Methodist Le Bonheur Healthcare is cutting executive pay 20% and furloughing employees as it tries to manage through the financial challenges created by the COVID-19 pandemic.

In some cases, staff hours have been cut. The hospital system did not elaborate on specific numbers or savings.

“This public health crisis has created a ripple effect across all segments of our economy in ways most of us have never seen,” said Michael Ugwueke, Methodist Le Bonheur Healthcare CEO.

“Methodist, like other health care systems in the Mid-South and around the country, has seen a significant decline in revenues as a result of a more than 40 percent decline in patient volumes related to the closure of nonessential services and the mandated cancellation of non-emergency procedures to prepare for COVID patients.”

Methodist said efforts to reduce expenses were made to minimize the impact on employees. Some have taken voluntary furloughs. It also allowed workers to take paid overtime first. The hospital system will cover health insurance premiums for all furloughed employees.

“We recognize the sacrifice everyone is making as we navigate this uncharted territory,” Ugwueke said. “Our associates are the lifeline of this organization. As we make adjustments to deal with our reduced volume levels and workload, we are committed to fairness, consistency and shared sacrifice.”

In a statement, the hospital system said it focused first on reassigning staff to other departments or roles. It said it had reduced overtime and contract staffing and eliminated open positions where possible.

“Those actions are ongoing, but as the pandemic has extended from weeks to months, MLH leaders finally had to consider making adjustments that would affect work schedules more broadly across the organization,” the system said in a statement Monday.

Methodist said the measures are temporary and will not affect patient care.

The system, like others here, has lost more than 40% of its revenue stream when nonessential surgeries were banned as part of an effort to save personal protective equipment.

Monday, Gov. Bill Lee lifted the ban with restrictions, effective May 1, for much of the state. The metropolitan counties will have to work with their mayors to come up with scenarios for moving forward.

Baptist said Monday it planned to phase the elective surgeries in, beginning this week, noting that what was elective when the ban went into place in March could now be necessary surgery.

Leaders in the industry praised Methodist leadership for bearing a share in the cuts.

“First and foremost, I applaud the leadership of the organization to being kind of at the front line to say, ‘Hey, we’re there with you. We’re also going to take a pay cut,’” said Don Bivacca, managing director of Healthcare Management Partners in Nashville.

In this health pandemic more than any other he can remember, he says hospital leaders are including themselves in the cuts.

“I’ve seen 10-30 and some cases 50% of executive pay being reduced for a 30-60-90-day period,” he said.

“An important thing for the folks that have been furloughed is they didn’t lose those their health insurance. That’s another great step this organization has taken,” Bivacca said. “It’s one thing if you are going to be furloughed or have to take a pay reduction, it’s another to lose your health benefits at a time like this when you may be at risk and you need health care. I was really pleased that the employees who were furloughed did not lose their health benefits.”

Last week, Saint Francis Healthcare furloughed about 100 employees or 4% of its staff across its two hospitals. Many of the workers have been told they will not be recalled until mid-July.

Saint Francis, which is owned by Tenet Healthcare, is also paying insurance premiums for affected employees. Tenet had earlier made a decision to temporarily stop making 401(k) pension contributions for all staff. It reinstated that benefit for the people who were furloughed.

Methodist said it will continue to make 403(b) contributions to the furloughed employees’ pensions. 

Tina Gerardi, executive director of the Tennessee Nurses Association, says it’s apparent that Methodist did what it could do before it had to start making cuts.

“It sounds like they don’t want to have to furlough people, but they are going to have to if they want to keep the doors open, which we need them to do because we don’t know what is going to happen,” she said.

She also said it was wise to let staff take their PTO first.

“It takes debt off the books. If you have hundreds of thousands of PTO hours on the books, if you do that first, then go to furloughs, they could see a bigger drop in their bottom line.”

Gerardi heard the cuts were coming, but did not know the number of people affected.

“As people absorb what has happened, we’ll hear more in the next few days.”