Boston hospital giving raises again; doctors took pay cut

Physicians and high-level managers in 2009 also wrote checks, while other staff gave up salary increases and 401(k) contributions in a bid to reduce layoffs.

By — Posted March 1, 2010

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Financial sacrifices on the part of physicians and other higher-paid staff at an economically strained Boston hospital have helped turn the institution around.

In March 2009, the 12 medical department chiefs at Beth Israel Deaconess Medical Center each took a voluntary pay cut of about $27,000 for the year, for a total of $350,000, saving 10 jobs at the institution. Other staffers did their part in an effort to reduce a projected budget deficit and layoffs. All but the lowest-paid workers gave up cost-of-living raises, 401(k) matching contributions and some paid time off. Executives, including the president and CEO, Paul Levy, also took salary cuts. Some wrote checks. For a period of time, Levy and his wife contributed $1 for every $10 donation to the hospital.

"Doctors doing that was important, but I do not think I would overplay the doctors' part," said Lachlan Forrow, MD, a general internist and director of the ethics and palliative care programs at Beth Israel. "That's not as striking as all people coming together and making sacrifices."

These efforts appear to have had the intended effect. The hospital, hit by the economic downturn, had forecast a 600-person work force reduction, but was able to contain layoffs to 70 of its 6,400 employees. Instead of a projected $20 million loss for fiscal year 2009, the institution finished in the black with a gain of $10.3 million.

And, as of April 1, raises will return for all staff, including physicians employed by the hospital. Those who declined raises last year will receive a 3% increase over their actual 2009 salaries.

Raises are returning because the institution's finances have started to show some consistent strength. In addition, a poll of staffers revealed that 65% of them felt restoring raises when possible was a priority.

Another 21% wanted the 401(k) match restored first, and 14% wanted earned time off accruals reinstated. "We are hoping to do that someday. We have to make sure that things are going well," Levy said.

The decision to ask staff for their ideas about handling the situation also appears to have mitigated some of the crushing impact on morale that financial stress and, in particular, layoffs can have.

"I don't want to say this was such a great time because it wasn't, but we were all in this together," said Dr. Forrow. "People helped save people's jobs. That was a great thing."

The institution held 11 town hall-style meetings for staff to discuss the situation and cost-saving strategies and discovered that many wanted to ensure that those making the lowest salaries -- such as housekeepers, food service workers and mailroom assistants -- would be least affected. This led to the decision to exempt these workers from the pay freeze.

"They are the employees who are the most vulnerable and have the least safety net," Dr. Forrow said. "When Paul [Levy] asked staffers what they thought of this, he got overwhelmed with the applause. It just totally resonated with everybody. That's the kind of place we want to be."

Hospitals nationwide saw 152 mass layoff incidents in 2009, according to the Bureau of Labor Statistics.

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