Cash-Strapped Centegra Health Systems to Eliminate, Outsource Hundreds of Jobs

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Centegra Health System announced plans to lay off 131 employees and outsource another 230 jobs after announcing significant financial losses for the year ended June 30, 2017. The Crystal Lake, Illinois-based company said the layoffs will not affect medical staff, but will impact support and administrative workers.

Centegra also said it will be outsourcing 230 positions to Alpharetta, Georgia-based nThrive, a company that currently manages Centegra’s business office and health information department.

Centegra Health System is a system of health are providers in McHenry County, Illinois. The company has hospitals in McHenry, Huntley, and Woodstock; fitness centers; immediate care centers; nearly a dozen physician care locations; and specialty care services. Centegra is McHenry County’s biggest employer, with close to 4,000 associates and a total of 500 volunteers.

In a memo to employees, Michael Eseley, CEO wrote, “The difficult decision to balance our workforce through a reduction will ensure our health system is financially viable for years to come. While this day marks a major step toward financial improvements, it brings change for people in a number of positions.”

The move comes after the company announced a year of steep losses. Centegra ended fiscal 2017 with an operating loss of $62.3 million; that’s $20.0 million more than officials at the hospital system projected in May. It’s also in sharp contrast to fiscal 2016, when Centegra reported operating profits of $4.3 million.

Centegra blamed much of the losses to the fees related to opening the 128-bed Centegra Hospital-Huntley in 2016, higher-than-expected write-offs for unpaid patient bills, and serving more patients on Medicaid and Medicare.

At the same time, revenues for fiscal 2017 were up 12.7% at $564.2 million. The health system’s expenses also increased. In fiscal 2017, Centegra’s operating expenses increased 26.3% year-over-year to $626.5 million. The biggest increase in expenses was salaries, which jumped more than $50.0 million in 2017 over 2016. Bed occupancy rates fell from 70% in 2015 to just 54% in 2017.

In an effort to stem the bleeding, Centegra announced restructuring efforts in June to its facilities and services. This includes closings its intensive care and medical-surgical operations at their 108-bed Woodstock hospital; those services were moved to Huntley and McHenry hospitals. The move is expected to save the hospital system $15.0 million per year. It is estimated that between 50 and 120 people lost their jobs as a result of the relocation.

Eesley said that times are tough for hospitals in general across the U.S. and that Centegra considered every viable option before deciding to axe 131 jobs and outsource 230.

“There are 30 communities in McHenry County, and it is not possible to provide inpatient care in every one of them,” he said. “Our decision helps the people of Woodstock to continue to receive their day-to-day medical care and emergency services right within their community,” he said.

“Those are the services that are used the most frequently. … By providing acute inpatient care at our hospitals in McHenry and Huntley, we give the most residents the closest access to inpatient services,” Eseley added. “Many specialty services will only be available in Woodstock. … We serve an entire community and must make our decisions based on every patient’s needs.”

Sources:

Centegra Health to eliminate, outsource hundreds of jobs,” Chicago Tribune, September 19, 2017.

About Centegra,” Centegra Health Systems, last accessed September 20, 2017.

Centegra Health Systems Consolidated Statement of Revenue and Expenses for the Twelve Months Ended June 30, 2017,” Centegra Health Systems, last accessed September 20, 2017.

Centegra Annual Report 2016,” Centegra Health Systems, last accessed September 20, 2017.

Centegra Health System to suspend most inpatient care at Woodstock hospital,” Northwest Herald, June 22, 2017.

Woodstock holding public hearings on Centegra ending some services,” Northwest Herald, September 15, 2017.

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