Kaiser to lay off up to 50 workers

An official says no physicians will lose their jobs as part of the restructuring

Kaiser Permanente Hawaii, unable to bridge the growing gap between its budget and expenses, plans to lay off up to 50 employees before the end of the year as part of a statewide restructuring.

Hawaii's largest health-maintenance organization also warned its employees in an internal memo Wednesday that it anticipates more restructuring and cost-cutting next year. Kaiser said it was conducting an in-depth analysis of its jobs and services to make sure it was meeting the needs of its 225,000 members.

FEELING THE PAIN Kaiser Permanente Hawaii began implementing additional cost-cutting measures Wednesday on top of other initiatives it put into effect earlier this year. NEWEST CUTBACKS » Laying off up to 50 employees, or about 1 percent of its total work force of 4,769 employees, with additional restructuring planned in 2007 » Leaving some physician vacancies unfilled » Withholding merit increases for senior leaders in 2007 » Limiting travel and expenses » No longer providing company-paid food at meetings » Not purchasing fresh Christmas trees or wreaths at its facilities EARLIER REDUCTIONS » Delaying pay increases for exempt employees and physicians » Directing nonmembers to other care providers

Kaiser said this year's layoffs will include outsourcing 15 transcription jobs on Oahu, as well as reducing management and administrative positions. None of Kaiser's physicians will lose their jobs and, as of yesterday, no nurses had been notified of layoffs, Kaiser said.

"Our plans are still being finalized; certainly, nurses would not be our focus," said Tammy Jones, Kaiser's acting vice president for human resources.

Jones said most of the cutbacks will hit nonunion jobs, and that the union positions affected "appear to be administrative in nature."

Employees will be notified by Nov. 14 if they are being laid off. Affected employees will be offered severance packages, Kaiser said. The HMO has 4,769 employees, which include call-in and part-time workers, in addition to its 380 physicians.

Kaiser Regional President Jan Head said the HMO is restructuring to provide local employers and members with a stronger health-care provider.

"These are challenging times for the health-care industry and require Kaiser Permanente Hawaii to make difficult decisions to immediately reduce costs while positioning us for the future," Head said.

Jones called the layoffs "gut-wrenching decisions."

Besides outsourcing the transcription jobs, Kaiser is consolidating some departments under a single manager, eliminating 2007 merit increases for senior leaders, continuing to hold vacant positions open, limiting travel and expenses, no longer providing company-paid food at meetings, and not purchasing fresh Christmas trees or wreaths for its facilities.

Jones said Kaiser hasn't yet determined how much the restructuring would save the company.

Earlier this year, Kaiser began other cost-saving initiatives, such as delaying pay increases for nonunion employees and physicians, changing physician pharmacy benefits, ordering inventory only as needed, directing nonmembers to other care providers, lowering capital spending and reviewing all outside contracts.

Kaiser, which has 18 clinics statewide and its Moanalua Medical Center on Oahu, said no direct patient-care services currently being used by members will be affected.

Eric Gill, financial secretary-treasurer for Unite Here Local 5, which represents more than 1,900 employees at Kaiser, said he was aware of the layoffs but awaiting further details.

"We're hoping it will be minimal," said Gill, whose organization represents virtually all of Kaiser's employees other than the doctors and registered nurses. "We recognize the company has some financial issues, so we'll work with them to continue the excellent product they provide in the medical marketplace. We want to be sure they stay strong and remain viable, and we want to work with them to get through a rough period. We're hoping to be able to work with them to find cost savings in other areas."

Kaiser, which is increasing health premiums 3.75 percent beginning in January, had an operating loss of $400,000 during the first six months of this year despite its cost-cutting initiatives. However, investment income of $5.9 million pushed its bottom line into the black during the period, with net income of $5.5 million.

The company will report its third-quarter earnings later this month.

In 2005, Kaiser had an operating loss of $10.2 million, and in 2004 it posted an operating gain of $5.4 million.

Kaiser said in its internal memo that the contingency plan it developed in 2005 to address its financial situation has reduced costs but hasn't gone far enough.

"The seriousness of our situation dictates that we make difficult decisions today and carry them out," said the memo, which was signed by Head and Mike Chaffin, president of Hawaii Permanente Medical Group. "This is part of a strategic plan that will rapidly bring our costs into line with the budget. Further, the plan also positions us to increase membership, offer competitive rates to our purchasers, and be the leading health-care provider."