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Advocate Aurora, Froedtert may cut some clinical services due to sustained losses

Wage increases that health care systems enacted to keep and attract employees during the pandemic have been the main driver of higher costs.
Froedtert Hospital
Posted at 3:06 PM, Sep 14, 2022
and last updated 2022-09-14 16:06:54-04

MILWAUKEE — Advocate Aurora Health and Froedtert Health, two of the largest health care systems in southeast Wisconsin, may cut some clinical services after sustained losses this year.

According to our partners at the Milwaukee Business Journal, employee compensation exceeded health system revenue, worsening financial challenges for health care systems. Federal government funds that provided relief from the Covid-19 impacts on health systems also ended after two years.

Advocate Aurora Health president and CEO Jim Skogsbergh said the health care system was losing money in the first seven months of 2022, calling the losses "unheard of."

“I fear that as a result of continued financial distress that all of us will have to begin picking and choosing which services we either curtail or eliminate," Skogsbergh said Tuesday at the Milwaukee Business Journal’s “Health Care: What’s Next?” roundtable. “And those are painful decisions.”

Froedtert Health also lost money in five out of the past six months, according to president and CEO Cathy Jacobson.

“This isn’t going to go away overnight,” Jacobson said. “This is at least a two- to three-year issue for us to work our way out of this. We have to reduce costs. Something’s going to have to give.”

Both Skogsbergh and Jacobson did not specify the clinical services they are considering cutting, the Milwaukee Business Journal reports. For now, the conversations are being had internally.

Froedtert Health is now dipping into its financial reserves and executives are looking at services where costs can be reduced, according to the Milwaukee Business Journal.

“We have to because the reality of the fact is that we are underwater,” Jacobson said. “We can’t not fill that next order, we can’t not fill the next table...The patients keep coming and we have to be there for patients.”

During the Milwaukee Business Journal's roundtable, executives said they are looking at how they can deliver health care differently than they have in the past. This could mean streamlining back-office functions, moving more employees to work remotely, and adapting the use of technology.

Health care systems will also be pausing on capital spending, the Milwaukee Business Journal reports. Skogsbergh said Advocate Aurora will be "very careful" on future capital spending, but not eliminate projects. Jacobson said Froedtert Health is prioritizing which capital projects to continue, but not go to a "grinding halt."

Wage increases that health care systems enacted to keep and attract employees during the pandemic have been the main driver of higher costs.

Advocate Aurora reported a net loss of $347.6 million in the quarter ending June 30 due to losses in its investment portfolio, the Milwaukee Business Journal reports. Froedtert saw a $17.1 million dollar operating loss in the quarter.

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