Erlanger Health System will give its employees a record $3.5 million in bonuses next month after the hospital boosted its earnings last year to the highest level in the hospital's 126-year history.
Pending final approval by Erlanger trustees on Thursday, Chattanooga's biggest hospital will give $400 to each of the more than 3,300 non-manager employees of Erlanger. The bonuses, which total $1.4 million, are the first companywide bonus checks given all Erlanger employees since 2004 and should be paid Oct. 2.
Erlanger's budget and finance committee endorsed the one-time payments Monday night after auditors said Erlanger more than tripled its net income in fiscal 2015 to a record $37.3 million, reversing more than $36 million the hospital previously lost from 2008 to 2013. In 2014, Erlanger earned $11.3 million.
Kevin M. Spiegel, Erlanger Health System CEO, has been credited with leading the financial turnaround of the hospital."This is a way for management to acknowledge all of the employees - both full-time and part-time - that really added to Erlanger's unprecedented success," Erlanger CEO Kevin Spiegel told trustees.
Britt Tabor, Erlanger's chief financial officer, said the turnaround at Erlanger has been the most remarkable in his 29 years at the hospital.
"We were able to grow revenues, increase our capital investments and better manage costs - all without laying off any employees," he said.
In fact, Erlanger has added more than 250 employees over the past year and 300 workers in the past two-and-a-half years since Spiegel became president.
In the fiscal year that ended June 30, the hospital boosted inpatient admissions by 9.4 percent and reported an increase in the number of surgeries by more than 7 percent. Erlanger's total revenues grew 15.3 percent to $713.2 million during the year, even as the overall hospital market in Chattanooga was relatively flat.
Tabor said the hospital adopted an auto-accept policy to help bring in more patients from outlying counties and upgraded its admissions and processing procedures to shorten the average length of stay in the hospital by 5 percent - and thereby improve the utilization of hospital beds and hospital income.
"We reached out to physicians, listened to their concerns, and we're making the kind of capital investments to make sure they want to practice here," Spiegel said.
Erlanger's financial condition had deteriorated by the end of 2013 to only 65 days of cash on hand - within five days of violating the hospital's bond covenants. But with improved results in each of the past two years, Erlanger now enjoys 106 days of cash on hand and projects it should make more than $18 million in net income in the current fiscal year even with record investments to expand Erlanger East hospital and install a new hospital IT system.
"Three or four years ago, it was not looking good at Erlanger," Erlanger Chairman Donnie Hutcherson said. "But it's much different now, and management deserves a lot of credit."
Executives of Erlanger will not share in the $400 bonuses, but the hospital will pay $2.1 million in extra incentive pay to its top 124 executives, up from the $1.7 million such pay a year ago to Erlanger's top 99 managers.
Spiegel will get a $244,966 bonus, bringing his total compensation in fiscal 2015 to $981,000 - or 7.2 percent more than the $914,669 he received the previous year.
The management incentives are based upon the hospital's financial and quality performance, both of which improved in the past year. Erlanger exceeded all of its financial goals, but still fell short of some of its quality measurements, even with its improvements.
Chief Nursing Executive Jan Keys, left, leaves the Emergency Department with Erlanger CEO Kevin Spiegel, as the top executive accompanies her on her rounds in this 2014 file photo.Last year's bonuses drew fire from state lawmakers who complained that Erlanger was too quick to reward its executives and did so without enough public discussion and review.
"Our problem was with the way they awarded these bonuses in secret and in violation of the Sunshine Act," state Sen. Todd Gardenhire said.
Last year, Erlanger trustees had to re-vote on the bonus payments to executives at a second public meeting to address concerns over how the payments were approved by trustees. Gardenhire said the public and legislators were better informed this year about the incentives and how they are implemented.
"I had some real concerns last year because it seemed like the first thing they did after they made a quarterly profit was to hand out executive bonuses," said Tennessee House Majority Leader Gerald McCormick, R-Ooltewah. "But they've shown some recurring good numbers, and I tend to leave it up to the board to make these decisions. I think we've got some very good board members at Erlanger, and unless they do something outrageous I'm going to leave them alone."
The bonuses to be paid Erlanger employees are in addition to a 3-percent pay raise planned for all hospital workers in January. Nurses at Erlanger also received raises this past January and in July 2014.
"This represents an investment approaching $15 million in Erlanger employees over a 24-month period," said Jennifer Stanley, chairwoman of Erlanger's management and evaluation committee. "I have always been, and continue to be, in favor of performance-based incentives to acknowledge employees who deliver outstanding results on behalf of our community."
Contact Dave Flessner at dflessner@timesfree press.com or at 757-6340.