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September 19, 2012 at 12:31 PM

Group Health CFO resigns, some jobs to be cut

Group Health Cooperative is undergoing a reorganization and belt-tightening to save $250 million over the next 16 months, its CEO told staff in a memo last week. As part of that, Richard Magnuson, executive vice president and chief financial officer, is resigning, and some jobs will be eliminated.

In the Friday memo, CEO Scott Armstrong said this is the third year of financial decline for the HMO.

Armstrong said until very recently, he believed that the quality improvements Group Health has undertaken — such as a new effort to help keep patients from having to seek expensive hospital care –- would produce the required savings. “But that approach hasn’t worked,” he said in the memo. “This cannot continue.”

Saving $250 million is an an achievable goal for an organization with more than $3.5 billion in annual revenue, Armstrong added, and is a target that will “align us better with what will be required of the entire industry in the years ahead.”

Mike Foley, Group Health spokesman, said Group Health’s bottom line has been hurt by increases in hospital charges. Group Health members who need hospital care rely on hospitals owned by other systems, such as Overlake Medical Center and Virginia Mason Medical Center in the Puget Sound area.

“Some community hospitals are trying to meet near-term margin objectives based on uncertainty about health-care reform,” Foley said.

Comments | More in General news, Health | Topics: Group Health, health-care reform, Scott Armstrong

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