Cuts at Erlanger to save $2.5 million a year

Cuts at Erlanger to save $2.5 million a year

February 18th, 2012 by Mariann Martin in News

Erlanger is preparing for middle management layoffs.

Photo by Tracey Trumbull/Times Free Press.

Erlanger Health System will cut 23 to 30 management positions by March 31 and offer a voluntary buyout program at the staff level as part of an ongoing plan to get the public hospital back into the black.

Most of the management positions were cut this week.

The manager and director layoffs comprise about 20 percent to 25 percent of Erlanger's midlevel management and will save the hospital about $2.5 million a year, Chief Administrative Officer Gregg Gentry said Friday.

"We wanted to start at the leadership level," Gentry said.

Last month, the hospital eliminated six executive positions, about 40 percent of its executive ranks. Estimated savings are about $1.4 million to $1.6 million. Employees in some of those positions were moved to budgeted positions elsewhere in the hospital, so the savings occur with the elimination of the executive posts.

Erlanger's Budget and Finance Committee will meet Monday to discuss January financial figures. Executives have acknowledged they expect Erlanger to lose money for several more months. In the first six months of the fiscal year, the hospital lost $10.3 million, primarily because of lower surgery numbers, administrators have said.

Among those laid off, directors were given a six-month severance package and managers received a four-month severance, regardless of their length of service at the hospital. The former employees also will be able to access health insurance for 12 months, although they will need to cover some of those costs.

Executives had been offered a one-year severance package.

Gentry said the severance packages were based on national market averages.

At the staff level, years of service at the hospital will be considered in the buyout process, he said.

Gentry said he did not know what percent of the hospital's other 4,500 employees would be affected.

"It depends somewhat on what response we get from voluntary buyouts," he said.

This is the first time in recent history that Erlanger has implemented voluntary buyouts during a layoff, he noted. So far the hospital is pleased with the response, he said.

Five managers and directors accepted voluntary buyouts, Gentry said.

While cuts are being made in all departments, they will be more heavily concentrated in support services and administration, Gentry said.

"Our goal has been to have no negative impact to clinical areas, to patient care," he said.

In an inter-office memo sent to employees on Friday, administrators said Erlanger must get its financial house in order before the last quarter of this fiscal year, which begins on April 1.

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