Baylor Scott & White Health targets 1,700 more jobs to reduce costs in non-core areas

Baylor Scott & White Health, the state’s largest not-for-profit hospital system, will be outsourcing and retraining 1,700 employees as part of a broader effort to focus on its core health care business and related opportunities.

The company said the move doesn’t involve front-line health workers, who’ve been dealing with the demands of the coronavirus pandemic for almost a year.

Baylor expects significant savings — $600 million over five years — and said all of it would be invested in front-line health initiatives.

Executives told employees about the moves Wednesday, with more details to come this week. About two-thirds of Baylor’s affected workers will be transferred to partner companies that specialize in information technology, billing and revenue management, and other support services.

About 600 to 650 positions will be eliminated, and those employees will be invited to participate in retraining programs, the company said. That would allow them to remain with Baylor at a time when unemployment is high and millions are looking for work.

“In no case — in no case — is anyone going to miss a paycheck,” Baylor CEO Jim Hinton said in an interview. “We can afford to make these commitments, and we want to do the right thing for the great employees of Baylor Scott & White. They’ve really done everything we’ve asked and more during this last year.”

This is the third time Baylor has publicly announced a cost-cutting move since the pandemic began last spring. After announcing major layoffs in May, Baylor ultimately let about 930 employees go. The company also cut the pay of 300 senior leaders, including the CEO and president.

Last month, Baylor confirmed it was laying off 102 employees in finance and accounting and outsourcing the duties to workers in India. A spokeswoman said 18 of the Baylor employees would be offered positions with the vendor providing the services.

Last spring’s layoffs were a direct response to the pandemic and related lockdowns, which greatly reduced business at hospitals and clinics around the country. But Hinton said the outsourcing of finance jobs and additional support services is part of a separate track to improve efficiencies and focus on the core business.

“The difference is that this is a transition to a new business model, a transition to a new way of working,” Hinton said.

Baylor has over 2,000 clinical positions open and is investing in other areas, including a regional campus of a medical school and a joint venture to improve coverage for the uninsured. At the same time, the health care industry is facing major changes and challenges — be they the pandemic or a new administration in Washington, Hinton said.

“We have this mind-set that we need to be in continual readiness mode,” Hinton said. “Any place that we can look at and do more effectively and save money, we should do that.”

As a not-for-profit company, Baylor does not pay dividends or share profits with investors. Hinton said the savings from these cuts “are designated for ensuring that front-line nurses, doctors, facilities and technology are available” for people in Texas.

Officials did not immediately identify the third-party companies that would provide the support services and take on the transferring workers. Some Baylor employees said that Atos, an IT services company based in France, is one of the partners.

Hinton said affected employees, including those being retrained, would be paid the same or more, depending on their future roles. Among the retraining opportunities are positions as certified medical assistants and in patient support services, a spokeswoman said.

The Baylor CEO was asked whether the job changes were primarily about reducing costs or increasing Baylor’s capabilities.

“It’s both,” Hinton said. “Because of the scale and operating efficiencies [of the new partners], they can do it less expensively and pass those savings on to us. So we can pass them on to the growth of this company.”

Baylor executives are going to some lengths to protect affected employees, but such good intentions often fall short, said Michael Davis, who teaches economics at Southern Methodist University’s Cox School of Business.

People may not like the new workplace, the work shifts, the boss or even the commute, and much of that won’t become clear for a while.

“It may be fine, it may not be fine,” Davis said. “But employees certainly want to look at the fine print.”

He pointed out that companies undertake similar restructurings all the time, even without a pandemic. “This may be stressful for the people involved, but it shouldn’t be surprising,” Davis said.

Baylor Scott & White has 52 hospitals, more than 800 patient care sites and over 47,000 employees, including joint ventures and employed physicians. In the fiscal year ended in June, Baylor reported over $10.5 billion in revenue, a gain of 4.7% despite the onset of COVID-19.

Last spring, amid lockdowns and restrictions on elective surgery, patient volumes plunged by half at Baylor. After surgery restrictions were lifted, Baylor quickly rescheduled patients, invested in new safety protocols and digital tools, and launched a campaign to convince the public that it was safe to come back.

The efforts paid off, with Baylor posting its highest quarterly profit ever. From July through September, operating income totaled $389 million, twice as much as in the same quarter of 2019.

Results were boosted by federal relief dollars and a one-time gain related to health insurance. But Hinton and his leadership team have been working to improve operations for several years, starting long before the pandemic.

The program has been effective, said Patrick Zagar, a credit analyst in Dallas for S&P Global Ratings. In an interview last month, Zagar said that “continuous improvement” efforts have become the standard in the health care industry as more companies try to ingrain that notion in their culture.

The pandemic created more urgency, according to Baylor’s CEO.

“There’s no question COVID has accelerated it, but it’s not the sole reason,” Hinton said. “For so many years, we’ve been working on being continually ready for whatever the environment throws at us — both threats and opportunities.”

In November, Baylor said it was working with the Baylor College of Medicine in Houston on a new regional medical school campus in Temple. Baylor’s 20-year commitment to the school is aimed at reducing the doctor shortage in Texas and fostering more clinical innovation, officials said.

In October, the company announced that the Baylor Scott & White Quality Alliance was teaming with Catalyst Health Network, bringing together two giant physician groups. Officials said they wanted to create more affordable health care options for employers and others who often go without insurance. Together, the two organizations have thousands of doctors providing care for about 1.75 million people.

Last year, the number of employees at Baylor fell by over 2,100, according to financial reports to bondholders. Over 1,000 more will leave as part of the latest outsourcing, but Hinton insisted that Baylor’s ambitions were not shrinking.

“Smaller is not in our vocabulary,” Hinton said. “This is a growth company, we’re in a growth state, and health care is a growth industry. This [move] is actually to propel our growth.”