Officials with Western Connecticut Health Network announced this week at least 116 positions would be eliminated as a result of state budget cuts that took effect this month.

Officials said the cuts would be felt across the entire network, which includes Danbury and New Milford hospitals, as well as affiliate medical offices in the region.

About 51 vacant positions will be eliminated and 65 employees will lose their jobs, according to Steven H. Rosenberg, the network's chief financial officer.

Another 25 positions may be cut if union officials don't agree to concessions, Rosenberg said.

"The major challenge we have is the significant cuts in government funding," he said.

Rosenberg said the hospital is losing $34 million in the next two years as a result of Gov. Dannel P. Malloy's cutbacks that took effect July 1.

"Trying to make reductions without impacting the level of care we offer our patients was a real challenge," he said.

A total of 18 New Milford Hospital staff members may be affected by the cuts, according to Andrea Rynn, director of community, public and government relations.

"New Milford is facing four nurses being laid off and two other nurses losing some hours," said Joanne Chapin, president of Nurses Union at New Milford Hospital.

"That won't happen if we can come up with a way to save Western money."

Chapin was given a list of suggestions on how savings might be realized. It included: Taking away shift differentials; eliminating some holiday pay; and changing overtime pay from occurring on a daily basis to being paid after 40 hours worked.

"We've put in a request for the financials from the hospital to explain why they are doing this," Chapin said. "Also for a firm number of how much they have to save. They expect us to come up with monetary saving to save nurses' positions. The union membership will have to vote on any decisions."

The nurses have a month to try to save jobs, Chapin said. New Milford Hospital has 125 nurses on staff; at one point, that number was 185, she said.

Chapin said she was told by Dr. Murphy that last year the operating margin for the hospitals was 2.8 percent and 2.9 percent. Western has to make 3 percent this year, she said Murphy told her.

Connecticut's hospital officials warned of dire consequences as a result of the $550 million cut during the legislative session this year.

Malloy's budget chief responded last week by challenging hospitals to reduce executive compensation rather than giving pink slips to rank-and-file workers.

"To say the state made them do it is a way to avoid responsibility for the actions their management is taking," said Ben Barnes, secretary of the state's Office of Policy and Management.

John M. Murphy, CEO of the Western network, received $995,838 in compensation last year, according to the state Office of Healthcare Access.

Murphy was behind 18 other hospital executives in the state who were paid more than $1 million.

Beyond the cuts, network officials said they are reducing "premium pay practices," including shift differentials and other bonuses that affect employees.

The move, Rosenberg said, saved more than 50 positions on the non-union side and could save another 25 positions if union officials agree to the concessions.

Mary Consoli, president of the Danbury Nurses Union, said nurses were upset with Thursday's announcement, especially since the union made major concessions to the hospital two years ago, including overtime adjustments and going to a defined benefit retirement package rather than the traditional pension.

Union leaders, she said, recently offered voluntary cutbacks in hours or an early retirement program to offset potential layoffs. Those requests, she said, were ignored.

"We are already lean and struggling to provide care," Consoli said. "Staffing levels directly impact patient safety and care."

Danbury Hospital is the largest employer in the Danbury area. Combined, the network employs about 4,280 people, which includes New Milford Hospital and satellite medical offices. While the network has reported more than $70 million in profit in the past two years, Rosenberg said the money is reinvested into the organization for capital expenditures and debt reduction.

The hospital typically spends as much as $40 million a year on new equipment and other capital expenditures, he said, adding the hospitals' target profit margin is 3 percent of operations, or about $20 million.

Rosenberg said the hospital has been "looking under every rock" for savings before layoffs.

Most recently, he said, the hospital sold its retail pharmacy and dialysis unit to third-party vendors and outsourced its dietary department in an effort to reduce costs.

The health care network was created in 2010 when Danbury and New Milford hospitals affiliated to save money.

The network is affiliating with Norwalk Hospital, although the merger has yet to be approved. Rosenberg said cost savings from that affiliation has yet to be figured into the organization's calculations.

Whether employees can return after the merger, he said, remains to be seen.

Michele Sharp, director of communications for the Connecticut Hospital Association, said hospitals throughout the state are making individual decisions to deal with the state budget cuts.

"It's an incredibly painful time for hospitals," she said.

Sharp said other hospitals are likely to announce cost-cutting measures because of the reduced state aid, including layoffs, service reductions, hiring freezes and changes to programming. Several hospitals, including Waterbury and St. Vincent's in Bridgeport, already have announced layoffs, citing state budget cuts.

"This will have a ripple effect throughout the economy," Sharp said.

Susan Tuz contributed to this story.