Some hospital CEOs are taking pay cuts as COVID-19 losses mount.
As the virus spread beginning in mid-March, the falloff in patient volume and a ban on lucrative nonemergency surgeries led many hospital chains to lose tens of millions of dollars a month or more.
As of Monday, facilities in Illinois that meet certain safety and capacity requirements are now able to offer some elective surgeries. Still, to ensure financial stability, organizations like Advocate Aurora Health and Loyola Medicine have had to cut costs—including at the top.
Advocate Aurora CEO Jim Skogsbergh's base salary is being cut in half this month until at least mid-August. The 28-hospital chain did not provide Skogsbergh's current pay, but he took home a total of $8.5 million in 2018 when his base salary was $1.8 million, according to recently released filings.
Other Advocate Aurora leaders, including senior executives and hospital presidents, also are taking pay cuts during the same period. The reductions, expected to total more than $1.5 million, will go toward the chain's Team Member Crisis Fund, which assists employees who are financially affected by the virus, spokeswoman Brigid Sweeney said in an email.
Advocate Aurora has been hit hard by COVID-19, with revenues declining $168 million in March. In April, "estimated revenues were down approximately 51 percent, almost a $524 million unfavorable variance from budget," Sweeney said.
Despite cutting hours as patient volumes fell, the chain had not furloughed workers. But starting June 8, it said pay for unworked hours will gradually decrease to zero. "We timed this such that our ramp up of elective surgeries and procedures over the coming weeks is expected to mitigate some of the negative impact on team members," Sweeney said, adding that employees will be able to use vacation time and borrow against their unaccrued time off.
BizTimes Milwaukee was first to report the pay cuts at Advocate Aurora.
Outside of Illinois, Renton, Wash.-based Providence is also cutting executive pay. Providence CEO Dr. Rod Hochman and president of strategy and operations Mike Butler will both take 50% paycuts. Group, senior and executive vice presidents at the health system will see 20% pay reductions; vice presidents will take a 10% cut.
York, Pa.-based WellSpan Health on Monday said its President and CEO Roxanna Gapstur will take a 25% pay reduction for 12 weeks while other executives see a 10% pay drop during the same period. The health system will put those savings into an assistance program for other WellSpan employees.
"COVID-19 is more than just a public health crisis; it's also a financial crisis for millions of Americans," Gapstur said in a statement. "As central Pennsylvania's largest private employer, we know our team members are not immune from the financial impacts of this pandemic."
Hospitals and ambulatory surgical centers in Illinois can begin performing inpatient and outpatient procedures so long as they meet specific criteria, including testing patients for COVID-19 within 72 hours of scheduled procedures and completing temperature checks on the day of the visit. But the losses to date are steep.
The Illinois Health & Hospital Association last month estimated that the state's more than 200 hospitals were losing a total of $1.4 billion a month amid COVID-19, with outpatient revenues down 50 to 70 percent.
Loyola Medicine has lost tens of millions of dollars due to COVID-19, as overall outpatient and inpatient volumes fell 80 and 60 percent, respectively. As a result, the three-hospital network has implemented temporary pay cuts for CEO Shawn Vincent and other leaders, as well as eliminating fiscal year 2020 bonuses for all workers.
Catholic giant Trinity Health, which owns Loyola, implemented temporary base pay reductions of up to 25 percent for leaders, in addition to furloughing roughly 2,500 workers, Crain's Detroit Business reported last month.
Vincent said the base pay reductions at Loyola—which took effect during May and June, with more senior people taking a greater cuts—will last at least three months. Vincent, who took over as CEO in late 2018, said his base pay is in the low $800,000 range.
Starting May 1, executives and senior managers at NorthShore University HealthSystem are taking 20 to 35 percent pay cuts "as we work through many future uncertainties," the five-hospital chain said in a statement.
In 2018, CEO J.P. Gallagher's total compensation was $2 million, $742,000 of which was his base pay, filings show.
"NorthShore is implementing proactive measures to remain financially sustainable so that we may continue serving our communities into the future with the same level of innovation, service and quality they deserve," the statement says. In addition to pay reductions for leaders, the hospital chain has suspended contributions to employee retirement accounts and required workers to use vacation time as it modifies work hours.
The University of Chicago Medical Center recently announced that it's furloughing workers and postponing planned capital projects, among other cost-cutting measures, having seen a $70 million decline in operating revenue and a $35 million loss in cash flow in both March and April.
The hospital didn't immediately respond to a request for comment about whether CEO Dr. Kenneth Polonsky and other leaders would be taking pay cuts.
Amita Health, however, has not implemented executive or associate pay cuts, spokeswoman Ogla Solares said in an email.
Other large Chicago-area not-for-profit hospital chains did not immediately respond to questions about CEO and leadership pay reductions.