Buffalo Business First: Kaleida puts cost of strike as high as $142 million per month

By Tracey Drury  –  Reporter, Buffalo Business First

Sep 29, 2022

Dollars and cents have been a major topic throughout the process as Kaleida Health bargains with two unions representing thousands of its health care workers. Those conversations have focused largely what workers are being paid, what they want to earn and how much the health system can afford to pay.

Kaleida officials said their most recent proposal to the unions would cost the system $200 million in additional costs over the next three years, versus $500 million in the most recent proposal from Communications Workers of America (CWA1168) and 1199SEIU United Healthcare Workers East, the unions representing 6,300 of Kaleida's 10,000 full- and part-time workers.

In recent weeks, talk of costs internally has shifted to calculating exactly what the economic cost of a strike could be for the $2 billion Buffalo health system. A strike authorization vote was made in mid-September.

Kaleida officials said that number could exceed $142 million per month, a figure that comes on top of projected annual operating losses of $100 million for 2022. That monthly figure includes:

• $50 million monthly in projected losses from temporarily shutting down elective surgeries and procedures and reducing available hospital beds. The $50 million figure was derived from how much it lost during the pandemic when the state shut down surgeries.

• $23 million weekly in expenses to bring in replacement workers through Huffmaster, a national health care crisis staffing firm, which has been working with Kaleida on a contingency plan to supplement staff at its hospitals, clinics and long-term care sites. Staffing includes nurses, support staff and laboratory workers covered in the contract.

“It would be very difficult for me to even begin to articulate how devastating a strike would be for our community and how long-lasting the impact from that will be,” said Don Boyd, Kaleida CEO. “We would need to continue to provide a certain level of access across the whole system in the event a strike would be across the system. That said, that’s not our goal, and I believe it’s also labor’s goal to avoid that.”

Kaleida also must consider non-financial costs, said Richard Gundling, senior vice president at the Healthcare Financial Management Association, a Chicago professional association.

“You'll have those lingering reputational issues, maybe from the community. Physicians and patients are angry for a while, but also, if the nurses are disgruntled or the laboratory techs, are they devoted to the facility?” he said. “People get over it, but it does have a short-term impact and concern.”

Without income from elective surgeries, Kaleida hospitals have no way to counter losses from Medicaid and Medicare services that may continue in the ER and surgeries that can’t be postponed, Gundling said.

“That’s how you pay for everything,” he said. “The emergency patients are still coming in; people are still having heart attacks and car accidents.”

Kaleida also won’t be the only system incurring costs from a strike. Other area hospitals will need to make adjustments to accommodate increased traffic if Kaleida's 900-bed capacity is limited. Kaleida is having daily strike contingency talks with the Erie County health department to figure out everything from ER access to ICU capacity to how specialty services will be managed, including stroke services at the GVI and pediatric specialties at Oishei Children’s Hospital.

“If we can’t staff up Children’s Hospital, where are those kids going to go?” said Michael Hughes, Kaleida chief administrative officer.

Union officials said in prepared comments they don’t want to strike, proposals from Kaleida are unsustainable and will not address declining quality of care. They also point to what they call Kaleida’s willingness to spend $100 million on agency and travel nurses versus working to create a competitive contract that would ease recruiting and address understaffing.

“We are fighting for a fair contract that will make safe staffing in our hospitals a reality,” said Jim Scordato, 1199SEIU vice president for Western New York hospitals. “Kaleida was financially impacted by the pandemic, as all hospitals were, but we cannot let its financial losses continue to dictate the quality of care within its hospitals and quality of life for its workforce.”

Kaleida recorded $1.36 billion in revenue systemwide through August, with an operating loss of $54 million. Assuming no spikes in Covid volume or a huge increase in admissions from seasonal flu, losses for the year likely will hit $100 million. That figure includes about $110 million in costs tied to travel nurses plus $34 in unrealized losses on investments.

Kaleida isn’t the only system struggling. According to a new survey by Kauffman Hall, more than half of all hospitals are projected to have negative margins through 2022, with projections indicating margins will be down 37% relative to pre-pandemic levels. Labor costs are projected to increase by $86 million.

Gundling of the Healthcare Financial Management Association said it could be the community that ends up picking up the tab.

“Who has to pick that up?” he said. “It’s the employers in Buffalo. It’s the health insurers and it’s the patients. Medicare and Medicaid are not going to pay for that, so everyone else has to pick that up and that’s the conundrum.”