PROVIDENCE – A pay freeze for all Lifespan employees, cutbacks in education and training benefits and the elimination of the nonprofit health care system’s service-credit program are among the elements of an austerity plan the nonprofit announced to staff in an internal memo. The plan also includes pay cuts for the senior management of Lifespan and its hospitals.
In an e-mail this afternoon to Providence Business News, the health care system said its Performance Improvement Plan was spurred by “financial shortfalls resulting from declining Medicare [and] Medicaid reimbursements, increased numbers of un- or under-insured patients; reduced volume as patients delay or cancel elective procedures; decreased average length of stay; and reduced earnings from investments.”
A modernized health plan: Supporting cost management and the employee experience.
The Surest health plan came from a group of innovators wondering: What if health care…
Learn More
“The plan is for all employees to forgo a salary / merit increase once,” the health care system said in an employee memo obtained by PBN. “Managers and directors have already given up the merit increase that had been scheduled to take effect on Jan. 1.”
“While a number of our employees are covered by collective bargaining unit agreements, we have been and will continue to discuss these changes with the unions and hope those employees will agree to the changes that are affecting their fellow employees.”
The memo does not rule out work force reductions. “While this plan does not include a broad layoff, staffing levels may be reduced [in some departments], based on changes in service or volume,” it said.
Besides a companywide pay freeze, the plan includes:
• A 1-year carryover limit on earned time and vacation time, down from the current two year limit. “This will be phased in so that employees will have time to use the excess paid time off,” the memo said. The change will begin Dec. 31, when workers will be able to carry over 1.5 times their annual earned time or vacation time; the new limit will take full effect at the end of September 2010.
• Education and training benefits will still be provided, but “at a reduced rate, and only for courses critical for an individual’s job or for the organization,” the memo said. Tuition assistance will be limited to 75 percent of the cost of eligible classes, with a calendar-year maximum of $1,250 for full-time workers and $625 for part-timers. And Lifespan’s Education Partnership Programs will now require a 25 percent employee contribution.
• The service-credit program will be eliminated.
• Longevity pay, offered by some hospitals, “will be provided only to employees who have completed 20 or more years of service.”
The plan also includes pay cuts for the senior management of Lifespan and its hospitals.
President and CEO George A. Vecchione – who in January agreed to forego this year’s merit raise and accepted a permanent reduction in benefits – will take a further 10 percent reduction in his base pay, the memo said, adding: “These changes amount to an effective total pay reduction of 26 percent.”
Hospital CEOs and senior vice presidents – who also went without their Jan. 1 raises and accepted permanent benefits reductions – will take a 2 percent cut in their base pay, for a total effective pay cut of 15 percent.
Vice presidents – besides foregoing the raises that would have taken effect Jan. 1 – will take a 2 percent cut in base pay, for an effective pay cut of 6.3 percent, the memo said.
In other actions earlier this year, the health care system “suspended or delayed capital projects … “renegotiated vendor contracts for more favorable rates; and reduced expenses associated with supplies, travel and education,” Lifespan noted in its statement today.
The health-care system – which continues to seek state approval for its planned merger with Care New England, a transaction for which the Federal Trade Commission again granted its approval in December (READ MORE) – posted a net gain of $102.22 million for fiscal 2007, the most recent period for which financial data are available. (READ MORE)
But it and its hospitals have been suffering – along with other health care providers – amid the economic downturn that has reduced state and federal government support while increasing demand for uncompensated care.
In 2007, Lifespan hospitals provided nearly 58 percent of the state’s uncompensated care, even though they account for only 41 percent of patient discharges, based on a report last month from the R.I. Department of Health and its Center for Health Data & Analysis. (READ MORE) “Our hospitals shoulder the largest portion of uncompensated care in Rhode Island,” Lifespan spokeswoman Linda Shelton said at the time.
“During the first five months of the fiscal year which began Oct. 1, Lifespan’s operating performance was significantly below budget,” Jane Bruno, the network’s vice president of marketing and communications, said in a statement today.
“Given the uncertain economic climate, we must take additional steps to address these financial challenges.
“We know the recession has hit particularly hard in Rhode Island, so we are working to minimize the impact on our employees, who continue to make sure our patients receive the best and safest care. The Performance Improvement Plan – combining reductions with revenue enhancements – is designed to allow our hospitals to provide the highest quality and safest care for our patients, while preserving jobs.”
Revenue improvements in the plan include a new Clinical Documentation Initiative (CDI) to ensure appropriate billing, coding and collecting for services rendered, as well as new eligibility software designed to insure that the appropriate insurance plan is identified and billed, Lifespan said.
“While the hospital system is fundamentally stable,” Bruno said – citing recent decisions by Standard & Poor’s and Moody’s to maintain Lifespan’s A3 bond rating – “we must address the financial realities of the world around us. That includes drastic cuts in the state’s FY 09 and proposed FY 10 budgets in Medicaid reimbursements, continued increases in charity care and bad debt, as well as reduced income from our endowment.
“We recently went to the bond market for $115 million to help restore our cash reserves and strengthen our balance sheet,” she said. “Our highest priority is to provide safe and effective patient care. We need to maintain our financial strength in order to support our work force and continue to offer excellent medical care to our patients.”
A tentative agreement between Rhode Island Hospital and Teamsters Union Local 251, still subject to ratification by the union membership, includes many of the elements in the Lifespan plan, Bruno added, thanking the Teamsters for “understanding the economic realities and working with us to find solutions that keep the best interests of all employees and patients at the forefront while we navigate through the recession.”
“We are pleased to be able to reach an agreement that keeps our 2,300 members on the job during difficult economic times,” responded Kevin Reddy, president of Local 251, which is the largest bargaining unit at Lifespan.
Lifespan is a nonprofit health care system – including The Miriam, Bradley, Newport and Rhode Island/Hasbro Children’s hospitals – that had 11,629 employees and 1,155 licensed beds at the end of fiscal 2007, the most recent period for which such data are available. Additional information is available at www.lifespan.org.
