Swedish closes sleep institute; layoffs to come

Swedish Medical Center is closing its highly regarded Sleep Medicine Institute, laying off 70 employees. Its medical director says he plans to re-open as an independent enterprise, leasing space on Swedish's Cherry Hill campus.

In addition, Swedish is eliminating the equivalent of 200 other full-time workers this year: Half of the reductions already have occurred and the other half will take place by September, said Cal Knight, executive vice president and chief operating officer for Swedish. Positions eliminated, vacated or left unfilled range from the vice-president level down, he said, and so far, there have been fewer than 30 layoffs.

Dr. Ralph Pascualy, medical director of the sleep center, said he is disappointed that Swedish is jettisoning the sleep center.

"This isn't easy," he said.

But Pascualy says he will reopen the center around the first of the year, soon after Swedish ceases ownership, and will continue operating a satellite clinic in Issaquah and perhaps another in the North End.

"We're going to do everything we've always done," he said. "We want to take care of the patients."

The sleep center, which started at Providence Hospital in 1984, became the Swedish Sleep Medicine Institute in 2000 when Swedish acquired Providence. Since then, the Sleep Medicine Institute has been jammed into the aging Heath Building adjacent to Swedish's First Hill campus, spread throughout five floors, Pascualy said.

In a memo sent Wednesday to staff members, the Swedish administration praised the sleep-medicine service but said the investment in new facilities "is not a core priority."

"[Sleep] is not a business we would choose to stay in," Knight added. "We'd rather choose to spend our money in more acute services such as medicine and surgery."

Swedish has chosen to focus its finances on a few specialty centers, including neurosciences, orthopedics, heart, cancer and women-and-infant services, he said.

Swedish's decision to spin off the sleep center comes as the medical center faces tighter-than-usual budgets.

"We are having our challenges this year financially," Knight said.

The budget already called for a smaller-than-ideal operating margin, he said, because Swedish is investing in an electronic medical-records system in addition to finishing up an ambitious building program.

But administrators didn't anticipate that patients would have more babies and fewer open-heart surgeries. Because the hospital makes more money on the "high-intensity" heart patients, that change blew an $18 million hole in the budget, Knight said.

"Our budget is 54 percent labor and benefits," Knight said. "There's virtually no way to make a course adjustment without changing labor expense in some way."

Carol M. Ostrom: 206-464-2249 or costrom@seattletimes.com