Furloughs, pay cuts, benefit trims hit Michigan hospitals during COVID-19 outbreak

Hospitals across Michigan are feeling the financial strain from the COVID-19 pandemic, and some are trimming pay and benefits for employees to stay afloat through the public health crisis. 

Trinity Health, a national Catholic health care system with five hospitals in southeast Michigan and another five elsewhere in the state, will furlough 2,500 employees from its Michigan workforce, spokeswoman Maria Seyrig said. Senior executives also are taking pay cuts, according to a Trinity Health press release.

Tenet Health, the Dallas-based hospital chain that owns the Detroit Medical Center, has suspended its contributions to employees' 401(k) plans across the country.

The steps are being taken as hospitals await emergency funding from the state and federal governments, including $100 billion for hospitals across America approved as part of the federal CARES Act and $50 million approved by the Michigan Legislature. 

"We’re starting to see changes in how hospitals are handling the financial stress they’re under, whether it’s through the change in 401(k) contributions to their employees or layoffs," said Ruthanne Sudderth, senior vice president for public affairs with the Michigan Health and Hospital Association. 

"I think that speaks to the extreme financial hardships that the pandemic is placing on hospitals of all kinds in every part of the state and country."

Hospitals and physician group practices nationwide are feeling severe financial strains after elective procedures and routine office visits have been suspended during the COVID-19 crisis. 

"Essentially all they’re doing is taking care of COVID patients and other kinds of emergent care, so they’ve seen their revenue plummet," Sudderth said. "And at the exact same time that their revenue has plummeted they have had to make huge expenditures."

Hospitals are spending money for enormous supplies of expensive personal protective equipment, the setup of child care centers to allow employees to come to work and overtime so medical staff can cover for other workers who've been quarantined, she said.

DMC suspends contributions

At the eight-hospital Detroit Medical Center, Tenet Health has suspended matching contributions for an employee 401(k) program "for the near term," according to a press release from the for-profit hospital chain. The DMC has about 12,000 employees.

The match has been postponed across the 65-hospital Tenet Health system, affecting employees at hospitals in California, South Carolina, Alabama and other states as they continue to fight the novel coronavirus. 

"We have not canceled, eliminated or cut the match for 2019 — just postponed it. This in no way impacts your savings in your own 401(k) account and still remains an additional benefit you will receive at a later date," Tenet said in a statement.

"Our most important mission right now is to provide the best possible support for our hospitals and other care facilities so they can continue to deliver life-saving treatment to fight COVID-19 and many other illnesses and conditions," the statement continued.

The corporation has decided to "direct additional resources to meet the increased demand for health care services, address evolving patient needs in our hospitals and protect front-line staff.

There don't seem to be any plans for layoffs at the DMC.

"I can tell you the demand to care for the ever-increasing number of patients is creating an increased need for staffing, especially nurses," said DMC spokesman Brian Taylor, when asked if the DMC would need to lay off employees. 

"The DMC is using a variety of resources to help to supplement nursing staff, including contracting with staffing agencies to secure more nurses and reaching out to colleges and universities to recruit nursing students who are close to graduation to assist in providing care to our patients, in accordance with state guidance."

The Livonia-based Trinity Health will furlough 2,500 employees at its Michigan hospitals but also reposition hundreds of workers to support hospitals coping with the COVID crisis, Seyrig said.

Trinity includes the Saint Joseph Mercy Health System, which has hospitals based in Ann Arbor, Chelsea, Howell, Livonia and Pontiac, as well as the Mercy Health system which has hospitals in Grand Rapids, Muskegon and Shelby.

All senior leaders at Trinity, vice presidents and above, will take a 15% to 25% pay cut starting next week, Seyrig said. President and CEO Mike Slubowski will take a 50% pay reduction, she said.

The Beaumont Health, Ascension Michigan and Henry Ford Health System did not reply to emails asking if they're taking steps to cut costs.

Questions on federal aid

Hospitals and physician group practices nationwide feeling severe financial strain are hoping for some relief from the CARES Act, a $2.2 trillion federal stimulus package approved last Friday by Congress that includes $100 billion for hospitals.

But it's unclear when the money will flow down to Michigan hospitals, or how far it will stretch to cover hospitals' revenue losses. 

The American Hospital Association earlier this week urged the U.S. Department of Health and Human Services and the federal Centers for Medicare and Medicaid Services to release the funds "immediately," said Sudderth of the Michigan Health and Hospital Association.

"That’s a hundred billion, and we are pushing them to get that money available to hospitals as quickly as possible," she said.

"We are hoping that they do that because it will bring a much-needed infusion of financing to our hospitals that, at this point, are frankly worried about making payroll or keeping their doors open.

"... We need that money to come down very quickly from the federal government."

The hospitals are also waiting for the state to release $50 million in emergency funding, Sudderth said.

But it was unclear Thursday how much of that funding will go to hospitals. Some of the money already has been spent, said Kurt Weiss, spokesman for the Michigan Department of Technology, Management and Budget.

"The state is already incurring significant costs for personal protection equipment, supplies and standing up alternative care facilities, and we expect we’ll need to utilize at least some of these state appropriations for those needs," Weiss said in an email.

"So in effect, the state dollars are already flowing.  We’ve been talking with the hospital association and other provider groups and have already advanced some payments to alleviate cash flow concerns."

Weiss said the $50 million was to cover capacity needs across the health care system, not specifically for hospitals, though "hospitals are certainly included."

"The (Whitmer) administration is working closely with the hospital association and other health care providers to monitor where funds are needed to expand capacity for treating COVID-19 in the state," he said. 

Weiss noted that significant financial aid will flow to hospitals from the federal CARES Act.

"Substantial financial support to hospitals is provided for in the recent federal stimulus bills, so we are ensuring that the more limited state funds are utilized in the most effective way possible," he said.

"The U.S. Department of Treasury is telling us that they will give us more guidance on the federal funds on April 12 and that the federal funds will start flowing later this month, likely on April 24 or near that date."

kbouffard@detroitnews.com

Twitter: @kbouffardDN