Wake Forest Baptist rescinds 1.5 percent merit raises

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WINSTON-SALEM, N.C. — Wake Forest Baptist Medical Center confirmed Wednesday it has rescinded a 1.5 percent merit raise for employees.

The center is Forsyth County’s largest employer with a full- and part-time workforce of about 13,000.

It declined to say how much money it projects to save from rescinding the merit raises for fiscal year 2013-14, which began July 1.

The center’s announcement comes five days after it said in a fiscal report to bondholders that the rollout of the Epic electronic health records system contributed to a $55.1 million operational loss in fiscal year 2012-13.

Stock investment gains of almost $54 million helped offset most of the operational revenue loss and dropped the overall fiscal 2012-13 loss to $571,000.

The fiscal report was filed on emma.msrb.org — the website of the Municipal Securities Rulemaking Board — as was the second-quarter report for Novant Health Inc., which showed a 31.4 percent decline in excess revenue to $36.4 million.

Wake Forest Baptist said Wednesday in a statement that its board of directors approved the merit increases in June as part of the fiscal 2013-14 budget.

“As the financial challenges continue in health care, Wake Forest Baptist Medical Center has had to respond to revenue decreases caused by state budget reductions, lower Medicare payments and retention of supplemental funding through the provider assessment,” the center said. It said those reductions occurred after the 2013-14 budget was approved.

“Despite achieving significant efficiencies in the last two years, the medical center feels the institution’s financial stability is best served by not implementing a 1.5 percent merit increase for employees.”

Spokesman Mac Ingraham said “there’s nothing further to add” when asked whether any employee groups, including medical school faculty or management, are exempted from the decision.

Gayle Anderson, president and chief executive of the Winston-Salem Chamber Commerce, said she is not surprised that Wake Forest Baptist chose to rescind the merit increases.

“In today’s economy, very few employers are able to give merit increases or cost-of-living increases,” she said. “A number of employers actually have had to reduce salaries. This is true throughout the nation, as well as in the Triad.

“As our economy improves, individual company’s circumstances may change to allow them to consider increases.”

It is the second time in less than five months that much of Wake Forest Baptist’s workforce has paid a paycheck price to help make up for the financial shortcomings related to Epic, which was launched in September.

On May 1, Dr. John McConnell, the center’s chief executive, told employees that another round of “multimillion dollar” cost-cutting measures had begun that would last through at least June 30. The measures include attempts at volunteer employee furloughs and hour-and-wage reductions primarily for nonclinical employees, a hiring freeze, a reduction in employer retirement contributions, and elimination of incentive bonuses for all executives in 2013.

Management acknowledged Friday in the fiscal report that “while some of these measures are intended to be short term in nature to address current financial challenges, some of these measures will remain in place through at least early fiscal 2013-14.”

“Management will continue to actively monitor and manage these measures based on operating performance.”

Wake Forest Baptist said in the fiscal report that Epic implementation “did have a substantial negative impact on fiscal 2013 operating performance through both direct implementation expenses and associated indirect expenses.”

The center reported $16.8 million in direct Epic expenses, an increase of $2.9 million from March 31.

Where the main Epic-related blow to the center’s finances came was in $53.7 million in indirect impact — $36.9 million of lost margin because of interim volume disruptions “during initial go-live and post go-live optimization” and $16.8 million in other Epic-related implementation expenses.

The center went live with Epic in an “all-in” approach that included its main campus and facilities. It plans to implement Epic at its affiliated hospitals in Davie County and Lexington by June 30, 2014.

McConnell has said that approach “was absolutely necessary for patient safety.” He has said he remains confident in Epic’s long-term benefit to the center.

Health care systems nationwide are struggling to adjust to lower volume of outpatient and elective surgeries, more uninsured people seeking help in emergency departments, reimbursement reductions from Medicare and Medicaid, and the impact of the federal sequestration on federal research grants.

Moody’s Investors Service said in an Aug. 28 report that not-for-profit hospitals overall experienced “weakening financial performance in fiscal year 2012 after three years of stability.”

“The fiscal 2012 medians highlight the challenges of operating with lower volumes and revenue growth, higher exposure to government payers and increased expenses,” said Deepa Patel, an assistant vice president with Moody’s.

The center said in the fiscal report that “management continues to aggressively pursue both short- and long-term strategies to grow revenues, control expenses and leverage our investment in Epic.”

The center said Nov. 14, 2012, it would eliminate at least 950 job positions during the fiscal year, including at least 475 full-time positions with current employees. Some of the other 475 positions were held by temporary and contract workers. The center said in the report that some jobs of current full-time employees were not eliminated during fiscal 2012-13, but will be in the current fiscal year.

Credit: The Winston-Salem Journal