I write to thank you again for your extraordinary work, which has made UW Medicine a national leader in the response to the COVID-19 pandemic. I could not be more proud of the efforts of all our employees. I also write to describe the unprecedented financial challenges related to COVID-19 and provide a summary of plans to stabilize our financial foundation as we continue to support your outstanding work to advance our mission of improving health for all people.
COVID-19 has created extremely serious financial challenges for all healthcare organizations, including UW Medicine. This financial threat is even more serious for health systems like ours that are committed to caring for vulnerable populations, advancing medical knowledge via research excellence, and providing the most advanced clinical care in the setting of training the next generation of healthcare professionals.
What is causing the serious financial challenge for all healthcare organizations? There are three major reasons, including:
- Lost clinical revenue due to cancellation of non-emergency and elective procedures to preserve hospital and clinic capacity for the “COVID-19 surge.”
- New expenses related directly to COVID-19 such as personal protective equipment (PPE) and testing expenses.
- Lost opportunities to implement new programs designed to improve care in the most cost-effective manner.
The impact on UW Medicine is an extreme threat to our financial stability. Based on the best information that we have to date, UW Medicine’s estimated financial losses due to COVID-19 will exceed $500 million by the end of the summer. As an example of the severity of the challenge, lost net revenue at the University of Washington Medical Center in April was more than $50 million. These losses are similar to experiences at other leading academic health systems around the country.
What are our guiding principles as UW Medicine leadership strives to address these financial challenges? We must maintain our commitment to our mission of improving health for all people, including our commitment to improving healthcare equity. We must support the continuing excellence of our clinical, research and educational programs. And we must provide the best possible support for you – our faculty, staff, students and trainees.
What are specific steps that we are taking to address the unprecedented financial challenge related to COVID-19? Some of the actions to provide financial stability for UW Medicine include:
- Accurate documentation of COVID-19 expenses to enable reimbursement from federal (e.g., FEMA) and state programs.
- Advocacy for reimbursement from federal sources (e.g., CARES funding and the Medicare advance payment program) for net lost clinical revenue directly related to COVID-19.
- Philanthropy for the UW Medicine Emergency Response Fund.
- Expedited planning to reopen our full range of clinical services in a manner that supports safety for our patients and the healthcare workforce.
- Active planning for the “new normal” for healthcare that includes substantial changes in the use of telehealth and other programs that can provide the highest quality and most cost-effective healthcare.
Although the steps outlined above will help address the COVID-19 financial challenges, UW Medicine must take additional action to ensure financial stability. Like many other national and local health systems, the UW Medicine leadership team has concluded we must urgently develop and implement expense reduction measures. What are the measures we are developing and planning to implement? Like our colleagues locally and nationally, we are working on the following steps, including:
- Reduction of compensation for senior leadership.
- System-wide expense reductions that support more “lean” operations for our clinical, research and educational programs, including all discretionary expenses.
- Limiting new recruitments to positions of critical importance.
- Postponement of capital expenses that are not considered to be mission critical.
- Voluntary and required furloughs and FTE reductions.
As we develop and implement these measures, we are committed to transparency, and your input will be vitally important, especially as we strive to support the excellence of your work while we reduce expenses.
Over the last several days, I have had multiple discussions with our leadership team. These discussions led to a decision by the UW Medicine senior leadership to request a reduction in their compensation for the remainder of this calendar year. I will request a 20% reduction in my salary and the Vice Presidents (Lisa Brandenburg, Tim Dellit, Jacque Cabe, Ruth Mahan and Don Theophilus) will ask for a 15% reduction in their salaries. In addition, our hospital CEOs (Paul Hayes, Cindy Hecker and Rich Roodman) and the 32 chairs of the School of Medicine academic departments will request a 10% reduction in their salaries.
The leadership teams are also preparing plans for temporary reductions in staffing and compensation for professional and classified staff of the University of Washington Medical Center, Harborview Medical Center, the UW School of Medicine, UW Physicians, the UW Neighborhood Clinics and Airlift Northwest. The proposed adjustments will be made with a goal of avoiding permanent layoffs to the extent possible and with an eye toward ensuring we are prepared to restart elective procedures and expand in-person clinical services. Valley Medical Center has already taken several actions, including furloughs and staffing changes related to low census, while additional expense reduction tactics are being finalized. I regret that these reductions are necessary and will impact the compensation of our outstanding staff.
I understand that this message may raise more questions than it answers. Much more communication within our clinical settings and the medical school is needed over the coming days and weeks. For classified staff, all plans and actions will be developed and implemented in accordance with our collective bargaining agreements. We will also be hosting town halls, and the senior leadership team will be actively working with faculty and staff across all UW Medicine organizations on plans for the expense reductions described above.
I would like to close by emphasizing the importance of maintaining support for the excellence of your clinical, research and educational activities as we make these changes. We must work together as a large team to ensure that we continue to improve health for all people.
Paul G. Ramsey, MD
CEO, UW Medicine
Executive Vice President for Medical Affairs and
Dean of the School of Medicine,
University of Washington