Suffice to say, the American workforce looks very different now than it did in 2007. First, the size of the workforce is still smaller as the national economy struggles to create jobs at a faster pace. Second, more part-time jobs are being created as some employers try to stay below the 50-employee “pay or play” threshold established by the Affordable Care Act. Third, a fair number of larger companies continue to sit on their cash rather than ramp up hiring, prompting elected officials like Madison Mayor Paul Soglin to implore them to employ.
While Greater Madison still has the lowest unemployment rate of any Wisconsin metropolitan area — 5.2%, according to preliminary data for June — the belief that Madison is insulated from national economic trends took a hit during the most recent recession. There was a time, just before the dot-com bust, when the Madison metro unemployment rate was well below the 4% mark, which is considered full employment on a national scale.
We spoke to the chief executives of five members of our Largest Employers list (see IB print edition) to get their take on business conditions and adjustments they have made, or will have to make, to their respective workforces.
Agrace: Hospitable to Change
For Lynne Myers, president and CEO of Agrace HospiceCare, the question “how’s business?” is difficult to answer. When you’re in the hospice and palliative care business and you’re trying to help people die with dignity, part of you wishes your services weren’t needed. But since the only givens in life are death and taxes, Agrace’s services are needed, and Myers senses the public is more trusting of hospice care.
With that trust, Agrace continues to develop its business, taking particular care to respond to changes brought about by the Affordable Care Act. Agrace has launched two palliative care programs; is expanding its footprint into Sauk, Iowa, and Columbia counties; and is entering into new collaborations with local health care partners who have their own ACA transformations to achieve. All of these developments will add employees over time.
Thus far, these and certain economizing steps have helped Agrace retain a staff of 500-plus employees, despite real and projected budgetary hits. Most of the ACA’s hospice implications are administrative, but the law also contains a “productivity adjustment” that will cut hospice payments by 11.8% over the next decade. What’s more, the federal government’s fiscal fracas isn’t helping, as Washington’s inability to avoid sequestration cuts has pruned an additional 2% from Agrace’s annual budget.
When 90% of your revenue comes from Medicare, these changes require adjustments. Addressing the ACA will require more efficient processes and new revenue streams, and adjusting to sequestration already has prompted Agrace to redesign a handful of clinical processes and to work with vendors to make sure it’s getting the best pricing.
Collaborations with local health care providers will expand the facility’s billable services. Agrace is developing partnerships with local accountable care organizations, including Dean, to provide palliative care to their Medicare patients. Palliative care is for patients who don’t need end-of-life care but who have a serious illness with symptoms and pain that must be managed. It’s difficult for physicians’ offices to care for very sick people who are placing multiple calls to primary care physicians or specialists. In those situations, Agrace works alongside physicians or goes into the patient’s home to get his or her symptoms under control.
“We are reaching out to meet our partners where they are, where their needs meet the services we provide, so they are able to provide care as efficiently as possible to the Medicare beneficiaries,” Myers said.
Acceptance of hospice care has been decades in the making, Myers said, and with an aging population of retiring baby boomers, death isn’t about to take a holiday. Agrace, which observes its 35th anniversary this November, has predominantly cared for people in Dane and Rock counties, but it always had a smattering of patients from other areas. In Dane County, 53% of deaths are serviced by a hospice provider; in Sauk, Iowa, and Columbia counties, only 37% are.
Since those areas are underserved, Agrace is building another facility in Janesville. “Over the course of the last year, we have begun to look at some of the neighboring communities,” Myers said. “We found a real dearth of access to hospice and palliative care services.”
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Metcalfe’s Market: Local Foodies
For Tim Metcalfe, president of Metcalfe’s Market, all is good on the business front. His grocery stores just won the Gold Award in Madison Magazine’s Best of Madison readers’ poll for the second year in a row. The company is putting the finishing touches on its new West Towne store, and revenues continue to rise.
The store that opened in 1917 as a co-op and stable — it sold groceries in the front and shoed horses in the back — today has quite a different format, one focused on sustainability and giving local food entrepreneurs access to the marketplace.
For Metcalfe’s, there were several factors in its embrace of sustainable concepts such as buy local, in which the store sources from local farms and artisans. Customer demand was part of the motivation, but Metcalfe has come to view sustainability as the best way to operate a grocery.
“What we have found was that ‘sustainable’ or ‘green’ and ‘local’ are not buzzwords or trends, they are one and the same and a strategy,” he explained. “If you work them hard enough, you can actually cut costs along the way.”
