Wellstar furloughs more than 1,000 employees as health care system faces up to $600M in losses due to Covid-19

Marietta-based Wellstar Health System, one of the largest healthcare systems in Georgia, announced today, May 19, it has furloughed more than 1,000 employees as it faces financial losses between $400 million to $600 million through the end of December.

The substantial decline in revenue for the not-for-profit health care system is due to unprecedented costs created by the Covid-19 pandemic, including preparation for treatment of infected patients and a “dramatic” reduction of patient admissions in April. Federal CARES Act funding intended to help hospitals dealing with unexpected costs due to the pandemic is only expected to cover only 40% to 50% of Wellstar’s losses. And despite treating Covid-19 patients, the patient volumes have dropped so low that many employees now have a substantially reduced workload, said Wellstar President and CEO Candice Saunders.

The furloughs began May 19 for the 1,070 employees, or 4.4% of Wellstar’s workforce, and are expected to last through the end of July. In addition, Wellstar reduced the hours for 1,861 employees, or nearly 7.7% of its workforce, through the end of July.

Other cost-saving measures that were put in place at the start of May included a hiring freeze, halting contract labor and eliminating overtime and bonuses. Wellstar’s corporate officers are also voluntarily taking between a 30% to 60% temporary pay cut. Physicians and advanced practice professionals are taking cuts in pay as well. Other levels of management are reducing their salaries. Capital expenditures have been paused. Retirement plans are planned to be restructured later this year as well. But these budget cuts were not enough to mitigate the financial losses, resulting in the furloughs and reduced hours for the nearly 3,000 employees.

The furloughs and reduced hours for employees will be spread out across the entire system, which includes 11 hospitals, 55 rehabilitation centers, 300 medical offices, nine cancer centers, 15 urgent care facilities and three hospice facilities. More than 20,000 employees work for the Wellstar Health System that has several hospitals in metro Atlanta as well as hospitals in Hiram, Griffin and LaGrange.

People may not understand how a health care system like Wellstar is suffering financially during a time when health care is so vital and with the constant news about Covid-19 patients needing care, Wellstar Chief Financial Officer Jim Budzinski said. But Wellstar provides many other health care services such as physician office visits, emergency department visits and elective procedures. All these areas have seen “dramatic” reductions in patients since mid-March he said.

Patient admissions plummet 26% in April from April 2019. Surgeries were down 59% in April and emergency department visits were down 46% in April, he said.

“And while we’ve resumed some of our normal services here in May, the reality is patient volumes will recover much slower throughout the rest of this calendar year,” he said.

“WellStar is projecting from the beginning of March through the rest of this calendar year a financial loss of $400 million to $600 million due to the pandemic before any consideration of provider funding relief we were going to receive under the CARES Act or our mitigation plans,” Budzinski said.

He added that 85% of the losses are due to reduced patient volumes and 15% are due to the emergency preparedness cost to fight the virus. In 2018, Wellstar recorded nearly $1.2 billion in revenue.

Wellstar received $72 million in the CARES Act funding in April and another $67 million in May. Budzinski said he estimates Wellstar could receive a total of some $214 million from the CARES Act, but that is not nearly enough to cover the significant losses.

The ramping up to prepare for the global pandemic began seriously in mid-March when Wellstar and many other hospitals chose to end elective surgeries to help flatten the curve of the virus as well as preserve personal protective equipment (PPE) as the gear became increasingly scarce.

“While successful, these efforts significantly reduced our patient volumes and ultimately impacted our financial situation. We are not alone in these challenges,” Saunders said.

“Hundreds of other leading health systems across the United States as well as here in Georgia are navigating these difficult realities,” she said. “The American Hospital Association estimates the financial impact to health systems to be more than $200 billion.”

Saunders said the furloughs, the pay cuts and other measures are difficult decisions to make but are necessary to keep the not-for-profit health care system financially stable now and into the future.

“Patients are at the center of everything we do, and we are in the business of patient care,” she said. “We have a responsibility to our community to remain financially stable so we can continue that work. And that has led us to these steps.”

Article compliments of Atlanta Business Chronicle