Tuesday, March 24, 2009

Final budget decisions

To give you the next chapter in our budget issues, here's the email that was sent out yesterday to the BIDMC community:


Many thanks for your participation, suggestions, ideas, and criticisms during the last couple of weeks. And special thanks for the generosity shown by hundreds of you throughout the hospital, including the Chiefs and Dr. Rosenberg. It is time to let you know my decisions about the budgetary matters we have all been discussing.

First, though, permit me to offer some observations. At stressful times like this, there is a natural tendency to feel fear. Most of us have families to support or other obligations that go beyond the basics of food, clothing, and shelter. We try our best to plan our lives and live carefully and frugally, saving for future contingencies. Then, an earthquake-like phenomenon occurs, a massive disruption in our economic system that shakes the very foundations of decisions about consumption, savings, and personal security. Add to this a follow-on tremor by telling you that the hospital has been affected by the broad economic issues and that we will have to make tough decisions that will affect you personally.

I know that this is very distressing. In my view, we have two ways to respond. We can retreat into isolation from one another. That path leads to resentment, distrust, and a slow degradation of the work environment and of the sense of mission of our hospital. Or, we can look within and find that the values which have guided our care of patients and families are also the same values that apply to our care for one another. In the words of Lois, a manager our Department of Medicine, I think we will learn much from the process. I even dare to believe that we will become a community of healing for one another, just as we are for our patients.

I choose to believe that we want to do the latter, that we work in this particular hospital because we have come to trust the BIDMC family to care for one another. My decisions below are guided by this premise. Some of you will disagree with aspects of what I have decided, or the rationale for them. I have read and heard those views in your comments on the chat room and in personal emails. I promise you that I have seriously considered those views, and that I respect them, but there comes a time when I need to balance competing concerns and make a decision that will not be popular with all. Please trust and understand that I don't take on this role with a belief that my views matter more than any of yours, but because it is sometimes my job to try to consolidate and reflect back the underlying ethical and moral judgments that you have expressed to me. I believe that this is one of those times, and that we as a hospital will be judged by the broader community for how we handle these issues.

So, my decisions below are guided by some social principles as well as business principles. As noted from the outset, I will do what I can to protect the lowest wage earners among us. Even above that income level, I will tend to ask proportionally greater sacrifices from those higher up in the income stream than those below. I do not do this because I believe people earning in the mid-range or even the high range have fewer financial obligations than the others. I know there are people earning $70,000 or even over $100,000 with very tight budgets and lots of financial commitments. But, as a general matter, people who have been earning more for years do have more options and assets than those who have earned less. I feel an obligation, therefore, to skew our budget relief plan in a manner that asks more of those higher up the wage scale.

What does this mean specifically? It means that the people in Grade 4 and below will be exempt from any salary cutbacks and will receive their expected 3% raise this year. People in these grades will be subject to the same reduction in earned time and in 401(k) contributions as everyone else. They will be subject to layoffs for poor performance like anyone else, but they will not be subject to current layoffs as a result of reconfiguring the work organization.

The Decisions

Earned Time Accruals
Many of you objected to the manner in which we proposed to trim earned time accruals during the next several weeks. You said, “Can we please reduce the amount of accruals more gradually, over several months, rather than all at once.” We will do this. The rate of earned time accruals will be reduced so that this is spread out between April and the end of September. The amount of reduction will be about the same: Weekly accruals will be reduced by approximately 19% during this six-month period, which will result in three to four days less accrual of ET for full-time employees, depending on years of service, and prorated amounts for part-time employees. I think you should expect a similar reduction in the total number of days accrued in FY2010, although it will be spread out over more months.

Earned Time Cash-out
Before I address this specifically, let me provide a context and summarize how earned time currently works here. Your comments often indicated some misconceptions of the rules.

BIDMC’s Earned Time (ET) program combines paid time off benefits into one bank of accrued benefit hours and allows employees to draw from this bank. The amount of ET you accrue depends on how long you have worked here. The minimum is 28 days per year for full-time employees, rising to a maximum of 39 days per year. (The ET program does not cover absences covered by Worker’s Compensation, military reserve duty, jury duty or death in the family. These are covered by separate rules.)

The Extended Illness (EI) program accrues paid time off for employees to use for a personal illness, or to take care of a family member during a leave of absence that has been designated and approved as an FMLA leave. Employees must use 24 hours of ET before the EI bank can be tapped. Eligible full-time employees accrue Extended Illness hours at a rate of 16 hours per year. This amount is prorated for part time employees.

Employees may not carry over more than one year’s Earned Time accrual into the following calendar year. Earned Time hours in excess of one times the annual accrual as of the end of the calendar year are rolled into the employee’s Extended Illness bank.

But, we have also had a rule that a person can cash out a portion of their surplus Earned Time days each year, rather than have it flow into the EI bank. The rule now is that employees must have at least 120 hours in their ET bank and must leave a minimum of 80 hours after cash-outs. This is prorated for part-time employees. The hours allowed for cash-out are based on years of service.

It is this rule that I have proposed to cancel going forward, and I have decided that we will go forward with that proposal. I understand that some people have come to expect to have these funds available each year, but this is a very unusual benefit. When we are reviewing how competitive our overall salary and benefits are in the region, we frankly do not consider the idea that someone can get an extra week or two of pay in return for not using Earned Time.

The change is effective immediately. However, I am sympathetic to the fact that the cancellation of the ET cash-out benefit will leave some employees with personal emergencies that they had planned to meet through the cash-out provision. Employees who have an immediate situation that compromises their ability to meet an important obligation that threatens their home, their family or their ability to continue working should send an appeal during the first week of April to Judi Bieber in the Human Resources Department. A committee will carefully consider these requests and will grant exceptions to the cash-out provision on a one-time basis.

Here are examples of the circumstances we will consider for exceptions:

    • Impending college tuition payment
    • Medical/Dental bill for scheduled procedures
    • Contracts signed for immediately necessary home/car repairs
    • Summer family care arrangements that allow an employee to come to work

We will not consider payments for vacation homes, cruises, weddings or new vehicles, general cost-of-living items like gas, food or clothing or contributions to savings accounts of any sort.

Employer Match to Retirement Funds
In my earlier message, I proposed to temporarily discontinue BIDMC’s 2% match to the 401(k) plan and the contribution to the executives' 403(b) plan. I said that we would expect to reinstitute these payments in FY2011. This proposal drew a number of comments pro and con. I have decided to adopt it. I am sympathetic to the fact that people who are closer to retirement will feel the effect of this step more than people who do not have plans to retire in the near future. However, it is one of the largest single items we can use to save money -- $3.5 million for the remainder of FY2009 -- and it has the least impact on current family budgets.

Annual Merit Increase for Directors and Managers

I will be reducing the salaries of directors and managers who received their 3% raise in January to the level they had before that date. As a general matter, directors and managers have higher pay that non-managers, and this decision is consistent with the principles I set forth above. Directors and managers will, of course, keep the increment in pay received from January 1 through March 30, but the base will be lowered as of April 1 to the previous level.

Annual Merit Increase for Non-managers
After earned time, perhaps the largest number of comments came in on the issue of how to handle this year’s 3% annual merit increase. I had proposed to suspend it going forward, i.e., for those people who would have received it on April 1 or thereafter. But I also said that people who had already received their increases would get to keep them.

Since this is the item with the biggest current hit to spendable income, people quite properly raised the issue of equity. Why shouldn’t people give back their increase and therefore be treated equally with those who have not yet gotten it? I have to admit that this is a tough call when the fairness issue is raised, but it is an easier call when you consider that people who have already received their raise have come to expect that amount in their paycheck each week and have budgeted for it. This is a bit different from people who have not yet received it. Perhaps I am trying to make too fine a point here, and you will still disagree, but it feels more right to me to do it this way.

To clarify, though, it also means that the people whose anniversaries are April 1 and after will be the first to receive merit increases when we reinstate the program. In essence, we will re-set the merit increase calendar to that date, instead of the usual October 1.

When will merit increases start again? I think we should plan on two years without increases – although we will start them up again sooner if the FY2010 results are better than we currently anticipate. So, if you were to have received an increase in April through September 2009, your next one will instead be during the same month in 2011. If you already received an increase in October through December 2008, your next one will be in the same month in 2011. If you already received an increase in January through March 2009, your next one will be in the same month in 2012.

(For those managers who received a raise on January 1 but whose raise will be rescinded, you will next be eligible for a raise on April 1, 2011. In essence, the managerial anniversary date will be re-set to April 1.)

The Residents
A few of you asked why residents should be exempt from the merit increase cancellation. The main reason is that we make a promise to prospective residents, when they apply, about the level and trajectory of wages. They, in turn, make a multi-year contractual commitment to our hospital. If we were to renege on that commitment, it would severely affect our future recruitment efforts in the highly competitive market that characterizes the Boston academic medical centers. Furthermore, to change the salary structure after the residents have submitted their selections for residency (called “the Match”) would place us in violation of national rules created to govern the selection process.

Beyond that, please rest assured, based on the fairness criteria, that the wages paid to residents – whether on an annual or hourly basis – are certainly not in any way overly generous, especially when one considers the average indebtedness of medical students when they graduate and enter our program.

Other Items
All the other items I proposed in my earlier email – meals at meetings; Blackberry and cell phone reimbursement; employee events; and attrition -- will go into effect. These received virtually unanimous support in your comments. And the salary cuts voluntarily offered by the vice presidents and Chief Operating Officer Eric Buehrens and me will go into effect. Finally, let's all continue to seek out other cost-savings measures in the floors, units, and offices.

