On May 21, the University of Mississippi Medical Center announced that it would have to lay off employees and reduce salaries for employees making more than $100,000 a year, as a result of losses related to the COVID-19 outbreak.
In a statement provided by the hospital, Vice Chancellor LouAnn Woodward annouced that some layoffs would occur, hiring freezes would be implemented, and salary reductions would be put in place for some administrative employees.
The letter, which was sent to all UMMC staff, faculty and students on May 21, stated that the hospital had lost about a million dollars a day in revenue as a result of the COVID outbreak. During the outbreak, most non-essential surgeries were banned, cutting into the hospital's revenues. Below is a copy of the letter:
Members of the UMMC Community,
I am writing today to share with you the next phase of our ongoing response to the COVID-19 pandemic. Specifically, I want to address the unprecedented financial challenges we face and, with firm commitment to keeping you well-informed, to describe our path forward and the actions that will be necessary to protect our institution and to preserve its important missions.
I have previously described how you, the people of UMMC, have responded to the challenges of COVID-19 in many amazing ways. Simply stated, you have stepped up to serve our patients, the UMMC community and Mississippi in nothing less than heroic fashion. For that, I am grateful and have never been more proud. I know you will continue to rise to the challenge, however large and whatever it may be.
THE PATH FORWARD
On multiple occasions I have emphasized that our top priority is the health and safety of our patients, faculty, staff and students. In all settings – clinical care, research, education and the service areas – this is foremost in our thinking and influences decisions made on all fronts, including the ramp up of clinical activities and research, the use of PPE, the timing of students and employees returning to campus, and the ongoing patient visitor policy, just to name a few.
As the state and nation move to re-open, we will continue to monitor all aspects of the situation around us and be prepared to respond in a flexible, measured and thoughtful manner that is informed by reliable data and the best available expertise. We all recognize that there is substantial uncertainty in what the foreseeable future holds.
While on the immediate horizon we see a devastating budget shortfall, we must not lose sight of long-term strategic priorities that are critical to the future success of all three mission areas that make up UMMC.
It is my goal to be broadly transparent as we take actions to address the financial shortfall and ensure the future of this great Medical Center. In my opinion, those of us in leadership have been given a responsibility to guard that future. This responsibility weighs heavily on my mind and on my heart.
FINANCIAL IMPACT
Even as amazing work and the hard fight against COVID-19 continues, we are witnessing widespread financial upheaval and uncertainty across our external environment. On a daily basis we learn of new budget cuts, closures, layoffs and furloughs occurring at hospitals, physician groups, universities and academic medical centers nationwide. Volatility in the stock market, rising unemployment and reduced state revenues create additional anxiety. We have not been immune to these external economic effects.
Despite some areas within our organization being busier than ever in response to COVID-19, patient volumes dropped significantly and revenues decreased correspondingly. We have experienced a patient care revenue loss of more than $1 million per day since mid-March, and this loss continues day after day. Health-related enterprises across the country are reporting similar huge financial challenges. And as unemployment increases, so will the number of patients who do not have adequate health insurance coverage. With a decline in state revenues and with increases in other financial pressures, we anticipate state appropriations will be even more constrained than usual.
Our internal projections show a negative $100 million financial impact to UMMC’s bottom line through September 2020. This projection assumes that patient volumes in clinics, inpatient beds and ORs return to 85 percent of our baseline by the end of June 2020. This forecast is inclusive of lost revenue and COVID-19 expenses, while also accounting for the anticipated receipt of federal relief funding. But expectations for abundant federal funding or relief funding from other sources are guarded at this point.
In April, health care entities across Mississippi collectively received $375 million in federal funds, of which UMMC received only $17 million. Those funds were allocated based on a metric that was easy for the federal government to ascertain and apply – prior year Medicare receipts by entity – but had nothing to do with COVID-19 preparation or activity. To date, about $700 million in federal relief funds have been disbursed to Mississippi health care entities, and thus far, UMMC has received $25 million across the entire health system (less than 4 percent of funding provided to Mississippi health care entities).
While expectations must be guarded, we will continue to aggressively pursue any and all federal funding opportunities for which we qualify. And we will energetically pursue all avenues to maximize revenues. However, it has become an absolute certainty that these efforts alone will not offset the serious budget deficit we are now facing.
We closed the month of February with a year-to-date $20 million positive margin. At that point, we were on track to achieve our full 12-month operating and cash budgets by the end of our fiscal year. Despite the COVID-19-related financial downturn since mid-March, our balance sheet remains strong and we have the assets required for us to survive this period of financial crisis. But each day we operate at reduced revenue levels drains additional cash from our balance sheet and weakens our ability to accomplish future goals and achieve our mission.
Facing this large financial deficit will require long, hard work and will test all of us. I would dare say UMMC has not faced a challenge of this magnitude in all of its 65 years of existence. It will take guts, grit and fortitude to pull through to the other side. Very tough decisions with difficult consequences will be required. However, I am confident we can and we will weather this storm and emerge stronger than ever.
ACTIONS REQUIRED
It is in this spirit, and with the clear intent of minimizing negative impact on the front line of patient care, that I share with you some of the actions required to address this challenge we face. Some of these actions are now in effect, others are soon to be implemented and some will take effect once operational details have been finalized.
Salary reductions for executive leadership: Executive leaders, including myself, the Chancellor, members of the Executive Cabinet, Deans, School of Medicine Department chairs and Health System executives have reduced our salaries by 15 percent for three months starting May 1.
Restriction on New Hires: Along with the CFO, Chief Human Resources Officer, and VC Chief of Staff, I am personally reviewing all hiring requests.
Staff – All hiring proposals will go through several levels of approval with only rare approvals occurring for any hire that is not deemed necessary for direct patient care.
Faculty – With rare exceptions, recruitment of new faculty is paused.
Restriction on Travel: For the remainder of FY20 and for FY21, UMMC-sponsored travel will be approved only for rare circumstances.
Capital Budget Reduction: We will reduce the capital budget and delay capital spending to the degree possible.
Non-Personnel Reductions: We will vigorously review contracts for services, leases, working arrangements with vendors and other services for discounts and savings opportunities.
Salary Reductions: Salaries for faculty and staff earning more than $100k per year will be reduced by 10 percent for three months starting July 1, 2020.
Indirects and Released Funds: Until further notice, indirects from grants and released funds will not be returned to departments.
Faculty and Staff Separations: Although we are implementing the initiatives above, regrettably some separations and layoffs are required. Decisions are being made at the departmental, school, program and unit level with sensitivity to avoiding compromise of our core missions.
CLOSING THOUGHTS
As I said earlier – this is terribly hard for all of us. No one will be untouched by the impact of this pandemic. We will do the hard work to ensure the future of this Medical Center. We will not disappoint those who came before us and we will, to the best of our ability, position those who follow us for success.
We will, as we have before, PROCEED WITH COURAGE. We will BE PERSISTENT. And we will PERSERVERE. I know I can count on you to step up to the challenge.
An abbreviated portion of a quote I shared recently in the VC Notes is, “All we have to decide is what to do with the time that is given us.” As for me, for the time given to me, I will lead this Medical Center with determination, hard work, honesty, integrity and as much courage as I can muster. I am willing to make the difficult decisions today for the hope of what will be tomorrow.
The mission of UMMC and our vision for A Healthier Mississippi has never been more critical than at this moment in time. #UMMCStrong
