BEVERLY — Northeast Hospital Corp. CEO Ken Hanover sent a letter to employees and doctors last week saying the organization is "at a crossroads" and could lay off as many as 100 people, or 5 percent of its work force.
The organization, which includes Beverly Hospital, is facing a $15 million budget gap because it is seeing fewer patients than expected and no increase in payments from insurance companies and government programs.
"This organization is at a crossroads, and we must adapt to the current and future health care climate to continue to effectively serve our community," Hanover wrote.
Hanover said $5 million of the potential $15 million in cuts could come from "potential staff reduction." That would equate to 75 to 100 people out of the organization's 1,800 to 1,900 full-time positions, he said.
Hanover said he would only eliminate positions "where it is absolutely necessary and where patient safety and clinical quality will not be placed at risk."
Northeast Hospital Corp. includes three hospitals — Beverly Hospital, Addison Gilbert Hospital in Gloucester and BayRidge Hospital in Lynn — and two outpatient centers, Beverly Hospital at Danvers and the Cable Center in Ipswich. The organization laid off 22 people in November.
A spokesman for Northeast Hospital Corp. said the organization will hire an outside company to evaluate staffing levels and make recommendations by September.
In his letter, dated April 30, Hanover said patient care volume and revenues have fallen behind projections since the start of the fiscal year in October. The organization is also expecting a decline in Medicare payment rates and no increases in Medicaid and private health insurance rates.
Hanover said in the letter that the health care industry is "undergoing significant structural change" that has put "considerable pressure" on hospitals to control costs.
In previous interviews, Hanover has said Northeast Health System, the umbrella organization that includes the hospitals, must grow to survive and is exploring opportunities for a merger.
An examination of the health insurance industry by the state attorney general's office earlier this year showed that Northeast Health System has fallen behind North Shore Medical Center in Salem in payments from insurance companies. The report said larger companies like Partners Health Care, which includes North Shore Medical Center, are able to use their market clout to negotiate higher rates from insurance companies.
Northeast Health System spokesman Chip Payson said Hanover, who took over as CEO last October, sent the letter to employees because he wants the process to be "transparent."
"This is difficult," Payson said. "It's going to be an ongoing process. We just want to be fair and equitable and transparent as we move through this. We take this very seriously."
Staff writer Paul Leighton can be reached at 978-338-2675 or firstname.lastname@example.org.