Grace Cottage Hospital in Townshend. (Zachary P. Stephens/Reformer)
Grace Cottage Hospital in Townshend. (Zachary P. Stephens/Reformer)
Friday February 22, 2013

TOWNSHEND -- Grace Cottage Hospital administrators are pledging to offer assistance to employees who have been laid off as part of a "financial corrections plan" spurred by upcoming regulatory changes.

The Townshend hospital -- which is Vermont's smallest such facility -- announced Thursday that 15 employees will be laid off in eight departments.

That represents about 10 percent of the Grace Cottage work force. Affected employees were notified Wednesday and Thursday, and more will be notified today.

"Every employee will be given a severance package. The board of trustees has stressed the importance of outplacement assistance to employees who have been laid off," administrators said in a prepared statement.

The hospital added that consultants have been retained to work with displaced staffers as they seek new jobs. An employee assistance program also will be offered.

Hospital leaders said Grace Cottage is cutting costs in other ways including freezing overtime, employee travel and any new hiring that is not approved by the chief executive officer.

But in a question-and-answer document issued Thursday, administrators said "payroll makes up approximately 70 percent of Grace Cottage's overall costs, so staff cuts immediately reduce fixed costs."

Deborah Boyle, who chairs the hospital's board of trustees, said those cuts were "planned so that our high quality of patient care will not be impacted."

"We are sorry that the employees affected by this reduction will no longer be with us," Boyle said in a prepared statement issued Thursday. "We appreciate their important contributions to Grace Cottage and to our patients during their employment here."

Administrators blamed the cuts on familiar pressures -- rising costs and declining revenues.

"With declining reimbursements from our payors including Medicare, Medicaid and private insurance companies, combined with increasing expenses related to regulatory requirements, tremendous economic challenges face all hospitals, and Grace Cottage is no exception," officials said.

They singled out the federal Affordable Care Act, saying the law -- also known in some circles as ObamaCare -- has and will continue to impose new financial pressures.

"As part of health-care reform, Grace Cottage has joined 13 of Vermont's hospitals as part of an Accountable Care Organization called OneCare Vermont," administrators said. "This means that we're part of a health-care team that is closely looking at costs, and Grace Cottage must reduce costs across the board so that other health-care organizations will continue to refer patients to us for their care."

Boyle said Grace Cottage "is preparing now for the full implementation of the Affordable Care Act" by making necessary adjustments.

"The decision to reduce staff was an extremely difficult one to make. However, this is part of a financial corrections plan that will help Grace Cottage be proactive as we prepare for the changes that the Affordable Care Act will bring about, including declining reimbursements and changes in how health care is delivered," she said.

She also said Grace Cottage is not alone in making such cuts.

"All hospitals around the state and nation are experiencing these pressures," Boyle said. "As Grace Cottage prepares for the future, we want to be sure that we will continue to provide Grace Cottage's nationally-recognized, patient-centered care."

Hospital leaders on Thursday also defended recent spending on capital improvements, saying funding for those projects was separate and not available for everyday expenses such as payroll.

Examples include expansion of Diagnostic Imaging Services and Messenger Valley Pharmacy, a hospital-owned facility just across the street.

"All of the funding for both of these projects came from grants and restricted donations from individuals, corporations and various foundations," administrators said. "These donors gave to these specific fundraising campaigns, and almost all of them do not give for general operating expenses."

Grace Cottage also has spent more than $2 million on implementation of an electronic medical record system. But officials said that project was funded by the American Recovery and Reinvestment Act, also known as federal stimulus money.

That cash, which is soon to be released to repay a loan, was meant for the medical-record project, was available for a limited time and "would not have been available for any other purpose," administrators said.

The lack of an electronic medical record system, officials contend, would have led to declining reimbursements and would have barred Grace Cottage from joining an accountable care organization.

Mike Faher can be reached at mfaher@reformer.com or 802-254-2311, ext. 275.