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One unit of the union representing Mercy Hospital employees voted Friday to accept a package of contract concessions while a second unit voted to reject it.

A new contract containing wage and benefit cuts was approved 422 to 390 by the bargaining unit representing service, technical and clerical employees at the South Buffalo hospital.

But a second unit that represents registered nurses rejected the contract by a vote of 195 to 188.

Both units are members of Local 1133, Communication Workers of America.

"We are not quite sure what this means," said Barbara Bauch, president of the local. "The employer is looking for $3.9 million in concessions. The question is where are they going to get it."

"I anticipate we will know more next week," she added.

Ms. Bauch speculated that the nurses' rejection of the concessions, including a 1 percent pay cut, can be blamed to some extent on an announcement Thursday by the administration of Our Lady of Victory Hospital in Lackawanna that it will give its employees a 3 percent raise in January. Both hospitals are part of the new Catholic health care system.

"I am very upset about the release of that news," said Ms. Bauch. "I think it heightened the anxiety here today. I think it directly contributed to what happened here tonight."

James W. Connolly, Mercy's chief executive officer, expressed disappointment at the vote on the package, which was designed to help the hospital close a projected $6.5 million budget gap next year and avoid up to 350 layoffs.

"We need these cost reductions from all our employees," he said. "We just do not have the financial resources to continue operating in this manner. Now, we must make some extremely difficult decisions in order to continue providing medical care to this community."

He added that the impact of the vote "is not clear at this time."

"We need to look at the cost savings we failed to achieve from the nurses' contract and work from there," he said.

He noted that the hospital has agreed to defer layoff announcements until after the holidays.

"We were really hoping the progress we made during the contract negotiations would be reflected in a unified vote," he said. "This certainly wasn't the outcome we had expected or hoped for."

The Mercy Hospital employees had reached a tentative agreement last week on $3.2 million in cost reductions that were expected to avert hundreds of layoffs if the workers approved the package. But the South Buffalo hospital had been seeking $3.9 million in cuts.

In addition to the 1 percent pay cut, the package included a 5 percent increase in workers' share of health costs, less time off for less-senior employees, a doubling of parking fees and a provision to make it easier for the hospital to contract out services now performed by its staff.

Even with the concessions, officials did not rule out some job losses.

The union represents 1,700 of the hospital's 2,137 workers -- mainly registered nurses, clerical staff, dietary workers and other non-medical personnel.

Hospital officials Dec. 3 proposed the concessions after projecting losses of $4.5 million this year and $6.5 million next year due to reduced payments for services from health maintenance organizations and government health care programs, such as Medicare for the elderly and Medicaid for the poor and disabled.

Without a quick agreement, officials said, the hospital would be forced to lay off as many as 350 people.

Connolly has said the hospital's business is good and expenses are in line with industry averages, but the reduced payments from health maintenance organizations, Medicare and Medicaid have cut significantly into revenues.

Employees acknowledged that the hospital industry is undergoing major change but questioned management's handling of the situation.

Ms. Bauch said many of her local's members believe that the hospital caused its own financial problems by overestimating revenues and underestimating costs in negotiating new payment contracts with HMOs after the state last January stopped regulating hospital reimbursement rates and allowed HMOs to negotiate payments.

"The feeling is the administration wasn't effective, but we're the ones taking the hit," she said.

Ms. Bauch also said employees complained that the concessions were not fair. They wanted administrators to give up perks, such as leased cars, in return for their approval of the wage and benefit cuts.

Mercy Hospital, which is part of the Mercy Health System of Western New York, reported a $378,000 profit in 1996 on total revenues of $112 million.

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