A self-proclaimed “foodie,” Metcalfe also believes that philanthropy and sustainability go hand in hand. Each Memorial Day weekend, Metcalfe’s sponsors The World’s Largest Brat Fest, an event that is part charitable endeavor, part music festival, and part sizzle. This year, attendees consumed 157,868 brats and raised nearly $118,000 for local organizations.
With two stores in Madison — at 726 Midvale Blvd. and West Towne — and one in the suburban Milwaukee community of Wauwatosa, there are more plans for expansion, possibly on East Washington Avenue, which will create more jobs. “We try to focus in on what we believe are customer values for giving back, being involved in the community, and especially embracing our local food entrepreneurs,” he explained. “We are very fortunate to live in this area of the country, where so much local food is produced.”
There are distinct differences between running a grocery store in Milwaukee and running one in Madison. Milwaukee is much more value oriented, as customers spend more time shopping the circulars and are much more willing to use coupons. They also love meat, but they are not as big on produce or seafood. That stands in stark contrast to Madison, where grocery shoppers are huge produce and seafood consumers. They love a deal, but they hate cutting coupons.
“Both towns are into local and sustainable, but Madison tends to really, really embrace it,” Metcalfe said.
Madisonians also embrace shopping for groceries online, a Metcalfe’s service that’s already 12 years old. Metcalfe was somewhat shocked at how well received the online ordering and delivery business was when it launched in 2001. He expected it would take a while to grow, but he’s not surprised by the variety of consumers who’ve come to rely on it. “Yes, a lot of people that do not have transportation use it,” he noted, “but we are seeing more corporate accounts and busy families jumping on board.”
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Stoughton Hospital: Will to Survive
Ten years from now, Terry Brenny expects Stoughton Hospital to be one of the survivors of the ongoing health care transformation because it will have recognized and responded to the realities of the reform environment. “In other words, we’re going to be dynamic and flexible and adaptable,” said Brenny, the hospital’s president and CEO.
Then again, Brenny is in the same boat as every other hospital executive, but he’s convinced Stoughton Hospital is well positioned to navigate the change brought by the Affordable Care Act. For Brenny, one comfort is the 18-bed hospital’s affiliation with SSM Health Care, the parent of St. Mary’s Hospital in Madison, which has a minority 40% share of ownership in the Stoughton Hospital Association.
The affiliation was formalized in 2003, and Brenny has no regrets. The hospital now enjoys the advantage of a larger system for group volume purchasing, help with strategic planning and, in some instances, physician recruitment. ”Another advantage is that we remain an open medical staff, and we are free to contract with and accommodate all the health plans and physician clinics in Dane County,” Brenny noted.
With the implementation of the ACA, many smaller hospitals are seeking to partner with larger hospitals or health systems. For larger hospitals, consolidation brings economies of scale and helps deal with the cost pressure of declining reimbursement; smaller hospitals gain access to electronic medical records. “We implemented electronic health records, the Epic system, by virtue of our affiliation, and we would have never been able to do that as a small, stand-alone hospital,” Brenny noted. “Epic simply does not market itself to small, free-standing organizations.”
In addition, SSM has developed an accountable care organization that contracts with Medicare for taking care of a defined number of Medicare patients. By being affiliated with SSM, Stoughton Hospital also can be part of that ACO, provide care to Medicare patients, and be reimbursed for those services. Under the ACA, those reimbursements will no longer be based on volume of services but quality of outcome, and that is changing the business models of hospitals nationwide.
Health care was late to the process improvement movement, and providers that continue to conduct business as usual won’t be around for long. Brenny understands this, which is why Stoughton Hospital has undergone “lean” training and emphasizes cost effectiveness throughout the organization, especially with inventory control.
The biggest workforce challenge is a projected shortage of physicians to address the needs of an aging population. According to the Wisconsin Hospital Association, the state will need an estimated 100 new physicians a year for 20 years to meet the expected demand. State medical colleges have stepped up recruitment because, in addition to more patients turning 65, physicians and other health care workers are, themselves, reaching retirement age.
“When you take all those elements together, you get the perfect storm where you are seeing significant increased demand for health care,” Brenny said, “and fewer staff to take care of people, whether that be primary care physicians, nurses, pharmacists, or physical therapists.”
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Webcrafters: Booking More Business
When Jac Garner recalls how Webcrafters has withstood the past five years, he thinks about the significant decrease in demand for printing capacity. That decrease has hurt Webcrafters in the areas of catalogs, periodicals, trade books, and educational books. For Webcrafters, roughly 70% of its business is in providing books, teacher’s editions, and student texts to K-12 classrooms.
