Erlanger Health System is furloughing some employees in a cost-cutting plan when its revenues plunged after elective surgeries were halted.
Officials said, "Erlanger is among the nation’s essential public safety net hospitals which operate on particularly thin margins. To help offset the significant costs of treating patients with life-threatening emergencies, chronic disease and traumatic injuries, Erlanger and other safety net hospitals have relied on such services as elective surgery procedures and imaging to maintain financial viability, officials sai.
"When government officials ordered hospitals and ambulatory surgery centers to suspend elective procedures to free up capacity and supplies to treat COVID-19 patients, the move had a significant impact across the industry, especially on safety net hospitals. Losing these key sources of income while shifting operations to test and treat COVID-19 patients led to a 30-40 percent drop in Erlanger’s revenue within days, according to Erlanger President and CEO Dr.
Will Jackson."
“An immediate and decisive action was required to ensure we continue to provide essential services to the community and safeguard the long-term health of the organization,” Mr. Jackson said. As a result, Erlanger officials are implementing a plan to mitigate the immediate financial impact, as well as provide the flexibility to prepare for unpredictable patient volumes.
Erlanger’s temporary expense reduction plan includes furloughing some administrative employees, changes to staffing, reducing overtime, suspending job recruitment for administrative positions, suspending vacation accruals, suspending 403b retirement contributions by the company and reductions in leadership pay.
“The sudden and unexpected COVID-19 pandemic has already cost Erlanger millions of dollars in the past week alone,” Mr. Jackson reported. “This is revenue critical to paying our 7,000+ employees and continuing to treat Chattanooga’s most vulnerable and acutely ill populations.
“We recognize that financial hardships are faced by many businesses and individuals today. We are optimistic that Erlanger, our community and our nation will overcome this crisis and that far better days are ahead,” Mr. Jackson said.
Erlanger officials said in a memo that the crisis "has already cost our system millions of dollars in the past week alone, and continued losses will undoubtedly continue for the short-term. Unfortunately, it is impossible to predict if and when we may experience a surge of Covid-19 patients much like has been seen elsewhere, which further adds to our organizational risk.
"Given these business realities, it is absolutely essential that we take decisive action to ensure a healthy future for Erlanger. Today we are implementing several critical expense reductions that will impact everyone across the enterprise. They are effective immediately.
"For selected departments, primarily administrative, employee work weeks will be reduced to two or three days per week. Your manager will inform you how this applies to your department. For those days of the week when not scheduled to work, hourly employees can either use paid time off or take time off without pay. Salaried employees will be required to use paid time off. Salaried employees who deplete their paid time off banks should contact their manager to determine their new work schedule.
"Departments identified as flex departments, primarily clinical in nature, must flex down based on workload and patient volume.
"Premium overtime will be eliminated for all employees unless extenuating circumstances exist.
"Administrative employees less than a .85 FTE, including temporary administrative employees, will be furloughed for 60 days, effective March 31. These employees may access their accrued paid time off hours.
"Paid time off accrual is temporarily suspended, beginning this pay period. Paid time off balances will remain intact and accessible to employees.
"The 403 b retirement plan company contributions will be suspended, starting this pay period. Employee contributions to the plan will continue, unless an employee elects to stop that contribution. Recruitment for all administrative jobs will be discontinued, with limited recruitment for clinical positions."
Officials said First Horizon Bank is providing a line of credit to Erlanger up to $50 million. Britt Tabor, finance director, said Erlanger would not immediately tape the fund, but would keep it as an option.
He said the U.S. Senate had approved $100 billion in funds to hospitals related to coronavirus losses. He said, "We will be making significant requests for those funds." He said Erlanger should be a prime candidate for the funds since it is a public safety net hospital.
Mr. Tabor said the elective surgeries are "the backbone of our finances."