In 2005, Westchester County Health Care Corp. was mired in a financial crisis.
Since then, WCHCC, which is based in Valhalla and does business as the Westchester Medical Center, has posted six consecutive years of profitability.
However, declining revenues and increased labor costs are threatening that streak for the 2012 fiscal year, which runs through Dec. 31.
Facing a $20 million in-year budget gap, net income is projected at just $74,000 this year, representing a 98 percent decrease from 2011 and the lowest mark since President and CEO Michael Israel took over in 2005.
Still, Israel is confident.
“We are doing what we need to do to put this medical center on firm footing,” Israel said. “We are challenged. That”™s the bad news. The good news is we”™re addressing the challenges and we will be successful.”
As a public-benefit corporation participating in the state”™s pension system, Israel said that medical center faces a number of unique financial challenges that separate it from comparable hospitals.
This year, the medical center will contribute $49.5 million to the state pension system, representing a 23 percent increase over 2011 pension expenses.
Since 2006, the hospital”™s pension bill has increased each year from $18.1 million to a projected $70 million in 2014.
Additionally, the cost of health benefits offered by the hospital to employees and retired employees is projected to increase by $6.1 million, or 8.6 percent, this year ”“ an issue Israel said can only be addressed through collective bargaining.
This year, Israel said, the medical center will pay $48 million more than comparable hospitals will pay in fringe benefits alone.
“That is the equivalent, on our budget, of over 5 percent of the budget,” he said. “If we had a level playing field on those two things (pension and health care benefits) we would be generating a 5 percent margin. So something”™s going to have to give.”
The increased costs come as Medicaid and Medicare reimbursements are on the decline. This year, Medicaid revenue alone is projected to fall by $6 million or 8.6 percent.
Overall, revenue for the current year is expected to decline by more than 2 percent.
Faced with a $60 million deficit for the 2012 fiscal year if staffing and salary levels were maintained, the medical center was forced to lay off 216 employees last year, freeze administrative salaries and consolidate other positions, resulting in a total staff reduction of 310 full-time-equivalent positions.
Even with those steps being taken, a $20 million hole remains.
“The changes that we”™ve had to make appear to be more severe and more acute. But we”™re making them and we”™re doing what we have to do to continue to provide the advanced care services to the residents of Westchester and the Hudson Valley,” Israel said.
The medical center administration has come under fire over the past several months in response to the layoffs and published reports suggesting that a number of administrators received pay raises last year.
Israel, however, refuted the reports, saying that a management-level employee would only have received a raise if they were promoted or if positions were consolidated, resulting in greater responsibilities for that respective employee.
“We”™re addressing the issues the best we can and it”™s ironic that you”™ve got a whole bunch of really smart people out there … pointing fingers and criticizing the steps that we”™re attempting to take to not only keep this institution strong but to allow us to continue to grow and deliver more service to the community,” Israel said.
When asked what steps might be taken to close the remaining budget gap, Israel would not go into detail and did not speculate whether more layoffs might be in store.
“We still have a $20 million hole and we are committed to a break-even budget at the end of the year and we are willing to take the steps necessary to get there,” he said.
He added that conversations with union representation are ongoing.
For the time being, Israel said the hospital would continue to invest in and improve its offerings. He also emphasized the importance of attracting the best staff available.
From the beginning of 2011 through the end of this year, the medical center is investing $128 million in its facilities, including capital equipment and technology upgrades.
