Northern Light Health’s warning of coming changes without providing details is creating a mood of uncertainty about its future, an expert said.
The health care system said Tuesday that changes are coming, but that no hospitals will be closed. Those changes may include staffing cuts, said Paul Bolin, executive vice president and chief people and administrative officer for the health care system.
The lack of plans and details seems like a distraction, University of Maine finance professor Pankaj Agrrawal said.
“[It’s] classic sort of virtue signaling saying the right words, because they know that the minute people see anything from them about finances, they’re going to react,” Agrrawal said, adding that Northern Light is trying to assuage patients and employees by “saying the right words.”
Tuesday’s revelation from Northern Light Health is the latest indication that staffing cuts are looming for the health care system, which is Penobscot County’s largest employer and the state’s second-largest health care provider. It follows months of leadership departures, service and facility closures, and troubling financial deficits.
When someone in executive leadership says the system needs to be “leaner” the same day as a federal bill threatening a $1.1 trillion cut to Medicaid and the Affordable Care Act, it’s a foregone conclusion that there will be cost cutting, Agrrawal said.
About 65 percent of Northern Light’s revenue comes from MaineCare, Medicare and Medicaid.
It’s clear the system cannot avoid cuts, Agrrawal said. Announcing these changes in advance is bad for morale, he added.
“It creates an air of uncertainty and it’s bad for the morale of the service providers when they’re saying ‘leaner,’” Agrrawal said. “That is just corporate dog whistle for layoffs or increased hours.”
Bolin said Northern Light made the announcement because it wants to continue to be transparent with staff and seek their input on changes. Finalized plans will be available in six to eight weeks, which may include staffing cuts, but those losses may also happen through attrition and positions not being filled, he added.
Each Northern Light location will be evaluated to see if there is an overlap in services with other nearby providers, as well as making sure the services are used, Bolin said.
Agrrawal said that implies the cuts are likely to be across the board and Northern Light may even look for strategic alliances to continue providing services.
The early announcement feels like a dress rehearsal, telling people to not panic before the fiscal year ends Sept. 30, Agrrawal said.
But the health system is not concerned about paying its debts, Bolin said. It is carrying nearly $617 million in debt at the end of 2024, compared with $445 million at the end of 2023.
Northern Light will likely match the reduced inflow of cash by reducing expenses to make those payments and stay financially solvent, Agrrawal said. It’s possible lenders had a requirement that the system show some financial prudence to keep lines of credit intact, he said.
The budget constraints and funding issues are caused by many factors, Agrrawal said. They include insurance reimbursements not keeping up with inflation, equipment and supply costs increases, the COVID-19 pandemic, and possibly decisions made by executives in previous years, he said.
“I feel for the administration also because, I mean, they’re walking a tight rope,” Agrrawal said.
