Empire Health announces 9 percent pay cut in Spokane

A total of 2,700 will be affected at county’s second-largest employer

Ten days after announcing a wage freeze, Empire Health Services gave its non-unionized hospital workers more bad news Monday. This time, it’s a 9 percent pay cut.

Carla K. Johnson
Staff writer Spokesman Review

More than 2,700 Empire employees, from CEO Thomas White down, will see wages cut. Empire, Spokane County’s second largest private employer, operates Deaconess Medical Center and Valley Hospital and Medical Center.

In tearful meetings Monday, employees learned they will see significantly smaller paychecks starting April 4.

‘‘This is going to hurt — big time,” said Julie Maddox, a 21-year Deaconess housekeeper, who expects to see her hourly wage fall to less than $11.40. ‘‘You know how it is when you’re used to having a certain amount coming in to the cover the bills?

‘‘Now what?”

Workers foresee more bad news this summer when their health insurance premiums are expected to rise. In addition, workers in food service, engineering, housekeeping, medical machine repair and laundry are waiting to hear whether Empire will hire outside contractors to provide those services.

The 9 percent pay rollback — which adds up to about $10 million a year — will have a modest effect on Spokane’s economy, said retired banker Phil Kuharski, who tracks business trends.

‘‘That’s one-tenth of 1 percent of the personal income of Spokane County,” Kuharski said. ‘‘It’s a hit, and it’s one of those things that incrementally, as we add on hits, has an impact.”

Hospital leaders called the pay rollback necessary for survival and defended a decision not to dip into the system’s $35 million in cash reserves.

‘‘The improvement of the (Deaconess) cardiac program and the emergency department will come out of those reserves,” said Chief Financial Officer Garman Lutz.

The rollback will save the hospitals $9 million this year, Lutz said, and help avoid more layoffs. Last year, the hospitals laid off more than 100 people. Other positions went dark through attrition.

Facing losses of $19 million last year, and a $1.4 million additional loss in January, administrators hope the pay cut will protect the system’s cash reserves.

That’s a key to securing financing from bond underwriters for a planned expansion of the Deaconess heart-care center.

Hospitals make money off heart work. Reimbursements for heart care tend to be better than for other types of care.

‘‘We need to preserve our share of that market as part of the financial underpinning of Deaconess and so we can continue to provide services such as maternity and the birthing center,” Lutz said. ‘‘We need programs like cardiac and NICU (neonatal intensive care unit) to provide the margins for those other services.”

Many workers learned the news in Monday afternoon meetings. A letter mailed Monday will reach other employees today.

‘‘Cost reductions are difficult, but necessary, to ensure the future of our hospitals,” CEO White wrote in the letter. ‘‘We remain optimistic that by working together, building our patient volumes, and controlling costs, we will be successful.”

Empire struggles with challenges that face all U.S. hospitals: rising costs, and Medicare and Medicaid reimbursements that lag behind those costs.

In addition, a decrease in patients also plagued the Empire hospitals last year. Patient numbers are beginning to climb again.

Empire’s operating expenses for 2003 are budgeted at $246 million. The pay rollback represents a 4 percent reduction in those budgeted expenses.

Meanwhile, Providence Services Eastern Washington, which operates Sacred Heart Medical Center and Holy Family Hospital, also recently directed department heads to cut costs by 3 percent.

But Providence bosses will have to find other ways to cut besides wages. Contracted salary levels with unionrepresented groups will be insulated from those cuts.

Empire hospitals are largely nonunion.

Unlike the Empire hospitals, Providence hospitals did not experience a decline in patient numbers last year, said Mike Wilson, Sacred Heart chief operating officer.

Maddox, the Deaconess housekeeper, already moonlights, supplementing her pay by cleaning private homes 10 to 20 hours a week. She said she may have to pile on more outside work.

‘‘I cried today,” she said. ‘‘You hope things will get better, but instead they just keep getting worse.”

Staff writer John Stucke contributed to this report.

http://www.spokesmanreview.com/breaking-news-story.asp?submitDate=332003181954