Firings, Furloughs, and Pay Cuts in Advance of COVID-19 Surge

Sheila Mulrooney Eldred

March 31, 2020

Editor's note: Find the latest COVID-19 news and guidance in Medscape's Coronavirus Resource Center.

CORRECTED April 1, 2020 //  Last week, doctors at a Boston-area hospital learned via video conferencing that they would be receiving a 20% pay cut — a slap in the face at the precise moment that those on the front lines of the COVID-19 pandemic need a pat on the back (and some more N95 respirators too).

But Steward Health Care System, which runs the hospital and dozens of others around the country, did the math and decided that the pay cuts were necessary to survive what they called "a seismic shock to our system." They also announced furloughs for a large number of their nonclinical staff.

Spirits sank after the announcement. "It was devastating," said one Boston doctor who works for Steward and asked not to be identified for fear of retribution. "I didn't say much during the call because I was so panicked, and I didn't want to be crying on the call."

Someone else did speak up, a senior colleague who warned that such a cut would kill morale at a time when physicians were already feeling vulnerable because of other shortages, including personal protective equipment. (Requests for interviews with Steward Health Care System executives were declined.)

Furloughs, layoffs, and even firings are happening elsewhere too. Hospitals in virus hotspots have already come up short on beds and face masks. Now a shortage of cash is prompting many to fire some of their healthcare workers, or furlough them temporarily, or — like Steward Health Care System — slash their pay checks.

Despite almost $200 billion earmarked for hospital systems in the recently passed federal stimulus package, many hospitals are still in dire financial straits. Most make the majority of their money through so-called elective procedures, such as knee replacements and cataract surgeries, almost all of which have been postponed in order to conserve personal protective equipment and minimize spread of the virus. Those cancellations translate to a significant financial hit.

On top of that, hospitals will lose an average of $1800 on every COVID-19 case, according to projections by Strata Decision Technology, a healthcare financial planning and analytic company. Some, they estimate, may lose much more, between $6000 and $8000 per patient. And hospitals were already hurting. According to a report from Bloomberg, at least 30 hospitals entered bankruptcy in 2019.

"This pressure on institutions to control costs has been around for several years," said Steve Lefar, executive director of the data science division of Strata Decision Technology and lead author of the study. "This is just making it incredibly acute for them."

Many hospital executives are bracing for months of hardship, leading to wrenching decisions to furlough or lay off staff, suspend bonuses or cut pay — even as some short-staffed hospitals in COVID-19 hotspots are issuing pleas for doctors to come out of retirement.

Forward Thinking?

While most furloughs and layoffs so far have affected people who don't work directly with patients, many on the front lines have been hit with pay cuts or withheld bonuses or retirement contributions. In Massachusetts, the state's medical society has asked Governor Charlie Baker for financial relief for healthcare workers in the form of grants, no-interest or forgivable small business loans for physician practices, and deferment of medical student loan payments.

At St. Alexius Hospital, in St. Louis, Missouri, Sonny Saggar, MD, was fired as CEO after he clashed with a bankruptcy trustee. Saggar had proposed offering open beds to other hospital systems during the pandemic — an idea that, he said, was turned down out of concern for the bottom line.

"This is one of those times where we need to put down our search for profit and money and just look after people's lives. We're supposed to have that calling in healthcare," said Saggar, who has since been reinstated as Chief Strategy Officer and director of the COVID task force and emergency department. He noted that he and the trustee have resolved differences over funding.

At St. Claire HealthCare in Morehead, Kentucky, 300 employees who were not involved in direct patient care — a quarter of the hospital's staff — have been furloughed, something Donald Lloyd, II, St. Claire HealthCare's CEO as of May 1, described as forward thinking.

To prepare for the influx of COVID-19 patients, the hospital shut down elective procedures early. "Prudence dictates the need to be extremely proactive," Lloyd said. "We need to devote our limited resources to frontline clinical teams."

Other hospitals are making similar moves, although many are not doing so publicly. Lloyd decided to put out a press release because he found it offensive that the federal government was "bailing out airlines and cruise lines before our frontline men and women caring for patients," he said.

Massachusetts-based Atrius Health, for instance, placed many staffers on a 1-month furlough, while simultaneously withholding a percentage of working physicians' paychecks, saying that they plan to pay them back at a later date.

TriHealth, in Cincinnati, looked elsewhere for ways to save money. Instead of cutting physician salaries, 11 executives took a 20% pay cut.

There are both better and worse ways to go about such staff reductions, according to Lefar. If reductions have to be made, it would be best if CEOs keep cuts as far away as possible from the front lines of patient care.

"My bias is to start with pay reductions for high paid executives, then furloughs, and beyond that layoffs," he said. (Furloughs allow employees to be brought back and receive unemployment benefits while not working.) "Anyone related to patient care — these are the people who are getting the country through this, these are the heroes."

After the Pandemic

Large hospital systems that can designate separate buildings for COVID-19 care may fare best financially, Lefar said. By retaining a clean, noninfectious facility, such setups could allow for an earlier return to regular procedures — as long as rapid COVID-19 testing becomes available.

Smaller hospitals, nearly half of which run at a financial loss, according to the Chartis Center for Rural Health, face the additional burdens of both limited capacity and a limited ability to separate COVID-19 care.

Mostly, Lefar said, it's a matter of doing whatever is necessary to get through the worst of it. "A lot of what is deemed elective or scheduled will come back," he said. "Right now it's crisis mode…. I think it's going to be a rough 6 to 9 months, but we will get back to it."

Sheila Eldred is a freelance health journalist and can be found on Twitter @milepostmedia.

Correction: Steward Health Care System runs multiple hospitals in the Boston area, and an earlier version of this story named the wrong one.

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