Article In Brief
Neurologists at academic medical centers and health systems across the country discuss how their institutions are cutting costs through furloughs, pay cuts, and benefit reductions due to revenue losses associated with COVID-19.
Institutions across the country have begun to respond with cost-cutting measures to the heavy revenue losses created by the COVID-19 pandemic. One such academic medical center (AMC), the University of Rochester Medical Center (URMC), experienced by mid-April a $500 million budget gap for the current fiscal year— attributed to declining revenues and higher expenses from measures implemented to prepare for a surge in COVID-19 patients. In response, management decided to furlough 1,517 workers at Strong Memorial Hospital, constituting 13 percent of its hospital staff. It also furloughed staff at its medical school and medical faculty group, among other areas.
As chair of neurology, Robert G. Holloway, MD, MPH, FAAN, was forced to reluctantly furlough more than 100 personnel in his department—14 percent of his staff. “The large majority were partial furloughs with employees asked to take off one or two weeks per month,” said Dr. Holloway. “We spent a great deal of time focusing on what was fair and equitable, but each decision was extremely painful,” he added.
“We worked hard to try to keep team-neuro together and to retrain some personnel by converting patient care techs to access (telehealth) specialists, for example,” he said. “Although we had to furlough a small number of our department's EEG technicians, we were able to bring them back fairly quickly when our procedures scaled up to capacity.”
“There were also across-the-board salary cuts at URMC with chairs incurring 15 percent reductions in salary over $100,000, and faculty incurring a 10 percent cut of salaries above $100,000,” Dr Holloway explained. (For example, a faculty member who is earning $200,000 per year would incur a 5 percent overall reduction—10 percent of $100,000 = $10,000).
Although retirement contributions have not been reduced thus far, and likely will not be, it is not clear yet how long recovery will take and whether other economic actions will need to be introduced. Dr. Holloway, who was appointed by the CEO to chair the COVID recovery task force, said it is not clear for how long these austerity measures would be enforced.
“We are ramping up volumes, tracking productivity weekly, and trying to get up to near-normal volume for the entire health system,” he said, noting that Rochester began phase I of reopening in mid-May.
Mayo Clinic: Temporary Furloughs, Cuts
On April 10, Minnesota's largest private employer, the Mayo Clinic announced that it would be unable to protect full pay and benefits for staff after April 28, and that temporary furloughs of some staff and salary reductions would be required. Subsequently, its CEO, Gianrico Farrugia, took a 20 percent pay cut, physicians and senior administrators received a 10 percent salary cut, other salaried employees a 7 percent reduction, and certain workers were asked to take extended furloughs. Even after those changes, Mayo predicted it would face a $900 million shortfall at the end of the year, which was expected to be covered by Mayo's reserves established over the last decade.
Lyell K. Jones Jr., MD, FAAN, chair of Mayo Clinic Government Program Strategy, said, “All Mayo physicians received a 10 percent salary cut, and with Mayo's flat salary structure, the cuts were consistent across the board.”
No physician staff were furloughed, but there were some allied health and administrative staff workforce reductions through a combination of reduced hours and furloughs. Dr. Jones anticipates that the salary cuts and workforce reductions will be temporary, but likely to last through the end of 2020.
“We will reassess our financial position at the end of the calendar year, and hopefully reverse cuts in 2021,” he said. Mayo continued to cover pension contributions and health benefits for furloughed employees, but other benefits have been restricted, such as business travel—measures which will continue until this summer.
UH: Cuts in Pay and Hours
On April 22, University Hospitals (UH) in Cleveland announced that it would be cutting the hours and pay of 4100 workers including hospital executives, directors, and non-clinical managers, department chairs and division chiefs by 20 percent for ten weeks. As chair of the department of neurology at UH Neurological Institute and Case Western Reserve University School of Medicine, Cathy A. Sila, MD, FAAN, was among those impacted.
Additionally, as of May, UH stopped matching all employee contributions to retirement accounts and delayed all merit-based pay raises across the system through the end of the year. Like many neurology departments across the US, the bottom line was affected.
“We were doing very well in January and February, and were actually ahead of budget,” Dr. Sila said. “Data for March and April has us behind budget overall, but not in all centers in neurology,” she continued. “We are hopeful that since the governor has initiated our reactivation to recovery phase as of May 1 that the reopening of our inpatient and ambulatory neurodiagnostic services will help us to reverse this trend,” she added.
More Cuts to Come
For some academic centers discussions on how to execute cuts are still underway. University of Washington (UW) Medicine had to temporarily furlough 1500 professional and non-union staff in mid-May due to $500 million of projected losses through the end of the summer, and on May 26, the UW announced an additional 4500 furloughs of unionized nursing staff.
“The school of medicine has not settled on a final plan as of yet,” said Nicholas Poolos, MD, PhD, interim chair of the department of neurology. “We are trying to avoid cuts in base compensation to faculty and we are looking at cuts in incentive pay and discretionary funding, while making sure that everyone is back working at capacity and getting volume back to normal,” Dr. Poolos said.
“Each department is working on an individual plan because compensation models vary from department to department,” Dr. Poolos explained. “However, as a public university, we have strong Washington state laws and faculty codes to protect salaries.”
Likewise, there are state law restrictions on discontinuing contributions to retirement plans, so Dr. Poolos does not expect to see those funds compromised. “Over the long term, cutting pension contributions at this time may be of far greater financial consequences to staff,” he added.
Although Washington state was in the forefront of the pandemic as cases started to trickle into the United States, UW acted swiftly, emptying out operating rooms, sending home its entire administrative staff, and transitioning units to COVID-ready beds.
