UAMS Hospital Announces Wage Freeze

A wage freeze - retroactive for some employees - that will save about $3 million a year was announced Tuesday for the University of Arkansas for Medical Sciences Medical Center in Little Rock.

UAMS spokeswoman Leslie Welch Taylor said about 3,300 hospital employees - about a third of all UAMS employees - will be directly affected by hospital administrator Richard Pierson's announcement that "merit adjustments" would be discontinued for the current fiscal year.

"We regret having to take this measure, but we feel it is the best solution in the interest of our employees and our patients," Pierson wrote in a letter to UAMS Medical Center employees. "This reduction in merit adjustment produces a cost reduction equivalent to 50 jobs."

While most UAMS employees receive raises at the start of the fiscal year on July 1, Taylor said Medical Center employees receive their raises on their anniversary dates. Therefore, employees who had hire dates in July, August, September or October will have to give up the raises they already received. They will not, however, have to pay back the extra pay they have already collected, she said.

Doctors are not included in the policy change as they are employees of the UAMS medical school rather than the hospital. Some 1,700 "classified employees" - typically lower-paid employees whose are paid on a pay schedule set by state government - also are not affected, Taylor said.

The pay freeze came 10 days into the tenure of UAMS's new chancellor, Dr. Daniel Rahn. In an e-mail titled "Financial update" sent to all UAMS employees on Tuesday, Rahn said UAMS ran an "operational budget deficit" in the first quarter of its current fiscal year. "The majority of this is attributable to hospital expenses outstripping revenues," he wrote.

Many of the factors are related to the economic recession, he said, "exacerbated by UAMS' $2.2 million state budget reduction and the possibility of more cuts if state revenues continue to decline."

The wage freeze is not the first cost-cutting measure at UAMS. In September, Rahn's predecessor, Dr. I. Dodd Wilson, issued a memo outlining guidelines requiring justifications for all hiring requests. Overtime has also been strictly limited, and Taylor said some of the institutions other operating units didn't give raises at all this year.

Here is the complete text of Rahn's e-mail:

Dear UAMS Family,

First of all, thank you for the warm welcome you have shown my wife, Lana, and me these first few days here in Arkansas.  Thank you also for the obvious dedication and pride you have in your institution.  This pride is palpable - something I am now pleased to share with you.  I have enjoyed meeting many of you this past week and will take every opportunity to meet those of you I haven't in the coming months.

UAMS is on an upward trajectory with regard to all aspects of its core mission.   I'm pleased with the expansion of our educational programs, the increase in our research funding, and the patient volume we are seeing with the opening of our new hospital and Psychiatric Research Institute. Students are learning at our new regional campus in Northwest Arkansas.  It is only a few months until we open the new cancer institute addition.  These are points of considerable pride. 

With all of this growth we have encountered some financial challenges.  We must operate within available resources and, at the present, that means we must reduce expenses.  For the last several months, Dr. Wilson and I have been discussing the economic issues we are facing as an institution and developing a plan to address them.  The first quarter of the current fiscal year, the institution ran an operational budget deficit.  The majority of this is attributable to hospital expenses outstripping revenues.  

While patient revenue is up, labor and supply costs are up more.  There are multiple factors contributing to the imbalance, including a shift in payor mix, increased emergency room volume, and other causes related to the impact of the recession on our patients and families.  This is exacerbated by UAMS' $2.2 million state budget reduction and the possibility of more cuts if state revenues continue to decline.

We have communicated with UA President B. Alan Sugg and the UA Board of Trustees regarding our financial strategy for the future.  To address the shortfall in clinical income vs. expense, hospital Director Dick Pierson and his leadership team have identified opportunities for reduction in personnel and non-personnel expenses and are implementing a cost reduction plan immediately. 

Campus wide, we have involved senior leadership in implementing cost reductions, including a strict hiring review, not filling positions where work can be absorbed by existing staff, reducing supply utilization, travel costs and other incremental actions. 

With your help, we will be good stewards of our resources, doing well and doing good at the same time.  We must never forget that the people of Arkansas depend on us to shoulder the burden of society's illness today and prepare for tomorrow.  This institution works because of you - the faculty, the staff, the students, the administrators - and your support of our common greater purpose.

Dan Rahn, Chancellor