Furloughs and reduced work schedules at Erlanger Health System that were implemented on March 30 as preparations for the COVID-19 pandemic caused a 30 to 40% drop in revenue ended Monday, according to an internal memo sent to employees.
In addition, vacation accrual and other benefits are set to be restored later this week.
Leadership salaries, which were reduced between 5% and 10%, will be restored the pay period starting Aug. 9, and Erlanger CEO Will Jackson's salary will be restored on the pay period starting Aug. 23.
"We all must recognize and understand there still is a great deal of uncertainty surrounding COVID-19 and as it relates to the national economy. As such, each of us must continue to act thoughtfully and decisively as conditions warrant, including the possibility of another potential surge of this crippling pandemic," Jackson said in the memo.
Erlanger employees have faced one round of furloughs and three rounds of layoffs in Jackson's nine months as CEO, including last Friday, when 93 non-clinical jobs were cut.
Erlanger trustee Jim Coleman, budget and finance committee chairman, said in an email on Friday that Erlanger's financial performance has been "severely challenged" by COVID-19, which caused dramatic declines in hospital volumes nationwide, and by being a safety net hospital, meaning it operates on thin margins.
"As we begin to rebound in volumes from COVID-19, we will continue to be conservative in financial projections and expectations. We will monitor the local situation for potential resurgence, and modify as necessary depending on actual results," Coleman said, adding that typically 60% of expenses in the hospital industry are personnel related.
"People are the largest investment for a hospital. Unfortunately, as patient volumes fluctuate significantly, this directly impacts employment numbers as well," he said.
The Erlanger Board of Trustees' budget and finance committee met Monday evening to approve management's proposed budget for fiscal year 2021, which begins on July 1.
During that meeting, Coleman spoke about the challenges of planning for the future during a pandemic, but also how both the board and management are grappling with "questionable" strategic decisions made by the previous administration.
He said although Erlanger has "missed budget" for nine straight quarters, eight of those quarters did not occur under Jackson.
Coleman didn't go into detail about what those questionable decisions were, but Erlanger under the previous administration - led by CEO Kevin Spiegel - was characterized by rapid growth and expansion.
Under Spiegel, Erlanger saw a 92% increase in net patient revenue, dramatic market share growth and improved bond rating. However, with that increase in revenue also came an increase in expenses.
"What we're doing is working with the current administration to correct some of those strategies, to repair regional relationships that have been damaged, and to grow service lines at Erlanger so we can have a sustainable Erlanger, that'll be a sustainable safety net hospital that this region deserves," Coleman said.
He noted that Erlanger has several other new trustees with health care experience and a well-grounded board with a range of skills and talents.
"I think that we're very apt to meet this challenge, and hold management accountable as we move forward in this budget," Coleman said.
He said the financial situation would be far worse if management hadn't implemented the reduction strategies in late March.
In fiscal year 2021, Erlanger is planning to bring in about $1.1 billion in total operating revenue, with $13.3 million excess revenues over expenses from operations and a 1.2% operating margin. The budget includes a pension contribution of $11.5 million paid out over 12 months.
Management is requesting $20 million in capital for infrastructure replacement throughout the health system and $1 million for Erlanger's hospital in North Carolina.
Management is also asking the board to approve a charge increase not to exceed 4.99% that would not impact patients with commercial insurance and self-paying patients.
Erlanger CFO Britt Tabor said the projected budget does not include COVID-19 stimulus money since there are still too many unknowns about if and when the federal government will allocate more money to hospitals to offset money lost in the pandemic.
Coleman said in the Friday email that management and various committees of the board have put countless hours into reviewing the direction in the upcoming year.
"We have made the best projections of how we believe [patient] volumes will rebound, but there are many unknowns facing the hospital system," he said. "We will continuously and actively review the budget versus the situation as it unfolds, making further adjustments as needed."
The committee unanimously approved the new budget, sending it to the full board for a vote during a meeting this Thursday.
Contact Elizabeth Fite at efite@timesfreepress.com or 423-757-6673.
Staff Photo by Robin Rudd/ Erlanger President and CEO William Jackson, left.