Facing a budget deficit of $17 million and a paradigm shift in the way people are seeking medical care, the University of Texas Medical Branch launched a review of its operations that will result in the loss of some jobs at the county’s largest employer, officials said.
Ten employees already have been notified their positions have been eliminated, medical branch President David L. Callender said Friday. Among them are the chief health strategies officer and four program directors, according to a list provided by the medical branch.
Tensions have been high at the medical branch as more cuts loom. More positions likely will be cut in coming weeks as two consulting companies complete a review of the medical branch’s operations.
“What we’re trying to do because of an existing financial challenge — but more importantly what we predict will happen in our ability to generate revenue from all sources going forward — is think about out how we can operate more efficiently,” Callender said.
He could not say how many more people would be laid off, but Callender said cuts will not be nearly as deep as the medical branch has faced in past budget crises.
“This is different,” he said. “This is not just a current financial challenge where we need to do something radical like an across-the-board layoff.”
As of Friday, 13,230 people worked for the medical branch, which is the largest single employer in Galveston County.
The medical branch’s budget deficit can be attributed to lower-than-projected revenues for treatment provided to patients, Callender said.
Essentially, fewer people than expected sought care at medical branch hospitals and clinics, and those who did seek care didn’t generate enough insurance reimbursements to meet projections, Callender said.
The medical branch is not unique, he said. Similar issues contributed to the closure of the Bay Area Regional Medical Center in Webster last month and are affecting health care providers across the nation.
“This is a commonly understood trend in healthcare and with academic medical centers,” he said.
While there’s no danger of the medical branch closing, officials there are trying to change the way it manages care to erase deficits, Callender said. Part of that plan is to make the medical branch more efficient, he said.
The medical branch earlier this year hired two consultants — the Berkeley Research Group and Huron Consulting — to conduct reviews.
Callender first announced the review plans in May during a town hall meeting on campus. He’s recording weekly updates on the review process in an effort to keep the medical branch’s community informed about the review process, he said.
Other factors that contributed to the financial issues come down to state funding. The Texas Legislature has in recent years reduced its funding to higher education, while spreading its funding among more public medical schools.
Hurricane Harvey, which struck in late August, also caused a direct $10 million loss for the medical branch, Callender said. As people recover from the storm and repair their homes and businesses, they’re spending less on health care, he said.
During this fiscal year, which began in September 2017, the medical branch’s deficit has been as high as $30 million. As of Friday, it was facing a $17 million deficit, though it was shrinking, Callender said.
The medical branch operates on a budget of about $2 billion and aims to end budget years with about $2 million leftover expenses to roll into a capital fund, he said.
For years, it struggled to treat the state’s poor and uninsured at its hospital but in recent years was able to sustain a positive margin of income over expenses and found its way back into the black largely because executives put in place tighter cost controls and took on more paying patients, while treating fewer uninsured people.
Harvey did not cause nearly as much damage as Hurricane Ike in 2008. That storm caused nearly $1 billion in damage to the medical branch, put it about $140 million in the red and led to the layoffs of nearly 2,400 people.
Two years before that, amid another efficiency review, the medical branch fired about 700 people.
The current reviews are planned to be completed by July. The medical branch does not anticipate having to end any of its programs, nor does it plan to disrupt patient care in a significant way, he said.
“As we look at efficiency, we have to look at labor, we have to look at people and how we use people,” he said. “But we don’t have any specific elimination target in mind.”