Update on MeritCares Financial Situation

Later this week, MeritCare will be reducing its workforce. MeritCare had scheduled a news conference for later this week to make this announcement, but information leaked to the media, so we are announcing some information at this time.

Later this week, MeritCare will be reducing its workforce. MeritCare had scheduled a news conference for later this week to make this announcement, but information leaked to the media, so we are announcing some information at this time.

MeritCare will be reducing its work force this week and it is expected that:
  • 75 - 100 employees will lose their jobs.
  • A number of employees will have their hours reduced. (This number will be released on Thursday.)
  • A number of jobs MeritCare currently has open will not be filled. (This number will be released on Thursday.)


This means that MeritCare will be reducing its work force by approximately 300 full-time equivalents across the entire health system.

Great care is being taken to ensure that these changes do not impact the quality of patient care. In addition, we will be doing everything possible to support both the employees who lose their jobs and those who remain.

We are using the term reduction in force vs. a lay off because when a company lays off people it's usually because their business has slowed down and there's a possibility they might get called back when business picks up. That's not our case. We are continuing to see an 8-9 percent increase each year in our patient volume so demand for our services isn't the issue. One of the reasons that a company makes a reduction in its workforce is because it needs to change its cost structure and work processes; this is the case at MeritCare.

When we talked publicly about our situation in early May, we said that we didn't expect to be reducing our workforce and that is the truth based on the information that we had at the time. However, Blue Cross Blue Shield of North Dakota recently announced that they would be withholding 2.5 percent of our reimbursement from Aug. 1, 2008 to year-end. Also, Medicare cuts to physician compensation of 10.6 percent are expected to begin July 1, 2008. We had hoped this could be stayed, but that appears unlikely. We have taken numerous steps to strengthen our financial condition and operational performance along with the reduction in workforce.

The details of the workforce reduction have not yet been finalized. We expect this to be completed by Thursday. We plan to do this general reduction in force quickly and to do it once. Any future reductions are likely to be much smaller and associated with down sizing or closing specific programs, or with the adoption of specific labor-saving technologies.