Northern Light Health is shifting 1,400 employees – including 130 in southern Maine – to an outside health services company, a move that top officials say will save the hospital system $1 billion over 10 years.
The 1,400 employees will no longer work for Northern Light Health starting in March, but instead will work for Optum, a Minnesota-based health services company. The employees will remain in Maine, retain their jobs, will not experience any cuts to their pay and will receive similar benefits, said Paul Bolin, chief people officer and senior vice president at Northern Light Health.
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 about 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 of the positions are not jobs that directly care for patients – such as doctors and nurses – but are 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 bulk of the jobs shifting to Optum are at the home office of Northern Light Health in Brewer. About 130 jobs in southern Maine will become Optum jobs, most based at Mercy Hospital.
Tim Dentry, president and CEO of Northern Light Health, said in an interview that the economic forecast for hospitals, especially larger hospitals such as EMMC, is “unsettled” and so they had to look at ways to save money to preserve core health care services.
“Nobody was going to save the day for us in health care,” Dentry said.
Steven Michaud, president of the Maine Hospital Association, expects the weak financial picture to continue as hospitals try to cut costs while maintaining critical services. Workforce shortages exacerbated by the pandemic are limiting the number of patients hospitals can serve, resulting in less revenue.
“Hospitals are facing unprecedented losses coming out of the pandemic, and there’s no reason to believe it’s going to turn around anytime soon,” Michaud said. “With the workforce shortage, we have plenty of patients, but it’s harder to get them through procedures and surgeries.”
Michaud said the same workforce dynamic also makes it more difficult to discharge patients who aren’t ready to go home, but are ready to be sent to assisted living for recovery or mental health patients needing placement. That is also leading to less revenue for hospitals. Combined with increased labor costs, inflation and expiring pandemic relief funds, hospitals are dealing with a rocky financial outlook, Michaud said.
Northern Light Health had about $2 billion in revenue in the 2021-22 fiscal year, but expenses surpassed revenue and operating losses are at about $132 million, said Northern Light Health spokeswoman Suzanne Spruce.
MaineHealth – the largest health system in Maine with 22,000 employees and the parent organization of Maine Medical Center in Portland – is not considering outsourcing jobs at this time, but CEO Dr. Andy Mueller said in a statement that the pandemic has “placed unprecedented stress on the health care industry” that will “require all of us to be innovative and rethink our business.”
Mueller said MaineHealth has lost money two of the past three years.
The revenue crunch is leading many hospital systems to look for creative ways to cut costs, Michaud said.
Brooke LaTour, spokeswoman for Optum, said that “Optum has similar relationships like this with a few other health systems across the U.S. and we’ve seen interest grow in the past three to four years.” Its most recent contract prior to Northern Light was to provide similar services in Marin County, California, near San Francisco.
Northern Light also recently sold its outpatient lab operations to New Jersey-based Quest Diagnostics, resulting in about 340 positions being transferred from Northern Light to Quest. That sale was finalized in early December, and the transfer occurred in January.
Traci St. Clair, business agent for Teamsters Local 340, said that slightly more than a dozen employees working various positions at the lab are Teamsters members, and they are beginning to negotiate a new contract with Quest.
“Our conversations have been good, but we haven’t sat down with them at the negotiating table yet,” St. Clair said. “It’s very early days.”
It does not appear that any of the positions transferring to Optum are represented by a union.
St. Clair said, however, that she’s concerned about the overall trend of outsourcing and whether it will lead to worse services for patients, employee layoffs in the years to come or reduced pay and benefits.
“It’s concerning,” St. Clair said. “What is the end game?”
Ultimately, St. Clair said, Northern Light is accountable for all services, even ones outsourced to companies like Optum.
Dentry said that over time some of the jobs shifted to Optum will be lost to attrition as employees leave. That’s because Optum has built-in efficiencies for providing similar services to health care systems across the country, he said.
Also, having Optum pay for overhead costs on IT systems, other technology, equipment and supplies will save money over the long term, he said.
Dentry said the bottom line is that Optum can provide the same service at a cheaper cost to Northern Light.
He said that will help its clinics and hospitals such as EMMC, which is facing financial pressures from workforce shortages and the increased cost of having to pay for travel nurses to fill gaps.
“This decision by Northern Light is going to take a huge amount of pressure off of individual entities like EMMC,” Dentry said.
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