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Pressure to cut health costs is felt by workforce that provides care

Brooks Memorial Hospital and its largest union reached a tentative contract last week, after five months of talks – but only after a federal mediator was brought in, there was picketing outside the Dunkirk facility and a union voted to authorize a strike.

In Niagara County, the jobs of as many as 60 full-time employees are in jeopardy as Eastern Niagara Hospital ended inpatient care at its Newfane site as of Friday.

And workers at long-term care facilities have faced layoffs, or uncertain futures, as nursing homes across the region have closed or switched from not-for-profit to private ownership.

“I think our members are feeling a greater amount of pressure on the job. The work is getting more difficult, and the fight to improve wages and benefits is more challenging year in and year out,” said Todd P. Hobler, vice president of Local 1199, Service Employees International Union United Healthcare Workers East, who represents nursing home workers in the area.

The health care workforce long has been a bright spot in the region’s lackluster jobs market, and it is a rare source of good news for private-sector unions whose memberships have shrunk recently.

But many workers feel under siege today, because the state and federal governments are prodding the industry to provide better care at lower costs.

Services that traditionally were provided in a hospital or nursing home setting increasingly are being delivered in an outpatient clinic or in the home, where unions are less common and competition is fierce. Health care reform is accelerating this reshaping of the industry and its financial model.

With employee salaries and benefits making up the largest part of their budgets, health care providers are looking to rein in labor costs.

At some facilities, workers face contentious contract negotiations, job cuts and growing demands on those left on the payroll – the nurses and aides who take care of our sick and our elderly. Other institutions try to work with their union employees.

“Costs are so out of control, and there are so many opportunities for bringing efficiency in the delivery of health care,” said Paul E. Tesluk, chairman of the University at Buffalo’s department of organization and human resources.

‘A real problem’

Health care costs have exploded over the last decade, and providers are feeling the squeeze to lower their costs and to deliver care more efficiently.

Spending on health care in this country hit $2.8 trillion in 2012, a figure that rose by 70 percent from 2002 and that accounts for 17 percent of our gross domestic product. Experts say this country can’t afford to continue to pay that much for care.

For all of that spending, however, the United States ranks poorly among the world’s industrialized countries when measuring health outcomes.

“So we have a real problem on our hands,” said Peter M. Lazes, director of the Healthcare Transformation Project at Cornell University’s School of Industrial and Labor Relations.

In a first step to rein in those costs, federal and state governments are reducing how much they reimburse hospitals and long-term care centers to treat Medicare or Medicaid patients.

And provisions in the Affordable Care Act emphasize preventive care, seeking fewer hospital readmissions and more treatment provided at a lower cost in outpatient or home settings.

Health care is labor-intensive, and employee salaries, health insurance and retirement benefits make up a large part of providers’ budgets. For example, employee costs made up 57 percent of Kaleida Health’s $1.16 billion in expenses in 2013, according to financial statements.

“Where the rubber hits the road is, labor is a significant cost, whether it’s unionized or not, and so if your revenue streams are under stress, and you can’t grow it fast enough to overcome COLA, then you’ve got to cut. It’s just simple math,” said Alan W. Gracie Jr., a director in Freed Maxick’s health care consulting practice, referring to a cost-of-living adjustment index.

Health care is a key piece of the economy, however, and the trillions of dollars spent on health care nationally support 18 million jobs in that sector.

And in Buffalo Niagara, health care has seen steady growth even as overall employment has stagnated.

Between January 2004 and January 2014, for example, employment in the health care sector in the Buffalo Niagara region rose by 8 percent, from 68,200 to 73,800, compared with an increase of less than 1 percent in the overall workforce, the state Labor Department reported.

25,000 local members

And the health care sector has provided a boost to area unions, which otherwise have seen their membership decline. Union members made up 17.9 percent of the area’s private-sector workforce in 2003, but just 14.9 percent in 2013, according to data compiled by researchers Barry T. Hirsch at Georgia State University and David A. Macpherson at Trinity University.

