling by a consultant, which will set up a help center at BMC's Hillcrest Campus.

The layoffs are a troubling sign from the county's biggest employer, which had been trying to weather the economic downturn without cutting staff. It has not filled an estimated 40 positions, hoping attrition would be a sufficient to pare payroll.

But as the state and federal governments have cut Medicaid and Medicare in the face of dwindling tax revenue, Berkshire Medical Center has suffered, Phelps said, while Fairview Hospital has been protected by its special designation as a critical access facility, which entitles it to higher payments from these public insurance programs.

Phelps said the problems at BMC were aggravated by the state's health care reform, which has done great work to insure more patients but has enrolled them in programs that pay Medicaid-like rates. In the end, that is not enough to cover the cost of care, he said.

"Health care is so complex that, when you do these reform efforts, there are always unintended consequences," he said.

No nurses or doctors were laid off yesterday, but the Massachusetts Nurses Association, which represents nurses at BMC, said the cuts will nonetheless have an impact on its members.

"We are waiting to see what these layoffs are," said Charles Rasmussen, an MNA spokesman. "Any layoffs that come in patient care areas are going to have a direct effect on patient safety and on the practice and work life of nurses. You can't subtract people from the team and not have everyone else on the team stretched out more."

Asked whether these reductions will be sufficient for Berkshire Health Systems to meet its numbers, Phelps said much of that will depend on the final version of the state budget and on President Barack Obama's efforts at health reform.

"It is hard to predict how we are going to be reimbursed for the care that we provide," he said. "At some point, the services that we offer and the way that we manage here has to match up to what purchasers are able to pay."