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Staff Photo by Matt Hamilton / Erlanger Hospital on Tuesday, Dec. 15, 2020.

Erlanger Health System's leadership team and staff will receive bonuses and raises not to exceed a combined $7.65 million in light of the hospital's 2020 performance following approval by the board of trustees on Thursday.

The one-time salary increase for employees of the public hospital system shall not exceed $6.5 million and will be implemented at management's discretion, Erlanger CEO Dr. Will Jackson said during Thursday's hospital board meeting. Although he didn't say when the raise would take effect, Jackson said that leadership will not receive any incentive payouts until after front-line staffers.

"People drive our organization's performance, and they've stood fast and sacrificed for this community over the past year," Jackson said, thanking the board for approving the "much-deserved raise" for his associates.

"Salary increases for eligible employees are warranted in light of the challenges we've had over the course of the past year as well as with the outstanding performance of [Erlanger] itself," he said.

Officials noted in a news release after the meeting that this would be the second across-the-board raise for staff since Jackson took over as Erlanger's chief executive in September 2019, with the previous raise occurring in February. Eligible bedside registered nurses and medical assistants also received additional raises in December.

Erlanger is a vastly different health system today compared to 15 months ago when Jackson took over.

At that time, the health system had 290 non-clinical managers. Now, there are 93.

Last December, Erlanger was about $11.4 million in the hole after ending the second quarter of fiscal year 2020 with a $5.4 million loss from operations.

In the months that followed, the pandemic struck and management undertook aggressive cost-cutting measures, including layoffs, temporary furloughs and suspending vacation accruals and retirement contributions. Some of those layoffs were part of Jackson's directive to streamline the health system regardless of COVID-19.

Executives also took temporary, voluntary pay cuts, with Jackson taking a 15% cut — the largest of any employee.

Officials estimated the hospital lost $35 million in net patient revenue during April due to temporarily suspending elective procedures, decreases in admissions and other coronavirus-related expenses. Those procedures, which included everything from colonoscopies to radiation for cancer treatment and joint replacements, are the lifeblood of a hospital's revenue.

To offset those losses and other COVID-19 expenses, the federal government granted Erlanger $55.9 million in stimulus funds.

Ultimately, the health system ended the 2020 fiscal year with a $35.3 million net income from operations. A report from independent auditors released in October found that without the stimulus funds, Erlanger was operating at a $19.9 million loss.

(READ MORE: Stimulus funds boost Erlanger $35.3 million into the black after losing $94 million in revenue due to pandemic)

Executive leadership team members, including 93 directors and vice presidents across the health system and clinicians with contracts containing productivity incentives, are not eligible for the raise.

The leadership team's incentives are based on goals set by the board each year and are measured at the end of each fiscal year, which for Erlanger is June 30. Trustees on Thursday voted to pay 50% instead of 100% of the earned incentive plan payout for the last fiscal year, citing ongoing uncertainties due to the coronavirus pandemic.

The total incentive payout will not exceed $1,150,000 and will go to the 93 other people not covered by the raise.

"We're being good stewards, being reasonable, but want to recognize the hard work of the leadership team, but put things into context with some of the difficult decisions leadership's also made during this journey," said Trustee Jim Coleman, chair of the board's budget and finance committee.

Jackson, whose base salary is $625,000, will receive an additional $50,000 for completing the three non-financial goals set forth in his contract when he took over leadership of the hospital in September 2019. Those goals were to reorganize Erlanger's management structure, establish a plan to address physician relations and a plan to restructure the Erlanger Medical Group.

Contact Elizabeth Fite at efite@timesfreepress.com or follow her on Twitter @ecfite.

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