BERLIN, Vt. (AP) – Expecting to post an estimated $5 million operating loss, Central Vermont Medical Center said Tuesday it would eliminate 17 management and administrative jobs and suspend employee raises.

Hospital officials said the shortfall was caused by an unexpected increase in Medicaid patients and a decrease in surgical revenue following the resignations of three surgeons.

Medicaid reimbursement do not come close to covering the hospital’s costs, said new CVMC President Judy Tarr.

“So when we see an increase in Medicaid volume, we also see an increase in our financial challenges,” she said.

To address the shortfall, the hospital, which has 1,200 employees, plans to lay off 10 management and administrative staff next week and cut seven similar jobs that are currently vacant. Employees were told Monday that raises, which were expected to be issued this fall, will not take place this year, Tarr said.

The hospital also plans to reduce the number of costly contracted services such as traveling employees and aggressively recruit surgeons to fill vacant positions.

“Making these reductions in cost will return us to a strong financial position and secure our future as the region’s primary medical center,” Tarr said.

The hospital had tried to offset the loss in January by cutting budgets for supplies and traveling workers but the reductions were not substantial enough, she said.

Early indications are that the hospital will post a $5 million loss for fiscal year 2007. The exact figure will be available later this month.

Last month CVMC sought and was granted an 8 percent budget increase by state regulators.

AP-ES-10-02-07 1636EDT