UPMC offering buyouts to 3,500 employees in cost-cutting move

UPMC is offering buyouts to 3,500 of its older workers in a move to cut costs as the Pittsburgh hospital giant adjusts to slowing demand for hospital-based care.

The nonprofit organization said Tuesday that it was offering the voluntary severance to employees who are 60 or older and have at least 10 years of service. The offer, which was made to 5.6 percent of UPMC's total workforce, includes medical and dental benefits, severance pay and a one-time cash payment of $15,000, UPMC said in a statement.

“This program both honors and respects long-term staff members who are ready to move to the next phase in life and, simultaneously, helps achieve cost-savings for UPMC by adjusting our workforce to meet the demands of the health care marketplace,” the statement said.

UPMC is the state's largest private employer, with about 62,000 workers.

UPMC spokeswoman Gloria Kreps said the buyout offer was not extended to executives, physicians, advanced care providers, workers in the insurance services division or workers covered by a union agreement.

Kreps said the organization does not have a minimum number of workers it wants to accept the severance, nor does it have a cost-saving target it wants to achieve.

“We plan to accept the majority of employees interested in volunteering for the program,” she said.

Workers have until June 12 to accept the offer. The amount of severance pay and the duration of medical and dental benefits will be based on years of service.

UPMC, the largest hospital operator in Western Pennsylvania, is facing stepped-up competition from Highmark Health, which owns the region's second-largest hospital network and is the state's biggest health insurer. UPMC owns the second-largest health insurer in the region, a division that has been the biggest contributor to the organization's growth recently.

UPMC has said it experienced a “minimal” financial hit in the January-March quarter, as a broad reimbursement contract that gave Highmark's commercial policyholders unfettered in-network access expired on Dec. 31.

But revenue from UPMC's hospitals in that quarter was flat at $1.4 billion, and income from operations dropped by 68 percent to $20.2 million, the system reported this month. Part of the decline can be attributed to a one-time gain of $38 million in the same quarter the year before.

“In this challenging market, we remain the region's most highly regarded and successful health care organization by continually realigning our workforce and by prospectively implementing innovative cost savings programs that assure our continued financial strength,” Kreps said.

Many hospitals have trimmed staff in response to lower patient volume in recent years. The Hospital Council of Western Pennsylvania last month reported a 2 percent decline in full-time employment, or the loss of 1,200 jobs, at the region's hospitals during 2014.

Frank Gamrat, an economist with the Allegheny Institute for Public Policy in Castle Shannon, said that while employment in health care is a strength of the Western Pennsylvania economy, hospitals are under pressure to cut costs.

“What we've noticed in the health care sector, in terms of the unemployment statistics, is you're not seeing a lot of growth in the hospitals,” he said.

“The face of health care is changing,” he said. “Hospital stays are no longer the norm.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.