PORTLAND – Maine Medical Center is cutting 225 jobs, including 50 through layoffs, and will slice the salaries of about 45 executives as the hospital struggles with a big budget gap while going ahead with a costly expansion plan.
Management at the state’s largest hospital told employees about the layoffs Tuesday. Officials said 120 people had accepted early retirement offers that included severance pay and health insurance assistance, but many of those vacated jobs will be filled. Officials also said 175 currently vacant jobs are being eliminated, and that the average cut in executive compensation would be 12.5 percent.
“We are in the middle of a new era in health care,” Richard W. Petersen, Maine Med’s president and chief executive officer, said in a news release announcing the cuts.
That new era has led to an operating deficit for Maine Med of $13.4 million as of March 31, halfway through its budget year. In addition to the loss it has already racked up, Maine Med said it expects lower payments in the future from both government programs and private insurers; a continued shift from inpatient care to outpatient services, which generate less revenue; and continued high levels of unreimbursed care and bad debt.
Other Maine hospitals are struggling as well. Parkview Adventist Medical Center in Brunswick, for instance, announced last month that it was cutting 16 full-time jobs and combining its intensive care and medical-surgical units in an effort to cut costs by $2.5 million. Hospitals in Bridgton and Rumford took similar steps, and Eastern Maine Medical Center in Bangor recently closed its laundry operation and moved 17 employees to other jobs.
Maine Med provided few details Tuesday about the layoffs and said it would not identify those whose jobs were cut. Matt Paul, the hospital’s director of communications and public affairs, said the cuts weren’t “isolated to particular departments or functions.”
Paul, who said he would only answer questions posed to him by email, didn’t respond to other questions sent by the Portland Press Herald. He also said Petersen wasn’t available for an interview, although Paul did not say why he wasn’t available.
Maine Med and other hospitals in the state are receiving $484 million — $186 million from the state, the release of which will trigger $298 million in federal payments — for overdue Medicaid reimbursements under a plan worked out by the Legislature and Gov. Paul LePage early this summer. LePage had argued that the payments would allow hospitals to grow and add new jobs with good salaries, but in a list of questions and answers emailed to employees Tuesday, the hospital’s management said the $67 million that Maine Med will receive is no “windfall” that could be used to avert layoffs, let alone add jobs.
The email likened the overdue payment to an employee going unpaid for two years, using savings and charging on a credit card to get by, and then receiving a lump-sum payment for his or her work.
“Would that be considered a windfall?” the email asked. “The answer, of course, is no. That’s the simplest way to look at this repayment.”
The Q&A also said Maine Med plans to go ahead with a $40 million expansion, which will add new operating suites, despite the financial troubles. The investment “is a direct reflection of our desire to continue to improve outcomes for our patients,” the hospital said. The email also noted that the expansion will be paid for over a number of years.
Maine Med didn’t offer details in its news release on the cuts to executive compensation, but in another email to employees, Petersen said about 45 executives will receive cuts averaging 12.5 percent.
Although Paul didn’t respond to a request for more information on the reductions, Petersen’s wording in the email could be significant — he referred to cuts in “compensation,” which usually refers to not just salary, but a range of benefits that include bonuses, contributions to a retirement plan and perks, such as memberships to clubs.
Petersen, for instance, received a salary of $606,243 for 2011, according to Maine Med’s filing with the Internal Revenue Service. However, he also received a bonus of $148,000 and other benefits, bringing his total compensation package to $1,039,940.
Among the other top 14 earners and key employees that Maine Med is required to report on, total compensation in 2011 — the most recent year for which figures are available – ranged from $237,269 at the low end to $1,128,006 for William L. Caron Jr., president of MaineHealth, Maine Med’s parent company.
Including Petersen and Caron, six of the top 14 earners had total compensation of more than $1 million.
Petersen told employees in his email that the 2014 budget doesn’t include annual pay increases for employees, but he said there could be a mid-year pay raise if the hospital outperforms its budget. He also said employees’ health insurance premiums will stay level for next year, the retirement plan will be unchanged and a match for an employee investment plan would continue.
Petersen’s email said the goal of the cuts was to create a budget that’s sustainable “and not simply make reductions to achieve a target,” and that he believed that had been accomplished.
“I’m confident that following this recent period of uncertainty, things will soon begin looking up for all of us,” he wrote.
Edward D. Murphy can be contacted at 791-6465 or at: