Oregon Health & Science University will institute a number of cost-cutting measures immediately in response to the global economic downturn, OHSU President Joe Robertson, M.D., M.B.A., announced Monday, Dec. 1.
The university is faced with the task of making reductions as a result of losses in investment income and lower than anticipated hospital revenues linked to the economic downturn. The measures will include freezes on hiring, salaries and bonuses. The university will also defer nonessential capital expenditures and impose new restrictions on staff travel and overtime.
“OHSU managers responded very well to earlier calls for cost-cutting and cash conservation,” said Dr. Robertson. “As volatility continues in global markets, it is now clear that we are facing a financial challenge that will be measured in years rather than months. Therefore, additional steps must be taken. We will leave positions open, defer expenditures and make other sacrifices with the goal of preserving vital services for Oregonians.”
Here are some additional details on OHSU’s cost-cutting measures.
•Effective immediately, salaries of all unclassified administration staff and faculty will be frozen at current rates until further notice. Classified employees will continue to be covered by their collective bargaining agreements.
•All new hires will require approval from the top executive level.
•No one-time payments (example: bonuses) will be made to employees without executive approval. As part of this step, OHSU’s executive leaders have chosen to forego any incentive pay in the current financial year that they would typically receive as part of the university’s Executive Leadership Plan.
•OHSU Healthcare has placed a “pause” on hiring (prioritizing those positions that directly impact high-quality care), placed a hold on some capital expenses, modified timelines for unit expansion, and stopped funding for conferences, travel and minor equipment.
•Unit-led reductions will also be necessary. These will involve some staff and/or program reductions. Each of these reductions will be considered carefully by OHSU’s executive leaders in order to preserve programs and personnel in the long run.
So far this fiscal year, the hospital has seen a 1.2 percent increase in patient volume, but it had planned for a 6 percent increase. During economic recessions, patient volumes traditionally decrease so a quick recovery of this revenue is considered unlikely. It is also noteworthy that according to the American Hospital Association, every 1 percent rise in the national unemployment rate translates into 2.5 million uninsured patients.
With the market changing so fast, Dr. Robertson said that any financial analysis of the funding gap OHSU faces would be a snapshot in time. However, for working purposes the gap is estimated at between $30 and $35 million. In addition, the trend is clear that the global downturn is a long-term factor. Working closely with individual units, OHSU will establish a cost-cutting target within the next two weeks, knowing that the target may change as conditions evolve.
“Although this belt tightening is extremely difficult for us, it is less than what many other employers in Oregon have had to undertake,” Dr. Robertson added. “While we are one of the largest organizations in the state, our sole focus remains our own residents’ needs. All of our missions are dedicated to preserving and improving the health of Oregonians. In moving forward, we’ll continue to bring grant money into Oregon in the search for future cures that will improve Oregonians’ health. We’ll continue to educate new health care professionals who are so badly needed across the state. We’ll also continue to provide care for the most complicated cases.”