Washington Regional Medical Center Freezes Pay

Monday, January 27, 2014

Pay will freeze or decrease this year for more than 2,000 Washington Regional Medical Center executives and employees, reflecting what the center’s chief executive said are troubled times for all hospitals.

In a letter to employees in December, William Bradley, the nonprofit center’s CEO, said spending cuts authorized by Congress pushed 2013 earnings down by $5 million. Earnings exceeded $200 million in 2011, the latest year with publicly available figures.

The immediate future doesn’t look much better, either, he said.

“The uncertain, unpredictable and increasingly hostile environment for health care emanating from Washington makes it exceedingly difficult to plan and budget,” Bradley wrote. “For some time, we have shared our view that 2013, 2014 and 2015 would be the most difficult years of the health care reform era. We continue to hold that view as 2013 comes to a close.”

In an email, Bradley said it was the first pay freeze in four or five years. If prospects don’t improve, officials will look into postponing or cutting back expansions or programs.

The medical center has plans for new electronic health records, for example, and an expansion of its Neuroscience Institute.

“We are studying that now,” Bradley said.

Officials have no plans to reduce grants given to the Washington County HIV Clinic, the Northwest Arkansas Free Health Center and other local health programs, spokeswoman Gina Maddox said. In 2011, the center’s grants totaled about $4.5 million.

By the Numbers

Washington Regional Medical Center

Employees: About 2,100

Earnings Decrease from 2012 to 2013: $5 million

Expected Earnings Decrease in 2014: $2 million

Spending Cuts For Next Five Years: $25 million

Executive Pay Cut: 1 percent to 3 percent

Executive Pay Cut in Dollars (total): $95,000

Source: Staff Report

Washington Regional’s team of more than a dozen executives will each take a pay cut between 1 percent and 3 percent. Their salaries ranged between about $180,000 to more than $700,000 in 2011.

Maddox said those pay cuts totaled about $95,000. The plan overall is expected to save about $25 million during the next five years.

Bradley pointed to two culprits for the center’s struggles.

First, difficulties with federal and some state health care exchanges — set up by the Patient Protection and Affordable Care Act, or Obamacare — led to fewer people signing up for insurance. Hospitals need those newly insured to offset the act’s Medicare and Medicaid spending cuts, he said.

By the end of December, 2.2 million had enrolled nationwide instead of the predicted 3.3 million, according to the U.S. Department of Health and Human Services, though the number rose quickly after improvements to the exchange website. That included about 66,000 Arkansans.

“We may never realize the intended participation numbers that were originally projected,” Bradley wrote in the letter.

Second, mandatory spending cuts known as the sequester further trimmed Medicare reimbursements and weren’t undone by the latest federal budget agreement.

Pat Driscoll, a spokeswoman for Northwest Health System, said officials were optimistic and modestly raised salaries in the past couple of months. Asked whether the system had laid off any staff, she said only that staffing varies by patient numbers and needs, “as is standard across the hospital industry.”

Mercy Northwest Arkansas did not provide information about staffing or salary changes during several phone calls and emails last week.