Early Retirement/Donations/Layoffs

Early Retirement
As I mentioned, all these steps will save $16 million in FY2009 and reduce the number of required layoffs from 600 to about 150. It is possible that we will be able to further reduce that number during the next couple of weeks. Many of you suggested that early retirements are a key step that could avoid some layoffs, and I am going to adopt your idea. We will institute an early retirement program that will permit people 62 and older who have completed 3 or more years of service to leave with a severance payment. Plus, employees in this group who are currently enrolled in health and/or dental insurance could elect to continue their participation at employee rates until the age of 65, when they are eligible for Medicare. In addition, employees volunteering for this program may be eligible for retirement benefits through the Pension Plan.

This is only a brief summary of the plan, and more information will be published soon. For those who are interested in considering early retirement, informational meetings will be held on Wednesday, March 25 at 8:00 AM and on Thursday, March 26 at noon in Shapiro 1A.

Donations to the hospital

Donations to the hospital can also help avoid layoffs. For example, the $350,000 in funds already committed by the Chiefs has already saved about ten jobs during this fiscal year. Charitable donations from the doctors as part of the fundraising being conducted by HMFP can also help, although we do not yet know by how much, in that the donations have not yet arrived.

I also want to encourage other staff members who feel so inclined to make donations. You can make donations on our website at www.bidmc.org and designate the gift for the BIDMC Staff Support Fund, or you can deliver them to the Development Office at 109 Brookline Avenue. To give you an extra incentive, my wife and I will personally match gifts through April 10 at the rate of $1 for every $10 donated.


Given these measures, I hope that the new layoff figure of 140 people will go down over the next couple of weeks. I’d like to see it drop considerably, but we’ll just have to see. We will wait until the last possible moment to issue notices of termination so that we can evaluate the effect of the early retirement and philanthropic initiatives.

Here are the instructions that have been given to the vice presidents. The order of layoffs will be based on the following four criteria, in this order, and apply to all BIDMC facilities (including Bowdoin Street, Lexington, and Chelsea, but not BID~Needham):

Performance: Poor performance will be the first factor in selecting individuals to be laid off. In fairness to those thousands of you who work hard and well, we will be moving more quickly that we would have in normal times when it comes to removing people for poor performance. Although we always expect the highest level of performance from our managers and employees, exceptional performance becomes even more critical when we must continue our work with fewer resources. Many departments will be affected by the layoffs we will implement. Our ability and willingness to retain managers and employees who are not meeting performance expectations will significantly decrease. The Medical Center stands by its personnel policies, including PM-04 (our Corrective Action Policy). That said, when staff levels are reduced we expect that terminations based on performance or behavioral problems will occur more quickly (in some cases immediately) and the corrective action described in PM-04 may be truncated or bypassed entirely, even in the most routine circumstances. I say this not to sound threatening, but to encourage every manager and employee to redouble your efforts to maintain the highest level of performance so we can keep the Medical Center running smoothly with reduced resources. Your consistently excellent performance is key to our success.

Volume: Where volume, hours of care or other demand metrics have not met budget and are unlikely to grow in the near future, we need to reduce salary expense so we do not carry over future structural problems.

Structural Reorganization: Some areas have the opportunity to restructure operations, streamline workflow, improve productivity and save personnel expense.

All Other: If these measures which are tied to performance and productivity can’t get us to the needed goal, then the least desirable alternative will become part of the solution.

I expect and hope we will not get to the last category. Indeed, I think that the first category will comprise the bulk of our termination notices. But I wanted you to have exactly the same information as the vice presidents so you know what their task is during the next few days.

Also, as I said to you earlier, all of this will likely close the gap for FY2009, but we have to understand that there is some uncertainty about that for FY2009, and there is still more uncertainty for FY2010. I want to defer action beyond this and see how things work out for us and the national and state economies. Only if still needed after these steps would we return to the idea of other layoffs. I expect we would review that early in the summer, and of course, will keep you all informed as we go along.

Thank you for your patience and understanding during this period.



Anonymous said...

As you have already taken a very large pay cut, it is very generous of you and Mrs. Levy to offer to match gifts made to the BIDMC fund. It has inspired me to donate. Thank you for your leadership and inspiration.

Jerry said...

When I read this I immediately thought of what would have happened had BIDMC been a union hospital. It seems to me that it is unlikely a union would make any of these concessions and massive layoffs would have been inevitable. The union would have also demanded that layoffs would be based on seniority rather than productivity. This is all the evidence I will ever need that unionizing BIDMC would be a horrible mistake. Just ask the Boston Teachers who will be losing more than 150 full time positions because the teacher's union is unwilling to forgo pay raises for one year.

Anonymous said...

