CORONAVIRUS

University of Iowa hospital employees to take furloughs, pay cuts

Top two executive salaries cut 10 percent for three months

University of Iowa Health Care complex, which houses University of Iowa Hospitals and Clinics, is seen in this photo tak
University of Iowa Health Care complex, which houses University of Iowa Hospitals and Clinics, is seen in this photo taken in 2014 in Iowa City. (The Gazette)

IOWA CITY — After about 4,000 University of Iowa Health Care workers rejected an administrative request that they surrender a negotiated pay raise for the upcoming year to help UIHC absorb tens of millions in COVID-19 losses, administrators have proposed alternate options that, for now, avoid layoffs.

Per the new proposal, most UIHC staffers still will get a 2.1 percent pay raise for fiscal 2021, which starts July 1, but must take unpaid time off or give back vacation hours.

“Employees will have flexibility with the options that work best for their situation, including when they take unpaid time off,” according to UIHC officials, who reported the options to faculty and staff during a series of town hall meetings this week.

Lower-wage earners will carry less of the budget-cutting burden than those making the most money — including top executives like UIHC CEO Suresh Gunasekaran and UI Vice President for Medical Affairs and Dean of the Carver College of Medicine Brooks Jackson.

Gunasekaran, earning an annual salary of $816,000, and Jackson, making $845,000, each will take a 10-percent pay cut for three months starting in the new budget year. Other UIHC executives will see no raises, absorb a 5-percent pay cut for three months, and must either take two weeks unpaid time off or lose 100 vacation hours.

Department heads will see no raise and absorb a 4-percent pay cut for the year. UIHC faculty — like physicians and tenured professors — will absorb a 2.5-percent pay cut and see no raises on the year.

Non-unionized staff making more than $50,000 will — like those in the union — get a 2.1 percent raise but will have to choose between taking two weeks of unpaid time off or losing 100 hours of accrued vacation time.

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Merit staff making less than $50,000 will get the raise and be required to take either one week of unpaid time or 50 hours lost vacation time.

UIHC also is enacting a 60- to 90-day hiring freeze starting July 1. That will affect between 200 and 400 open positions that won’t be posted, Gunasekaran told The Gazette, noting the campus has been able to avoid layoffs at this time due, in part, to improved patient volumes.

“Our goal has been, and continues to be, to avoid layoffs and to minimize the impact on employees,” Gunasekaran said. “Several factors, including being able to quickly and safely increase patient volumes, as well as federal stimulus funding, allowed us to develop a much more favorable solution for addressing the financial impact than initially anticipated.”

UIHC leaders earlier this month told the Board of Regents they expected to lose about $120 million through the end of June from COVID-19, down from a projected $150 million thanks to $30 million in federal aid.

Gunasekaran on Tuesday told The Gazette the outlook has improved since that board presentation, as patient volumes have rebounded faster than expected from unprecedented drops — tied to, among other things, a governor-imposed halt on elective surgeries.

The swing could amount to about $40 million, meaning 2020 COVID-19 losses could hold to $80 million or $90 million.

“The value of volume that was postponed during the pandemic, we didn’t think it would come back so quickly or be as valuable as it has been,” he said. “So it’s been a real silver lining in May and June.”

Paired with strong performance earlier in the budget year, UIHC projects ending fiscal 2020 barely in the black — but well below original expectations. And administrators still are projecting COVID-related losses of $40 million to $50 million in the new budget year from lower patient volumes, payer-mix changes, and higher costs for things like drugs and supplies.

“And that’s assuming no COVID resurgence,” he said.

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Because ending next year with a $40 million to $50 million loss isn’t acceptable, Gunasekaran said, the plan is to improve operations and find enough efficiencies to reach a break-even or positive status.

And while the pay cuts, furloughs, and hiring freezes will help, Gunasekaran said the focus will be on growth and improved efficiency.

“The cuts are kind of the minority part of it,” he said. “We’re really betting on our ability to run a better operation. We’re counting on our team to improve our patient throughput, improve our supply and billing efficiency, to improve our collaboration so we can use staff more efficiently.”

He mentioned 25 initiatives aimed at growth and efficiency — including expanded services in high-demand areas, like cardiovascular, orthopedics, and cancer programs; more training; better quality and performance outcomes; timelier discharges; and improved patient satisfaction.

And although salary cuts are part of the mix, Gunasekaran said the institution also is implementing a “success-sharing program” that will incentivize productivity by collectively rewarding staff when the institution meets select targets.

The program, which excludes faculty and executives, will trigger a bonus for each staff member equal to one percent of his or her annual base pay if UIHC beats budget and achieves a target margin of three percent. The bonus would come in a lump sum at the end of the year. And it could be higher if the margin improves beyond 3 percent, Gunasekaran said.

Administrators earlier this month asked unionized staff members to forfeit their contractual pay raise for 2021, which members agreed to consider if the Board of Regents put back under contract terms they stopped negotiating on when lawmakers stripped public-sector bargaining rights in 2017.

Gunasekaran said doing so would have been a lengthy process, and now is not the right time to sort through the details.

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“I don’t think there was anything unreasonable that they asked for,” he said. “It’s just that, under the circumstances, litigating things that have broad impact on the overall contract was just not realistic.”

Union leadership said because they still are evaluating cost savings of the new UIHC proposals and gathering input from staff, they don’t yet have any comment on the updated cost-saving options.

Gunasekaran said although much remains unknown about the future of the pandemic — which continues to infect more Iowans daily — circumstances for UIHC could be worse.

“This is a much better scenario than we could have envisioned at this moment in time,” he said. “However, there is still a lot of uncertainty — will there be another peak in COVID? Will patient volumes remain high enough?

“We feel confident our plan moving forward will allow us to navigate what may lie ahead.”

Comments: (319) 339-3158; vanessa.miller@thegazette.com

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