Tufts-New England will trim staff

At a time when most Boston teaching hospitals are thriving, Tufts-New England Medical Center is laying off about 35 employees, less than 1 percent of its staff, because it hasn't met targets for increasing the number of inpatients.

The hospital began informing affected employees last week, after a series of staff meetings in which chief executive Ellen Zane and chief operating officer Ed Schottland told employees the nonprofit hospital was falling short of financial goals.

"In some areas, we are not meeting our volume and financial targets, yet we are staffing and buying supplies as if we were meeting or beating our volume goals," Zane and Schottland said in a May 31 e-mail. "Our staffing per bed is significantly higher now than it was last year. This is not how a successful hospital must run."

A hospital spokeswoman said the staff cuts would affect nurses and administrators. Besides the layoffs, Tufts-New England Medical Center is looking for other ways to reduce costs but said it won't cut any services.

Tufts - New England Medical Center, the smallest of Boston's teaching hospitals, has stumbled in recent months while its peers have done well. Operating margin -- a measure of how much money it makes providing medical services -- shrank from 1.32 percent in fiscal year 2005 to 0.43 percent in fiscal year 2006, according to the state. For the year ending Sept. 30, 2006, Tufts - New England Medical Center posted an operating profit of $2.35 million, a decline of almost two-thirds from the previous fiscal year.

In contrast, Massachusetts General Hospital's operating margin rose from 2.8 percent in fiscal 2005 to 4.6 percent the following year, and its operating profit increased by more than 80 percent to $108.4 million.

For the six months ending March 30, Tufts - New England Medical Center's inpatient volume increased by just 0.74 percent. Mount Auburn Hospital, whose patient volume was the best of any Boston-area hospital during the same period, saw an 8.3 percent increase in inpatients.

Zane and Schottland said in their e- mail to employees that an increasing number of patients are being admitted for observation only -- stays of under 24 hours. Insurance companies pay lower rates for such patients than they do for those formally admitted. The hospital's volume would have increased by 3 percent in fiscal year 2006 if patients under observation were classified as inpatients .

"We thought we'd continue to see the same mix of inpatient and observation patients we saw in the past," Zane in an interview yesterday. "That mix has changed, and we have to staff according to our new mix."

Because Tufts - New England Medical Center is smaller than other area teaching hospitals, she said, the increase in observation patients had a major effect on finances.

In addition, Zane said, the hospital spent heavily last year to hire and retain doctors to help grow its pediatrics specialty.

After large losses from 2002 through 2004, the hospital has made a partial comeback and posted two years of profits. But significant challenges remain -- at the same time executives are saying staffing per bed is too high, nurses have been complaining of understaffing. The nurses, represented by the Massachusetts Nurses Association, are planning an informational picket at the hospital's Chinatown campus June 27.

"It's getting increasingly worse," said Nancy Gilman , cochairwoman of the nurses' bargaining unit at the hospital. "There are patients admitted to the hospital when there's a bed for them, but no nursing staff to take care of them. What we need is staff."

In a March letter to Zane and Schottland, Emergency Department nurses said, "We believe that the financial needs of suburban expansion have taken priority over safe patient care."

Separately, the hospital's plan to expand in the suburbs was dealt a setback in February. New England Baptist Hospital, which was to build a $300 million suburban hospital in collaboration with Tufts - New England Medical Center, instead chose to work with Beth Israel Deaconess Medical Center. Suburban expansion is an important part of the hospital's strategy, Zane said, but it hasn't yet decided how to proceed.

"Tufts-NEMC is still in a turnaround situation," said Ellen Lutch Bender , chief executive of Bender Strategies LLC, a hospital consulting firm. "They're going to continue to have to make adjustments to stay the course. I think the hospital is working aggressively to identify market shifts and make compensatory changes to adjust to those shifts. There are always setbacks in turnarounds."

Jeffrey Krasner can be reached at krasner@globe.com.