“We were very proactive and thankfully, the tidal wave never struck us,” Dr. Poolos said. “We resumed elective surgery this week, and in-patient volumes are back up for non-COVID conditions, but we are waiting to see how the reimbursement changes mandated by CMS for telehealth play out and whether third-party payors will embrace those rules.”
Health Networks Affected
It is not only AMCs which have suffered financial losses. Health networks have also incurred revenue shortfalls and hospital-based employees have been hit by pay cuts. Steven L. Lewis, MD, FAAN, who assumed the role of chief of neurology at the Lehigh Valley Health Network (LVHN) in Allentown, PA, in August of 2017, said physicians, including neurologists, are being held to the same relative value unit (RVU) commitments that were previously budgeted for the current fiscal year ending on June 30, despite the interruption in many services due to the COVID-19 crisis.
“If my group of 25 neurologists fails to produce the number of RVUs originally budgeted, we will have to pay any overage through salary paycheck reduction,” he said.
After much discussion, a preemptive reduction of 4.5 percent per provider paycheck from May 2020 to September 2020 was negotiated. “This is potentially a large RVU shortfall—and therefore, a significant paycheck reduction—if we fail to make up for many weeks of diminished productivity, but our team has exhibited remarkable motivation to increase their workload, expand patient hours, relinquish vacation time voluntarily and make other sacrifices in order to meet this challenge and get the paycheck reduction reimbursed to us,” he said.
Pay Cuts at Akron Children's Hospital
“On April 14, pays cuts were announced for all managers, physicians, and advanced practice providers at Akron Children's Hospital,” said Bruce H. Cohen, MD, FAAN, director of the NeuroDevelopmental Science Center and vice-president and medical director of the Research Institute. The pay cuts were proportional to salary, and most physicians incurred a 10 percent pay cut.
“Although it was voluntary, nearly everyone cooperated,” he said, adding that he anticipates the cuts may last through 2020, but will be reviewed again in August. Like many places, Dr. Cohen said there is a hiring freeze. “Contracts which have already been signed and authorized will be honored, however,” he explained.
CME travel and all business travel has been discontinued through 2020, as have matching contributions to retirement plans. The losses as of the second week in March were $40 million and physician voluntary salary benefit cuts will only account for 25 percent of those losses.
“The government bail-out will help with some of the shortfall and we are ratcheting up the volume to make up the rest,” Dr. Cohen said. “In an effort to recoup losses, we have expanded schedules and increased our workload. Neuro-proceduralists like those who administer Botox or perform Baclofen pump refills and electrodiagnostic testing will expand their hours to catch up with the backlog,” Dr. Cohen said.
Neurologists Rally to Help Others
Despite incurring cuts in their own salaries, neurologists across the nation have banded together to help others, reflecting camaraderie and a sense of altruism. For example, faculty at the department of neurology at URMC donated more than $20,000 toward a fund to support those health care workers who were furloughed.
Under the guidance of the department's director of wellness, Andrea C. Wasilewski, MD, the department developed several initiatives to address the emotional toll—among them, daily morning guided meditation sessions via Zoom, interactive sessions on building resilience, an online volunteer marketplace where department members can sign up to volunteer their services or request assistance with various tasks, and an online live journal where expressions of gratitude, statements of joy and creative writing are encouraged.
At many institutions, neurologists also advocated for others. “At Mayo, we worked hard to avoid pay cuts for residents, and they ended up being one of the few groups unaffected by salary or workforce reductions,” Dr. Jones said.
“At UH, neurology faculty donated vacation time to the non-clinical staff impacted by the mitigation strategy to restore their loss of paid time off,” Dr. Sila said.
And although LVHN Neurology is also comprised of 20 advanced practice providers (APPs), the 25- member neurologists voted by an overwhelming majority to take on all the financial risk and not allow any paycheck reduction from the physician assistants and nurse practitioners with whom they work.
“I was moved by their generosity and camaraderie,” Dr. Lewis, said. “The enthusiasm has been palpable, and it has been heart-warming to witness,” he added.
At Akron Children's Hospital there were many individual small acts of kindness, according to Dr. Cohen. Early in the crisis, all food services at the hospital, aside from food for inpatients, was shut down in Akron Children's Hospital; although many employees and physicians worked at home, Dr. Cohen's team had 50 to 60 employees working in the office every day on rotating schedules.
“The physicians banded together and reached into our pockets and hosted catered lunches. Not only did the staff appreciate what amounted to lunch banquets, with social distancing in place it was a huge bonding experience,” he added.
Tallying Financial Losses As COVID-19 Impacted Hospitals and Health Networks Nationwide
Over the four-month period between March 1 and June 30, 2020, hospitals and health care systems across the United States will have incurred $202.6 billion in losses for America's hospitals and health systems, or an average of $50.7 billion per month, according to a May 2020 American Hospital Association (AHA) report. The damage is being inflicted by both a rapid increase in expenses and an unprecedented loss of revenue. Margins for many were already declining prior to the pandemic, according to the report, which cited Congressional Budget Office concerns that projected between 40 percent and 50 percent of hospitals could have negative margins by 2025.
Disruption of supply chains and increased demand for medical equipment and supplies such as personal protective equipment (PPE), has increased the cost of providing hospital care. Market forces caused the cost of certain medical supplies to increase tenfold or more since the beginning of the pandemic according to experts. New costs such as housing, transportation and child care for essential workers, testing tents, medical screening and treatment for front-line workers, additional capital costs such as extra hospital beds, intensive care units, COVID-19 isolation unites, ventilators and related support, have created great financial strain.
At the same time, hospital and health system revenues declined sharply in March as elective procedures and surgical admissions were cancelled and many patients decided to forgo care and stay at home. Canceled hospital services are projected to account for $161.4 billion in revenue over the four-month period beginning in March.