Garner, president and CEO of the Madison-based book publisher, said the biggest limiting factor has been the challenged state and local education budgets that existed during the recession and the slow-growth economy that ensued. While the good news is that this funding situation is starting to change, the reality is that some classroom curricula can be delivered electronically.
At the moment, e-book readers are a little less likely to provide pleasing color, tablets like the iPad are more likely to provide it, and catalog traffic has declined because retailers and business-to-business companies have very active websites. Some of those vehicles are not the best choice for certain high-resolution color products, while others are making progress, Garner noted.
Webcrafters is not betting everything on the possibility that K-12 funding is turning a corner; the company is trying to leverage technology with customer needs in mind. The company is doing a considerable amount of printing with a digital, four-color inkjet press, which allows books to be produced in less quantity, with shorter print runs. Better inventory management is a high priority for large educational publishers, and one way to help them address that is to use the inkjet press.
There may be pent-up demand to replace old textbooks with newer editions, but future business will definitely come from the fact that 46 of the 50 states have adopted the Common Core Curriculum standards for teaching math and reading. With this new curriculum, there has been significantly more demand, heading into the 2013-14 school year, to produce books that offer this new material.
“Thankfully, that’s coming at the same time that many of the states that had been operating in a deficit position are now operating in a better fiscal circumstance, so they are better able to help school districts fund the purchase of those new materials,” Garner said.
Now at 400 employees, Webcrafter’s workforce is down about 25% in the past year, when the company began what Garner called an “extensive, voluntary separation program.” It was a combination of attrition and pay-and-benefit packages chosen by more than 120 people who left the company to pursue work elsewhere, but Garner said the changes were necessary to remain competitive in the educational book-manufacturing market.
Garner doesn’t envision the workforce growing back to previous levels because these markets have gotten smaller and require more automation and digital manufacturing technologies. “There will be more changes to come,” he said. “This is a part of the economy that’s going to be impacted both by digital electronic delivery of printed material and by new digital manufacturing techniques.”
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WPS: Risk and Opportunity
It’s been almost one year since WPS Health Insurance announced that 600 jobs could be eliminated due to lost government business, so it’s natural to assume it’s been a tough year for one of Madison’s most prominent insurers. While those layoffs were difficult, they don’t tell the whole story, according to President and CEO Michael Hamerlik.
Thanks to growth in other government contracts, there have been fewer layoffs than expected. While the loss of the contract for TRICARE, the health care program serving uniformed military personnel and retirees, was significant for the not-for-profit WPS, there has been growth in its Medicare business.
“We’re doing other work for the Medicare program that is going to absorb, by my best guess, over 200 positions that would otherwise have been lost,” Hamerlik said. “It’s always tough to say farewell to colleagues, and we had to do some of that, but there have also been some bright spots.” Those bright spots include meeting bottom-line financial projections for 2012 and being on track to do so in 2013.
There is a chance that WPS could regain the TRICARE business — the company was a subcontractor to the main contractor, whose contract was not renewed — but it won’t happen overnight. “There are three [such] contracts in the United States, and of course the one we lost is likely going to be with the successful party for a handful of years, but there are others out there,” Hamerlik explained.
As a health insurer, WPS is affected by the Affordable Care Act in several ways. Hamerlik does not believe the ACA will affect WPS’s Medicare claims processing, but the lower reimbursement environment could affect the private health insurance side. When government payers do not make an adequate payment, whether it’s Medicare or Medicaid or another program, that puts pressure on other payers to increase their payments, said Hamerlik.
“Somehow, the revenue has to be raised by an organization, whether it’s a hospital or a physician,” he explained. “It’s hard to draw a direct cause and effect, but there is certainly a correlation between what private payers pay and what government payers pay.”
The complaints about the Affordable Care Act are coming from all directions. While business groups are pleased that the employer mandate has been delayed for one year, some consumers are losing the benefits they were told they could keep. Hamerlik said any change is a combination of blessing and curse, but it’s still too early to evaluate how the ACA will affect the company. WPS Health Insurance will not be on the health insurance exchanges set up by the law, but its Arise health plan will be.
“Let me give you the two perspectives,” Hamerlik said. “One is that there is going to be so much change and so much government bureaucracy that this is going to be impossible. The flip side to that is the government is mandating that everybody buy the product we sell. If you state it that way, you can see that, yes, there is both risk here and there is great opportunity.”
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