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Originally published Monday, March 19, 2012 at 5:28 PM

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Corrected version

Swedish hospital system warns staff of likely layoffs

Swedish Medical Center delivered some grim news to employees Monday: Swedish is losing $250,000 a day and it likely will have to lay off workers.

Seattle Times health reporter

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Swedish Medical Center delivered some grim news to employees Monday: Swedish is losing $250,000 a day and likely will have to lay off workers.

"We all know this is not a sustainable situation, and we need to respond quickly and thoughtfully to correct this trend," Swedish CEO Kevin Brown said in a memo to physicians and volunteers.

Brown said patient volumes and revenues are significantly lower than Swedish had projected.

In a Q&A to staff, Swedish spokeswoman Melissa Tizon addressed the question of layoffs.

"Given the extent of our financial losses, we will need to make some very difficult decisions in the next few weeks," Tizon said. "We will need to reduce all of our costs, and that will likely include reducing staffing to match current volumes."

The losses, Brown said, are a continuation of a trend Swedish saw in late 2011, when it experienced three months of consecutive loss. In January and February of this year alone, it has had an operating loss of $16 million, he said.

In 2011, Swedish's hospitals, clinics and ambulatory-care centers had patient revenues of $1.825 billion before $1.89 billion total expenses, according to preliminary figures supplied by Swedish.

Those figures include two months of operations from its newest hospital, Swedish/Issaquah.

Brown said Swedish is not the only health-care system having financial difficulties.

"Utilization of health-care services is down across the country," he said.

"Individuals are not accessing health care the way they once did."

Major factors, Brown said, include higher health-insurance deductibles and uncertainty in the job market, which has led more people to delay health care because of out-of-pocket expenses or because they don't want to take time away from work.

Patient volumes across the Swedish system so far this year are 8 percent lower than projected, and below what they were a year ago, he said.

In addition, the health-care system is seeing fewer patients with commercial insurance and more patients who are uninsured or covered by Medicare or Medicaid, which "do not adequately cover the cost of providing care," Brown told the staff.

Tizon said the management at Swedish has already taken steps to reduce expenses, including reducing external hires, freezing capital spending except for items needed for "safe, quality patient care" and freezing discretionary spending such as travel for conferences.

Swedish in February finalized an affiliation agreement with the much-larger Providence Health & Services. But Tizon said Providence was not driving the cuts, because Swedish is responsible for managing its own operations.

Last month, Swedish closed its Visiting Nurse Services and laid off 216 employees.

In his memo Monday, Brown asked employees not to panic but emphasized that "we do need to act with a sense of urgency."

In the Q&A, Tizon defended Swedish's decision to build a new hospital in Issaquah, which opened last year, saying plans for that hospital were done at a time when more patients were using hospital services.

She noted that the state Department of Health agreed there was a need for a hospital in Issaquah, which has a growing population with a "larger number of commercially insured residents" — the latter being a group of patients necessary to Swedish to help offset the cost of serving uninsured and underinsured patients.

In December, Swedish borrowed more than $104 million through the Washington Health Care Facilities Authority, which allows hospitals to issue tax-exempt bonds through the state authority.

According to the agency, the loan, which went in part to pay off previous obligations, will save Swedish about $15 million in interest payments over the next 11 years.

Last year, Swedish, the largest health-care system in the Seattle metropolitan area, said it had approximately 11,000 employees.

Swedish Health Services is made up of five hospital campuses (First Hill, Cherry Hill, Ballard, Edmonds and Issaquah); ambulatory-care centers in Redmond and Mill Creek; and Swedish Medical Group — a network of more than 100 primary-care and specialty clinics throughout the Puget Sound area.

Carol M. Ostrom: 206-464-2249 or costrom@seattletimes.com. On Twitter @costrom.

Information in this article, originally published March 19, 2011, was corrected March 20, 2011. The story contained an incorrect references to Swedish's debt and to the interest the hospital would pay on a $104 million loan.

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