Physicians the Latest Healthcare Workers to be Hit With Layoffs

A Pennsylvania health system says it will lay off physicians, Cleveland Clinic offers 200 early retirement. Are physicians the next group of healthcare workers worrying about layoffs?

Earlier this week, Crozer-Keystone Health System in Springfield, Pa., announced it would lay off 250 positions, including some physicians.

The announcement garnered national attention within the industry because the layoffs may affect a group thought to be immune from such cuts: physicians. Until recently, few hospitals employed physicians, thus, laying them off would be impossible; as independent members of the medical staff, they weren't actually employed by the hospital. But as that is changing, could physicians be the next workers at risk of losing their jobs? In 2012, 29 percent of physicians either worked directly for a hospital or for a practice that was at least partially owned by a hospital, according to the American Medical Association.

That healthcare layoffs are on the rise can't be denied. In December 2013, the industry lost more jobs than it added, the first time that had happened in 10 years, according to data from the Bureau of Labor Statistics. Last year, stalwart healthcare institutions including the Cleveland Clinic and Vanderbilt announced layoffs. Should physicians be concerned? Are those who left private practice for hospital employment and stability at risk of being cut?  

Probably not. The Cozer-Keystone announcement is a unique one, and compelled me to explore if other systems had resorted to physician layoffs as a way to reduce costs. The only other recent report of physician layoffs I could find was associated with a hospital closure — 32 medical residents lost their positions when St. Vincent's in Manhattan, the hospital they were training at, closed.

There has been some talk that physicians were among the some 3,000 Cleveland Clinic employees (the Clinic has long employed its physician workforce) offered early retirement last year as part of the health system's efforts to cut $330 million from its budget. In January, it was reported roughly 700 employees took the early retirement offer. A statement by the Clinic following the news said it would continue to evaluate the situation, but didn't specify how many, if any employees would receive layoff notices.

I contacted Cleveland Clinic earlier today to inquire about physicians being offered early retirement. A spokesperson for the health system informed me that indeed they had. "We had 26 professional staff members take the voluntary retirement. This is small percent of our entire professional staff of 3,000. It was offered to less than 200 based on their age and years of service."

The specifics of the packages offered weren't disclosed, so it's impossible to know just how attractive the deals were. The offering of the packages to physicians at all suggests that health systems' efforts to cut costs no longer ignore the costs of physician employment, or consider them an untouchable group.

Certainly hospitals are facing unprecedented financial challenges, due to pressure on reimbursement and the need for capital investment in resources to prepare for value-based care. Many have also, in recent years, added a very costly expense to their budgets: physician salaries. Despite all of this though, physicians are probably least likely of any worker — in healthcare or beyond — to receive a pink slip.

Why?

Still, no real significant pink slip threat for MDs
In an era of an expected physician shortage, it's hard to believe any healthcare provider would find it prudent to cut members of such a highly sought-after professional group. According to the Association of American Medical Colleges, the U.S. will experience a shortage of 90,000 physicians by 2020 and 130,000 physicians by 2025, unless current practice patterns significantly change. A new focus on letting all providers practice at the top of their license, growth in the number of mid-level providers, and technological advances allowing for greater care in the home may make a dent in this shortage, but it's hard to imagine primary care and specialty physicians ever not being in sharp demand — especially if a physician is willing to relocate to a new market based on need.

Additionally, and obviously, physicians bring volume and revenue to a facility. As more hospitals employ physicians, there of course is a chance they could choose to lay them off. This is largely unlikely, though, unless the physician contracts were so poorly executed that the hospital is losing significant money employing them, or the organization is in such a dire financial situation that any and all cuts must be examined to keep the facility open.

In some cases, hospitals may be forced to lay off physicians, but it will be rare, and in situations with financial challenges are extreme. For instance, five-hospital Cozer-Keystone has struggled significantly, losing $15.7 million since July 1.

If the health system does follow through with its planned physician layoffs, it will be the exception, not the rule. While its sad to hear of a local healthcare organization struggling, the physicians should have no problem finding a position in the market. I hear some places in Philadelphia are hiring. 

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