Lee Health is freezing salaries and cutting benefits for all of its 13,500 employees in 2021 following a $20 million financial shortfall that the organization has blamed on the COVID-19 pandemic.
This is the first time in nine years the health system has put a stop on all employee raises, which usually average 3% annually. Lee Health is Lee County’s largest employer.
Before the pandemic, the publicly operated hospital system had expected a profit margin of about $70 million by the end of its fiscal year on Sept. 30.
“This has been very unique, unprecedented – the most massive loss the organization has ever experienced,” said Ben Spence, the organization’s chief financial officer.
Lee Health doctors, nurses and other staff have been hard at work fighting the coronavirus for our community. These are images of them at Lee Memorial Hospital, Gulf Coast Medical Center, HealthPark Medical Center, Cape Coral Hospital and other Lee Health outpatient facilities, showing their commitment to confronting this pandemic. (Photo: Lee Health/Special to news-press.com)
The hospital system operates about 95% of the hospital beds in Lee County and has been the primary provider of COVID-19 care in the region. Its health centers include Lee Memorial Hospital, Cape Coral Hospital, Gulf Coast Medical Center, HealthPark Medical Center and The Golisano Children’s Hospital of Southwest Florida.
Salaries and benefits account for roughly half of the organization’s nearly $2 billion in spending any given year.
In addition to the salary freeze, the health system’s match for employee retirement plans which will decline from 5% to 4%. Health plan premiums and copays will also increase. And the organization has put new limits on the ability of senior leadership to accrue paid time off year after year.
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Spence said the hospital system will avoid more massive cutbacks and layoffs thanks to an expected infusion of up to $78 million in federal COVID-19 bailout funds from the $2.2 trillion CARES Act.
While that seems like it would push the organization into comfortable profitability, Spence said the health system needs an annual margin of roughly $50 million to $70 million to adequately keep up on building projects and maintenance and to replace and upgrade equipment.
Lee Health has canceled all capital projects except for the on-going expansion of Gulf Coast Medical Center in south Fort Myers, Spence said. That project is expected to be complete next year.
In a Sept. 22 memo to staff, Lee Health CEO Larry Antonucci said these and earlier cuts have helped the organization avoid layoffs. He also said that the hospital system is working on an incentive bonus plan for employees.
Earlier this year, the organization’s top executives took 10% cuts in pay, vice president-level managers saw 5% pay reductions and health system director-level employees received a 3% cut in pay.
Antonucci also agreed earlier this year to cut his own $1.05 million annual salary by 10% and will forgo a scheduled raise next year – a total cut of 16% over the next 12 months.
And members of Lee Health’s 10-person elected board of directors will see their state-mandated yearly stipends of $15,250 by 20%.
The total savings from those top-level reductions is about $3 million, Spence said.
Lee Health has not faced a deficit budget year since 2000 and even managed to eke out several million in revenue over expenses during the height of the Great Recession.
In another tough budget year seven years ago, it froze only top-level salaries, and then-CEO Jim Nathan volunteered to hold off on a contractually scheduled $30,000 raise.
“It is important to know that Lee Health is doing everything possible to protect jobs, benefits and paychecks, and we are committed to being open and transparent with you about our current circumstances,” his memo states.
Florida hospitals have treated more than 43,000 COVID-19 patients since the pandemic began in March – including more than 2,700 in Lee County — often leading to full intensive care units, expanding coronavirus units and shortages of protective gear.
At the same time, many health centers dramatically scaled back on elective medical procedures, depriving them of a big source of revenue.
ER volumes were also down, leading Lee Health and other hospitals to wonder if patients who needed to get evaluated were too scared to come in.
In the case of Lee Health, inpatient surgeries were down about 10% compared to the previous year, ER visits were down 10% and outpatient medical procedures were down 3%, according to a report to the organizations elected board of directors.
Physician visits and outpatient surgeries were higher than the previous year but fell well short of where budget planners had hoped they’d be, according to Lee Health.
“Our volumes were down more than 50% in the first few months of the pandemic,” said health system spokesman Jonathon Little. “Volumes have returned to near normal for many service lines, but we are still under in surgeries and emergency room visits.”
Medicare does pay hospitals an extra 20% for hospitals treating COVID-19 patients, though it is not enough to make up for the shortfall in other paying patients. Lee Health, for instance, estimates that the Medicare add-on provided about $7 million extra.
Frank Gluck is a watchdog reporter with The News-Press and the Naples Daily News. Connect with him at [email protected] or on Twitter: @FrankGluck.
Lee Health staff celebrate Ivan Munoz Suarez, a Lee Health employee, as he is wheeled out of the intensive care unit at Health Park Medical Center after eight days on a ventilator. He is expected to remain in the hospital a few more days to complete his recovery from COVID-19.
Fort Myers News-Press
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