News Release

Friday, January 23, 2009

Contact: (757) 668-7554 Greg.Lampman@chkd.org

CHKD Announcement

NORFOLK, Va. -- CHKD announced today a series of measures aimed at shoring up its financial position as it faces year-to-date losses, declining Medicaid reimbursements and investment reserves hit by market forces.

The organization is working to improve revenues by making services more accessible and systems better able to capture available reimbursements.

In the fall, CHKD made substantial cuts to non-labor expenses and froze 90 non-clinical vacant positions, anticipating the worsening of the economy and its effect on CHKD. Those positions will not be filled. In December, CHKD announced that its on-campus child care center would close no later than June 12, 2009. That decision affected 27 employees.

CHKD is, however, facing financial realities that require further action. Today, the organization enacted a workforce reduction involving 28 employees. This reduction will not affect the care CHKD provides to its patients. The positions were in administrative, support and managerial roles. CHKD employs approximately 3000 people throughout its Health System. The staffing changes reflect decisions to restructure, combine responsibilities or eliminate tasks. The affected staff members were provided with severance, and Human Resources is assisting them with their transition needs

These decisions were based on CHKD’s projections for revenues, expenses and reimbursements and our long-range strategic plan. The organization is closely monitoring several key variables, including the pressing concern of proposed reductions to Medicaid reimbursements. Nearly 55 percent of CHKD’s inpatient days are covered by Medicaid. That number could go higher as the state reports substantial increases in Medicaid enrollments. Already, the Governor’s proposed budget freezes CHKD’s current Medicaid payment rates through the state’s 2010 fiscal year. Because Medicaid reimbursements do not fully cover what it costs CHKD to provide care, CHKD lost $3.4 million on Medicaid in 2007 alone. In fact, despite the aforementioned measures, the hospital’s costs are expected to increase next year by $1.5 million, which further compounds the effect of any freeze or reduction in rates. Thus, we are actively seeking support in Richmond for consideration for CHKD.

Jim Dahling, CHKD’s President and CEO, said today, “CHKD’s financial health is impacted by the forces of fluctuating inpatient, outpatient and surgical volumes, uncertainties in our reimbursement horizon and the drop in value of our investment reserves. The actions announced today are meant to restore our ability to invest in the needs of our patients, staff, infrastructure and equipment. Every decision we make, no matter how difficult, must maintain our ability to provide superb pediatric care for our patients and to secure our future.”