This is a difficult time for many, many people, but what I believe truly defines our characters is how we handle the tough times, both personally and as a community. As a member of the BIDMC community, my heart does go out to those who will be hit hardest by these changes, accepting that even I may have hard times to come. But I do not believe that a reasonable person can accuse the decision-making process regarding these changes as being reckless or heavy-handed. There has been great care shown in how the institution will need to respond to challenging economic times, which is a testimony to its intelligent, moral and compassionate leadership.

Barbara Olson, MS, RN, FISMP said...

Thanks for making the process and logic used to make these tough decisions so transparent. I live in the southeast, and my family is subject to many of the same problems you've shared. I think we're all struggling to reconcile economic realities with a host of competing, yet worthy, needs.

Last year, I was the Safe Medication Management Fellow at the Institute for Safe Medication Practices, which afforded me an opportunity to study the value of a variety of performance improvement strategies. I remember chatting with a professional from the pharmaceutical industry about transparency. I saw it as a good thing, while he had more reservations, reflecting that an execution might not be made easier by a running narrative (first, we're going to shave your chest, then we're going to lead you down a dark hallway, and strap you in, and so on).

But I stand by my assessment that transparency IS good. It reflects a belief that people are capable of understanding tough issues and moves us another welcome step away from paternalism.

I'm not thrilled with all that has changed in my family, at least from an economic standpoint. But clear communication and transparent processes may be among the few available "spoonfuls of sugar" to help this bitter medicine go down.

Thanks again!

Anonymous said...

I have nothing to do with the BIDMC community and happened upon this post via exectweets. I am incredibly impressed with the compassion, caring, and sound judgments made by the leadership and the willingness to be so incredibly open. Wow. I wish more companies would be so inclusive and forthcoming during these tough times.

Anonymous said...

Paul, your incredible leadership during a challenging time was the focus of a class I taught today in the Nursing Scholars Program at UMass Boston. You are an excellent example of a truly resonant leader in healthcare. Thank you for leading with hope, compassion, mindfulness and a whole lot of talent!

Anonymous said...

Another idea! How about asking the board members to give up their parking cards? That would probably save at least 5 or 10 jobs at BI.

Anonymous said...

Paul, I think the decisions you have made so far are in the best interest of the hospital and the employees. I just want to express some of my frustrations being a nurse who has worked here since 1982. I know there are many of us in this category that have stuck it out through good times and bad all these years and really have nothing to look forward to.

I know this isn't the time to ask for perks but I strongly feel that being a dedicated employee for so may years should come with some kind of reward.

I was so looking forward to being here for 20 years so I could earn an extra week of ET and then that was taking away around the time of the merger. Now we have a freeze on ET and don't get raises, we don't make a whole lot more than new nurses right out of school.

Our pensions and 401k's may be at risk the closer we get to retirement..... here's my thought, I feel that senior nurses shouldn't have to work weekends and holidays anymore after putting in 20-25 years here. This requires no money out of the budget, in fact will save money by not paying time and a half to the highest paid nurses and would make us feel valued and that we get some kind of perk for our dedication. There has to be some incentive to stay here and to ease the burden of "the aging nurse".

Anonymous said...

BIDMC needs a good PR team STAT. First of all, reporting the intricacies of the budget crisis to everyone has created the illusion that BI is suffering more than MGH, BMC, BW and other local hospitals - even though, for instance, MGH already conducted layoffs a long time ago, as did other hospitals. It just wasn't publicized. Who looks bad in this? BI, of course.

Add in the article today about the plastic surgeon who fell asleep at the wheel during some lipo procedure. Also, remember the one about the botched surgery, having been operated on the wrong side of the body? Not to mention the former anesthesia attending who was found OD'ed in the hospital, despite not having credentials to enter the areas in which he was found.

Now let's not forget the smear campaign run by the union last year.

Another joke - the fact that the hospital pays the Red Sox for the pleasure of being the "official hospital" then people hear of actual Red Sox players going to MGH for their MRIs.

This hospital needs a better PR team before it sinks.

Anonymous said...

I have a wife who works at the BIDMC and has confidentially shared the process and communications with me regarding cost reductions. I've used it as a model and as a personal guide for engaging with our company during our tough economic ride. Instead of dictating change we also reached out to our employees for their ideas and it also surfaced alternatives we hadn't considered. I wanted to pass my thanks and appreciation and especially to tell you that there are others going through the similar gut wrenching process.

Anonymous said...

Thanks, Ed, although I wonder why is was confidential, since everything is posted here anyway! I pleased, though, that we were able to be helpful in your place, too.

Anonymous said...

Thank you, thank you, thank you for acknowleding that residents should NOT take a pay cut. I looked at the salaries for Boston residencies and had NO IDEA how I would afford to a) live in Boston, b) own a car (necessary for my particular program) and c) eat.