Regional One Health, the safety-net hospital for the region, last week cut pay 10% for all salaried workers, including executives and doctors and nurses caring for COVID-19 patients, as it tries to navigate the crisis without furloughing staff.

Methodist cuts executive pay, furloughs staff

“While we have done the responsible things to prepare Regional One Health for COVID-19, this preparation has taken a toll on our financial situation as elective surgeries were canceled and outpatient visits are down,” Dr. Reginald Coopwood, president and CEO, said in a statement.

The cuts went into effect April 26.

Regional One, like other hospitals in the nation, has seen significant declines in patient numbers and revenue due to the ban on elective surgeries and the general anxiety people feel about being in the hospital now.

Unfortunately, the hospital said, the relief funding for hospitals has not accounted for the fact that Regional One is home to the region’s only burn and trauma centers and high-risk obstetric service, and also provides care for a disproportionate number of uninsured patients.

As a result of these expenses, it says it has been forced to adjust operating capacity and cut costs.

On top of the pay cuts, the hospital has suspended its match of employees’ 403(b) retirement plan and paid time-off accruals. It eliminated overtime and is no longer contracting workers through staffing agencies. It has trimmed capacity and staff hours to match its current volume of business.

Regional One has 3,200 employees and 364 beds.

“These decisions were not made lightly,” Coopwood said, noting the solutions will allow the hospital to maintain its standard of care for patients while also continuing to prepare for a potential surge of COVID-19 patients.

“We are also committed to minimizing the negative financial impact to our organization and our employees,” he said. “By working together during this time, we believe we will be able to avoid employee layoffs or furloughs.” 

Staff were told of the cuts last week. Coopwood expects they will be in place through the end of July.

“It’s commendable that they are attacking this shortfall without furloughs and layoffs,” said Dave Archer, the former CEO of Saint Francis Healthcare who is now on the faculty at Christian Brothers University. “But that’s not to criticize other systems that have been forced to use furloughs and layoffs.

“The average hospital in this state has seen a 60% reduction or more in revenue. It’s unprecedented. It’s catastrophic.”

Friday, the Tennessee Hospital Association released an analysis of the revenue picture, noting that the state’s hospitals were losing $1 billion every 30 days without elective surgeries, as well as a tenfold rise at least in the cost of personal protective equipment (PPE). That’s in an industry that typically generates an average of $1.7 billion in monthly revenue.

Based on losses of that magnitude, Archer said, hospital leaders in Memphis have “shown great restraint.

“If this continues for six months or more, and we continue to see significant reductions, then you presumably will have to make more structural changes – eliminating programs and closing hospital units.”

Saint Francis announces furloughs; experts say other hospitals have few choices

Less than two weeks ago, Saint Francis Healthcare parent, Tenet Healthcare, announced it was furloughing 10% of its workforce company-wide. In Memphis, the reductions affected about 4% of Saint Francis’ workforce.

Monday, Methodist Le Bonheur Healthcare, announced it had furloughed staff and that hospital executives were taking a 20% pay cut to deal with the losses, including drops in patient volume of more than 40% associated with elective surgery.

Methodist is giving managers flexibility in adjusting capacity to lower patient volume, including planned reduction in work hours and temporary furloughs.

“Our goal is to offer flexibility to meet associates’ needs while flexing our staffing to fit our current reality,” it said, noting that for that reason it could not say how many had been furloughed.

Methodist and Saint Francis both are paying 100% of the furloughed workers’ pension and health premiums.

Monday, Gov. Bill Lee announced hospital and surgery centers could begin phasing in elective surgeries on May 1. Locally, mayors in Shelby County say those procedures will be included in Phase 1 of reopening the local economy, which is tied to 14-day leveling both in the number of new cases and hospitalizations, and the capacity for hospitals to treat what could be burgeoning numbers of patients.

Regional One is looking at its options regarding elective surgeries, said Dr. Martin Croce, chief medical officer.

“We intend to comply with the mayors’ plans for re-opening, and we hope to have elective surgery soon in compliance with the governor’s plan.” 

Even with the cuts, the hospital’s leaders say they are still looking for more efficiencies as they monitor volume and expenses.

“We empathize with Regional One and its staff who are impacted by this difficult decision,” said Clint Cummins, CEO of the Memphis Medical Society. “We have seen these situations arise in multiple health care employers throughout our city and state, be it a hospital or solo practice, and everyone in between.”

The society has set up a new system to source PPE for its members who Tuesday were picking up bottles of sanitizers set outside Cummins’ front door.

“As restrictions are lifted, we hope that our members, the facilities where they practice and our entire community can return to pre-pandemic levels of staffing and patient service,” he said.

Cristie Travis, CEO of Memphis Business Group on Health, says employers will have lower insurance bills this year due to the reductions in elective surgeries and are concerned people are not getting the care or screenings they may really need.

“There will be a lot of pent-up demand, probably in 2021,” she said. “We are going through this temporary mismatch. There are needs out there, but people are not going to seek care, preventive or even for clinical needs right now.”

Hospitals were included in the federal stimulus packages to shore up the losses. They are set to receive $170 billion in two stimulus packages.

“But if you look at the revenue losses in Tennessee hospitals and extrapolate that across the country, that money is not going to go very far,” Archer said.

In the first package, money was distributed based on the amount of Medicare revenue a hospital generated. Regional One, which serves a large uninsured and TennCare population, likely received less.

But Archer also notes that Regional One probably has not experienced the same loss of elective surgery revenue. It does fewer of those surgeries and has a lower number of commercially insured patients, which produce a higher percentage of revenue for hospitals.

A 10% across-the-board pay cut is a good strategy for the short-term, Archer said.

“People will tolerate it and in some ways rally around the idea if it’s for a month or two, or maybe even three.

“If it’s long-term, they won’t. The downside in the longer-term, versus furloughs or layoffs, is you tend to lose your best people.”