This area’s three main health care unions – 1199SEIU, Communication Workers of America and the Civil Service Employees Association – have about 25,000 members in the industry.

The jobs aren’t easy. Those workers care for the ill, the dying, the aged and the infirm. They draw blood and empty bedpans and deliver meals and keep rooms clean.

But the jobs have been attractive because they offered the prospect of steady employment, decent pay and good benefits to workers with a wide range of educational backgrounds.

“I love my job. I always wanted to be a nurse since I was 5 years old,” said Diane C. Flack, a licensed practical nurse at the Absolut Care of Orchard Park skilled nursing facility and 1199SEIU member.

Any efforts to rein in health care spending put those jobs at risk, and that’s why the health care sector is shaping up as a major battleground for private-sector unions.

Brooks Memorial Hospital is affiliated with UPMC Hamot of Erie, Pa., part of the University of Pittsburgh Medical Center system. Officials with 1199SEIU say they believe that Brooks took a hard line in its initial contract proposals – including a freeze on wages and employer pension contributions and a reduction in paid time off – at the direction of administrators in Erie and Pittsburgh.

“I think they’re trying to come into the area and make a statement to the unions,” said James A. Scordato, a vice president for 1199SEIU who represents workers at hospitals.

The Dunkirk hospital lost $2.3 million on $43 million in revenue in 2012, when employee pay and benefits accounted for 56 percent of expenses. “We’ve been very clear, I think, throughout negotiations that these negotiations are about local issues, the local realities of the hospital,” said A. Jack Davis, vice president for administrative services at Brooks.

At Eastern Niagara Hospital, the equivalent of 60 full-time workers there are likely to lose their jobs because the hospital on Friday ended inpatient care at its Newfane site. That location will remain open, for emergency and outpatient services, with the equivalent of 34 full-time employees, while inpatient services are transferred to the hospital’s larger Lockport site.

Small community hospitals aren’t alone in facing financial woes or the threat of closing. Five not-for-profit nursing homes in the Buffalo area have closed over the last five years.

Outside Erie County, county governments that have operated their own long-term care facilities are selling them to private operators, citing similar financial and regulatory challenges. When the nursing homes have a union, new operators often seek to reopen the existing contract to try to extract concessions from employees.

Hoping for cooperation

“When these nursing homes are sold, we are going in to organize these people, because these employers that are coming in are horrible. I mean, they want to pay minimum wage, they want to pay very little in benefit structure,” said Florence R. Tripi, Western Region president for the Civil Service Employees Association.

Officials from the McGuire Group and Elderwood, two of the largest nursing home operators in the area, and the New York State Health Facilities Association, which represents the interests of the industry, all declined interview requests.

A few health care providers and their unions are trying to work together to confront the industry’s stark financial and regulatory realities.

At Kaleida Health, Jody L. Lomeo, the new president and CEO, made building a better relationship with the system’s unions a top priority. The day after his interim appointment was announced in January, he met with representatives of the unions at 1199SEIU’s offices.

“That speaks volumes in terms of his philosophy and the philosophy of the organization,” said Daniel J. Farberman, vice president of labor and employee relations at Kaleida Health.

Weathering the storm

Management and union leaders at BlueCross BlueShield of Western New York stood side by side at a May news conference to announce that the region’s largest, and only unionized, health insurer would move 40 jobs to its Buffalo headquarters from Pennsylvania.

The Economist magazine recently compared the 21st-century nurse to the 20th-century autoworker, and Cornell’s Lazes has studied what the health care industry can learn from the auto industry. The short answer: Unions have to be viewed as adding value, not serving as a stumbling block.

“If the health care unions don’t get smart about where the industry is going, and try to become a partner in that process, those jobs are not going to be union,” Lazes said.

Union members agree, and they say they believe they’re well-positioned to weather this period of industry change.

“Health care has been community-based,” said Debora M. Hayes, the CWA’s area director. “It can’t be done from Mexico or India or Bangladesh – a lot of it can’t be – so you know it’s going to stay in the community. People are going to have jobs.”