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According to Moburg, the executive council looked closely at how its staffing compared to other similar-sized facilities across the state and determined that PAHCS had an excess in staffing in some areas. The layoffs were done throughout the organization, Moburg said.

In its last fiscal year - which concluded at the end of September - PAHCS lost $672,000 from its operation, or just over $50,000 per month. The staff layoffs should reduce PAHCS's expenditures enough to cover that gap, according to Moburg. Salary expenses represent about 55 percent of PAHCS's budget, said Moburg. "We need to be efficient in how we operate," he added.

Don Thomes, chairman of the hospital board, said the board and the administration agree that maintaining quality care is critical. The layoffs should not affect care, said Moburg, since the layoffs represent excess staffing.

In recent years, PAHCS has expanded greatly, purchasing two nursing homes, changing one to assisted living at Washburne Court, and undergoing a $7.5 million remodeling project at its main campus in Paynesville.

While these moves have strengthened PAHCS's mission of "Caring for Life" - from birth to death - and improved its long-term position, according to Moburg and Thomes, they also have left PAHCS in a cash-poor position. PAHCS has been further hurt by changes in its reimbursement, they said.

PAHCS is expected to switch next month to critical-access hospital designation, which will provide cost-based reimbursement from Medicare. That switch is estimated to provide PAHCS with a net gain of $937,000 in 2004, but PAHCS still had a need to operate more efficiently, said Moburg.

PAHCS used offers of early retirement to reduce approximately 30 staff postions just over a year ago, but they also increased some salaries in the past year, based on a system-wide compensation study using statewide comparisons.