Rideout cuts to save $3 million include cutting ties with Nevada County
March 20, 2017
Rideout Health's announcement that it will lay off 106 employees, discontinue specific services and separate from its clinics in Nevada County is expected to reduce the organization's annual financial losses by more than $3 million, an official said.
Gino Patrizio, CEO of Rideout Health, told the Marysville Appeal-Democrat the changes to the organization's operations are to address its annual financial obligations required by its bondholders.
"(The changes) are not a sign of serious financial risks for the organization, rather they are necessary to meet our bondholder's year-over-year financial obligations," Patrizio said.
One of the hospital's bond covenants — requirements that must be met — is an obligation to generate 1.2 times, or more, revenue than its annual debt service coverage.
Patrizio said the cuts to staff, services and clinics are expected to help with that because the organization has an annual cash loss from providing those services and positions.
If the organization does not meet its bondholder covenants, it risks further downgrades to its credit rating and possible acceleration of its debt, which is $112 million.
"These decisions are things we must do to keep us on course, but it doesn't mean we are in trouble," Patrizio said.
The cuts announced by Rideout Health will require a reduction in staffing by a total of 106 employees across the entire organization, Patrizio said. The organization has about 2,200 employees.
Rideout Health is trying to find a larger organization to affiliate itself with. Officials with the organization said an affiliation would help Rideout Health provide additional services to its patients and the community while also providing financial benefits.
Patrizio said the announced cuts are not directly related to the affiliate search.
"(The cuts) are related in the sense that one of our goals is restructuring debt to reduce operational requirements the organization must meet every year," he said. "Again, it's not a sign of real trouble for us, rather it's a sign of difficulty for us in meeting our bond obligations that were set many years ago."
Separating from Nevada County clinics
Rideout announced four clinics in Nevada County will no longer by associated with Rideout Health by June 30 — three primary care clinics and one cardiology clinic. Rideout Health was responsible for operating the clinics, employing staff members and bringing in physicians to work out of the facilities.
"Our intention several years ago when we entered the Nevada County market was to continue investing in the market with additional infrastructure," Patrizio said. "Due to the many changes Rideout has experienced since then, we've come to the conclusion that it's not feasible to continue making those investments."
Rideout's decision to separate from the clinics comes on the heels of last week's announcement by Sierra Nevada Memorial Hospital that it's looking into the possible sale of outreach lab draw stations in western Nevada County.
"We are currently investigating the possible sale of our outreach lab services, which would include draw stations at Catherine Lane, Penn Valley and the (Sierra Nevada Medical Hospital) Diagnostic Center," stated Debbie Plass, the hospital's vice president of operations, in an email. "This process is in the evaluation phase, and we expect to have a definitive decision about outreach lab services within 30 days."
Rideout's Patrizio said investing in "additional infrastructure" essentially means bringing in additional physicians to expand services provided by the clinics. Not being able to expand its infrastructure in Nevada County results in an annual cash loss of more than $1 million for Rideout Health, he said.
Rideout Health got into the Nevada County market to establish its brand in the region and expected to see a return on its investment. However, due to the location of the clinics being so far from where the organization primarily operates in the Yuba-Sutter area, the expected returns did not occur, Patrizio said.
Though Rideout Health will no longer affiliate itself with the clinics, Patrizio said the organization does not expect the facilities to shutter completely.
"I know each of the physicians are making his or her own arrangements to continue practicing out of those clinics," he said.
Twenty-two employees — excluding the physicians — that work at the clinics for Rideout Health will lose their jobs when the organization cuts its ties sometime between now and June 30.
Cuts to services
Rideout Health announced it will discontinue home health, hospice and medical equipment services within the next 60 days. Patrizio said the three services operate at an annual cash loss of more than $2 million.
Patrizio said the decision to cut the services is reflective of the highly competitive market in the area. He said the Yuba-Sutter area has eight home health service providers, five hospice providers and three medical equipment providers.
"As a segment of the hospital organization, it's hard to keep services under the hospital's infrastructure with the current competition in the market," he said.
Though the hospital is cutting its services in those areas, Patrizio said there will be plenty of options for local residents when it comes to receiving those services. He said the hospital will provide anyone in need of those services with information on how to go about receiving services through alternative providers.
There are 57 employees with Rideout Health's services expected to lose their jobs within the next 60 days.
Cuts to other positions
Besides the 79 positions being cut from the reduction in services and shuttered clinics in Nevada County, Patrizio said, the organization will be eliminating 27 positions from various departments and from management-level positions across the organization. As of Friday, Patrizio said all of the 106 employees that are losing their jobs had been notified of the layoff.
He said the organization is offering those individuals help in finding a new job. He said assistance will be provided in career services, job placement and resume and interview skills.
"We will bring in services onto our campus to make sure they have access and are assisted in the transition," Patrizio said.
Additional cuts to staffing or services are not contemplated, Patrizio said, but Rideout will be implementing restructuring and efficiency measures that will produce savings equivalent to cutting another 50 positions.
He said the measures will be adjustments in how Rideout Health manages its labor. He said the changes will increase the organization's efficiency overall and will serve as an alternative to more business cuts.
The adjustments will be across the organization, he said, and will include refinements to how departments are operated. For example, instead of cutting positions, changes might include a reduction in hours across a particular area of the organization.
"It's a burden we will share across the organization," Patrizio said. "In other words, everyone will be tightening their belts one more notch."
Jake Abbott is a reporter for the Marysville Appeal-Democrat. Contact him at email@example.com.