Northern Light Health is moving 1,400 employees — including 130 in southern Maine — to an outside healthcare services company, a move that senior officials say will save the hospital system $1 billion over 10 years.
The 1,400 employees will no longer work for Northern Light Health beginning in March, but for Optum, a Minnesota-based healthcare services company. Employees will remain in Maine, keep their jobs, experience no pay cuts and receive similar benefits, said Paul Bolin, Northern Light Health’s chief people officer and senior vice president.
The move is part of a national trend by hospital operators to reduce costs by outsourcing billing and support operations.
Northern Light Health – the second largest health care company in Maine with approximately 12,000 employees – is the parent organization of Eastern Maine Medical Center in Bangor and Mercy Hospital in Portland, rural hospitals in northern Maine and a large network of outpatient services.
Most positions are not jobs that directly care for patients – like doctors and nurses – but office-based administrative positions, including “Revenue Cycle Management, Information Systems, Inpatient Care Management, Analytics, Project Management Office and Supply Chain,” Northern Light Health said in a statement. The majority of the jobs moving to Optum will be in Northern Light Health’s home office in Brewer. Approximately 130 jobs in southern Maine will become Optum jobs, most of them at Mercy Hospital.
Tim Dentry, President and CEO of Northern Light Health, said in an interview that the economic projections for hospitals, particularly larger hospitals like EMMC, are “uncertain” and so they need to look for ways to save money to keep essential health services running .
“No one would save the day for us in healthcare,” Dentry said.
Steven Michaud, president of the Maine Hospital Association, expects weak financial conditions to continue as hospitals try to cut costs while maintaining essential services. Labor shortages exacerbated by the pandemic are limiting the number of patients hospitals can serve, resulting in reduced revenue.
“Hospitals are facing unprecedented losses from the pandemic and there is no reason to think that will change any time soon,” Michaud said. “Because of the labor shortage, we have a lot of patients, but it’s harder to get them through procedures and surgeries.”
Michaud said the same staffing dynamics also make it harder to discharge patients who are unwilling to go home but are willing to be sent to assisted living to recover, or mental health patients who need housing . This also leads to less income for the hospitals. Combined with rising labor costs, inflation and phasing out of pandemic aid funds, hospitals are grappling with a difficult financial outlook, Michaud said.
Northern Light Health had approximately $2 billion in revenue for fiscal 2021-22, but expenses exceeded revenue and operating losses are approximately $132 million, said Suzanne Spruce, spokeswoman for Northern Light Health.
MaineHealth — Maine’s largest healthcare system with 22,000 employees and the parent organization of Maine Medical Center in Portland — isn’t currently considering outsourcing jobs, but CEO Dr. Andy Mueller said in a statement that the pandemic is putting “unprecedented stress on the healthcare industry,” which is “requiring all of us to innovate and rethink our business.”
Mueller said MaineHealth has lost money in two years over the past three years.
The revenue crunch is prompting many hospital systems to look for creative ways to cut costs, Michaud said.
Brooke LaTour, spokeswoman for Optum, said, “Optum has relationships similar to this one with a few other healthcare systems in the United States, and we’ve seen a growing interest over the past three to four years.” To offer services in Marin County, California near San Francisco.
Northern Light also recently sold its outpatient laboratory operations to New Jersey-based Quest Diagnostics, resulting in approximately 340 positions being transferred from Northern Light to Quest. This sale was completed in early December and the transfer took place in January.
Traci St. Clair, business agent for Teamsters Local 340, said just over a dozen employees working in various positions at the lab are Teamsters members and are beginning to negotiate a new contract with Quest.
“Our talks have been good, but we haven’t sat down with them at the negotiating table,” St. Clair said. “It’s very early.”
Apparently, none of the positions moving to Optum are represented by a union.
However, St. Clair said she is concerned about the overall outsourcing trend and whether it will result in poorer patient services, staff layoffs in the years to come, or lower wages and benefits.
“It’s concerning,” St. Clair said. “What is the endgame?”
Ultimately, according to St. Clair, Northern Light is responsible for all services, including those that are outsourced to companies like Optum.
Dentry said that over time some of the jobs relocated to Optum will be lost through attrition as employees leave. That’s because Optum has built-in efficiencies for delivering similar services to healthcare systems across the country, he said.
Having Optum assume the overhead of IT systems, other technologies, equipment and consumables will also save money in the long run, he said.
Dentry said the end result was that Optum could offer the same service at a lower price point to Northern Light.
He said this will help his clinics and hospitals like EMMC, which is under financial pressure from labor shortages and the increased cost of paying traveling nurses, to fill gaps.
“This decision by Northern Light will take a lot of the pressure off individual companies like EMMC,” Dentry said.
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