TMC Healthcare cuts 5 top execs

Leaving by the end of this month are Rhonda Dean, CEO of El Dorado Hospital, which TMC Healthcare purchased in February 2004, and four Tucson Medical Center vice presidents. They are Dr. Palmer Evans, who oversees quality improvement; Dr. Donna Fulton, medical director; Rosemary Notarantonio, chief nursing officer; and Judy Rich, chief operating officer.

"The game's up," said TMC President and CEO Frank Alvarez, who will stay and oversee administrators to be appointed at both hospitals. "We want to be proactive in making cuts where we can without impacting bedside care," he said.

Costs of the war in Iraq, hurricane relief and the new Medicare prescription drug benefit that starts Jan. 1 could lead to up to $50 billion in cuts in Medicare, Medicaid and other federal programs next year, he noted. But even if the federal health-care programs for the elderly and the poor are not cut, their rates are expected to remain flat next year, at best, Alvarez said.

With the cost of providing health care expected to increase as much as 8 percent next year, TMC and other hospitals stand to lose big money, he said.

TMC is performing well financially and expects to finish this year with a $2.5 million profit, Alvarez said, while El Dorado is expecting to break even at the end of this year. Cutting the five positions could save TMC Healthcare, the hospitals' parent organization, about $1 million next year, he estimated. No further cuts are anticipated, and the positions being cut will not have a negative effect on patient care, Alvarez said.

Four of the five discharged executives offered to leave in response to a request from Alvarez last week, he said. All will be given severance packages, he said, but would not give details. He did not identify which of the five left voluntarily.

Alvarez announced the consolidation Monday in an e-mail to the hospitals' doctors. New appointments — including those of lower-ranked administrators to head TMC and El Dorado — could be announced as early as Friday, Alvarez said.

Dean, who has headed El Dorado Hospital for 12 years, said she supported the consolidation but chose not to be part of it.

"At this time in my career, I decided I would opt out of this organization," Dean said Tuesday. "I love my hospital. I have a wonderful staff and a wonderful medical staff. It's sad to leave now, but I was thinking of retiring in the next few years. I'm going to enjoy Christmas and see what comes."

Evans, an obstetrician-gynecologist before joining the administrative staff of TMC, said he feels upbeat about retiring, although it's happening a year earlier than he planned. He also is confident, he said, that the physicians who work at TMC and El Dorado will be well served by Richard Rodriguez, the hospital's chief medical officer.

"I've had a wonderful experience in this community. I really feel very fortunate," Evans said. "This gives me an opportunity to plan what I want to do next."

Fulton declined to be interviewed.

Dr. David R. Siegel, president of the Pima County Medical Society and section chief of neurology at TMC, said he was disappointed that directors decided on the cuts without first consulting the physician staff.

"I understand perfectly well the administration of TMC has a fiduciary responsibility to the institution to make sure it's a viable business and the doors stay open," Siegel said, emphasizing that he was speaking for himself and not the medical society. The people being let go "are people I've certainly grown to trust, and Dr. Fulton particularly provided a sympathetic ear and provided a lot of constructive input for the medical staff."

Siegel said he did not expect the cuts to impact the quality of patient care at TMC, "but it certainly can affect morale. It affects my morale — I'm very disappointed."

Dr. Casey Blitt, a TMC anesthesiologist, said he thinks the changes will have little impact on patient care "because none of these people were directly involved in patient care."

The board of directors of TMC Healthcare, which operates TMC and El Dorado, was guided in its decision by the book "America the Broke," by University of Arizona economist Gerald Swanson, who sits on the TMC Healthcare board.

"We want to take the two hospitals and make them one," Swanson said Tuesday. "There was some redundancy in executives, and if you're going to cut costs, I'd rather see it done at that level than at the staff level."

John Rivers, president of the Arizona Hospital and Healthcare Association, called the decision to trim costs in anticipation of reimbursement cuts realistic.

"I think most hospitals should be more worried than they are — or than I think they are — about the future payment environment with both Medicare and Medicaid," Rivers said. "I'm not sure we'll ever see payment rates from the federal government any higher than they are right now.

"By any objective measure, we're headed for a train wreck at the federal level, and in that environment I don't know how anyone can expect Medicare payments to keep up with the costs of providing care."