Just one year after issuing layoff notices to 315 workers, Sharp HealthCare announced a “realignment” effort Tuesday that affects approximately 260 of its more than 21,000 employees.
Registered nurses, nurse practitioners, social workers, imaging technicians and case management staff are among the clinical positions affected, while non-clinical roles include transportation, credentialing, patient intake and services and other administrative and business operations staff.
Chris Howard, Sharp’s chief executive officer, who took a pay cut last year when announcing the first round of layoffs, said that reductions to federal reimbursement programs such as Medicaid and Medicare, many driven by H.R. 1, the president’s budget bill passed by Congress last year, have created a need for further cuts.
H.R. 1, known as the One Big Beautiful Bill Act, changes some funding mechanisms that pay medical providers, adjusting behind-the-scenes programs but also mandating work requirements for many Medi-Cal recipients, a move that is predicted to significantly reduce the number of Americans with medical coverage. And, Congress declined to maintain subsidies that Americans buying coverage through health insurance exchanges receive, a decision that has already caused many to let their coverage lapse.
“Many of those patients are now on Medi-Cal and, ultimately, with the requirements of H.R. 1, there will be more patients that will have no insurance at all,” Howard said. “Providers like Sharp must be prepared to continue providing vital services to those communities and address the financial challenges that come along with providing that care.”
Sharp’s most recent quarterly financial report to its bondholders shows a $38 million operating loss through the first nine months of its fiscal year, though accounting for investment income generated by more than $4 billion in savings, and removal of non-cash expenses such as amortization and depreciation shows that, thus far, the operation has earned about $88 million.
Why, then, is it necessary to enact more cuts if there is cash in the bank and a slight profit? Howard said that the cuts are designed to help the organization make its operations break even. There must be some margin in order to make investments going forward, he said.
“Every healthcare organization must have, at a minimum, a 2% to 3% operating margin, with more money coming in than is going out, so that we can provide raises to our team members in future years and replace vital equipment,” Howard said.
But that line of reasoning did not resonate with the Service Employees International Union, which represents about 6,000 Sharp employees, 81 of whom received layoff notices Tuesday.
“These caregivers, whom Sharp wants to cut, work across Sharp HealthCare facilities, providing direct patient and mental health care,” the statement said. “They are the same frontline healthcare workers who are volunteering their time to pass Proposition 40 in November to help save the California healthcare system from collapse due to federal healthcare funding cuts.”
Proposition 40 would impose a one-time 5% tax on taxpayers and trusts with a net worth greater than $1 billion, using proceeds to pay for social programs, including healthcare. While many California Democrats back the ballot measure, state Republicans and Gov. Gavin Newsom are in opposition.
Not all of the affected jobs necessarily involve layoffs. Howard said that 120 behavioral health positions are being restructured to meet the requirements of a new state law — Assemby Bill 116 — that specifies a minimum of one nurse per patient in “stand-alone” acute psychiatric hospitals that are not part of a general-purpose medical center.
Sharp runs the largest such facility in San Diego County and obtained a temporary reprieve on the state’s requirement to begin meeting the 6-to-1 ratio on June 1. But it, and other stand-alone facilities such as Alvarado Parkway Institute, will need to comply by next year.
While daytime staffing at its Sharp Mesa Vista behavioral health hospital already meets requirements, overnight shifts have been managed based on the number of patients in beds and on the severity of their illnesses.
“We’re having to rebalance that because the mandate is an across-the-board 24/7 mandate,” Howard said.
Those currently in behavioral health jobs were to be immediately offered jobs on different shifts based on union seniority, only losing their employment if they were unable or unwilling to switch shifts. Howard said he believes that the inflexible ratios will not cause any appreciable change in care for patients.
“Sharp has always effectively staffed behavioral health services, but when we have a new blanket standard presented and placed upon us, then we have to make sure that we optimize the entire continuum of behavioral health services, so that we don’t duplicate or replicate services elsewhere,” Howard said.
The Sharp Experience, an operating philosophy that emphasizes hospitality, right down to always taking patients where they need to go rather than just giving directions, has long been a core part of the medical provider’s identity.
Sharp has traditionally paid its employees to attend an all-hands recognition event for those deemed by their peers to best meet the organization’s guiding principles.
Howard said that while the event is no longer held annually, it will go forward this year.
“That event in particular is no longer an annual event, and other events that we have sponsored, especially off-site, have been reduced or eliminated over the past five or six years, all in an effort to reduce expenses,” Howard said. “At the same time, we want to ensure we continue to recognize the exceptional accomplishments of our team members.”
In the end, Howard said that he believes it is important to maintain the focus on hospitality that is at the core of what has been called the Sharp experience, even as bottom lines narrow.
“We pride ourselves in being the largest private employer in San Diego County, but all while doing this in a way that preserves the Sharp experience and preserves the financial integrity of the organization,” Howard said.