Facing huge financial losses, UVM Health Network cuts salaries, freezes hiring

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The University of Vermont Health Network announced Friday it is facing “staggering revenue losses” of about $152 million for the year because of the COVID-19 pandemic, triggering salary cuts and a hiring freeze.

The loss is offset somewhat by $37.9 million in federal funding that has come into the health network.

Dr. John Brumsted, president and CEO of the health network, said in a statement that COVID-19 forced the hospitals in the network to completely change how they delivered care “in a matter of days” to provide the best care for patients.

“Now we must confront the harsh financial realities that this situation has had on our organization, which means terribly difficult decisions that have a direct impact on our co-workers and their families,” Brumsted said. 

Those decisions include immediately reducing the base salary of “leaders,” eliminating employer retirement benefit contributions to those leaders, and putting a hiring freeze in place at all network affiliates.

The UVM Health Network includes the UVM Medical Center in Burlington as well as the UVM Health Network Medical Group. It also includes:

  • Alice Hyde Medical Center in Malone, New York.
  • Central Vermont Medical Center in Berlin.
  • Champlain Valley Physicians Hospital in Plattsburgh, New York.
  • Elizabethtown Community Hospital in Elizabethtown, New York.
  • Porter Medical Center in Middlebury.
  • Home Health & Hospice, based in Colchester.

300 out of 14,000 affected

The reductions in base salaries will affect about 300 employees out of a total workforce of approximately 14,000 employees. Directors’ salaries will be reduced by 5%, while vice presidents and above will have their salaries reduced by 10%.

There will be a freeze on any further capital spending in fiscal year 2020, except for a few exceptions for those focused on patient care, such as implementing Epic electronic health care records.

In addition to cutting the base salaries of leaders, the health network is also eliminating any performance-based compensation for directors and above. Lastly, administrators are reviewing and reducing expenses not related to personnel and patient care.

Taken together, the cost reductions are expected to save about $25 million in the current fiscal year. The hope is that savings, together with funding from the federal government and increased revenue as patient services come back on line, will begin the financial recovery of the health network.

How the losses happened

The health network canceled elective surgeries and procedures on March 17, which contributed to its financial losses. Three days later, on March 20, Gov. Phil Scott made it official for the entire state, suspending all elective surgeries and procedures.

In a news conference held by Burlington Mayor Miro Weinberger on Friday afternoon, Dr. Stephen Leffler, president and chief operating officer of the UVM Medical Center, said the hospital is losing about $1.1 million every day as a result of suspending elective surgeries and procedures.

“That’s a huge part of our business, how we keep everything going,” Leffler said. “We also spent significant dollars preparing for a surge (in COVID-19 patients).”

Leffler estimated that by the end of March the medical center had lost more than $30 million, and that it alone projected a loss of more than $85 million by the end of the fiscal year on Oct. 1.

“We made the hard decision we had to make changes right now,” Leffler said. “We couldn’t wait for federal stimulus money.”

Other factors that contributed to the overall losses for the health network are:

  • Creation of stand-up COVID-19 units and temporary testing facilities.
  • Significant work to increase telehealth services.
  • Suspension of collections on patients’ past-due accounts.
  • Issuing an extra week’s pay for employees earning less than $99,000 per year.

The total losses from these factors are estimated to be more than $20 million, with new costs being added every day. A steep drop in patient care unrelated to COVID-19 resulted in a loss of as much as 50% of normal revenue for that care. In March alone, the health network lost $44 million.

Contact Dan D’Ambrosio at 660-1841 or ddambrosio@freepressmedia.com. Follow him on Twitter @DanDambrosioVT. This coverage is only possible with support from our readers. Sign up today for a digital subscription. 

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