Salem Hospital Faces $9 Million in Cuts, Pays High-Priced Consultants

The hospital’s home health agency might be closed or sold

November 12, 2009 -- When Norman Gruber, CEO of Salem Hospital, sent his staff a memo announcing cutbacks of $9 million next year, he might have unleashed a hailstorm.

Salem residents have responded with a fury, calling the hospital a “country club” for its expensive art work, furniture, new construction and bad planning decisions. 
Other people are worried that patient care will go “downhill” because of staff reductions. Of the $9 million in reductions, labor costs will absorb $6 million.   
The financial problems faced by Gruber may be far from over. has learned that he’s talking with management about either closing or selling the hospital’s home health agency because of declining revenues.
During September, the hospital lost $2 million, and also lost money in July and August. In his Oct. 16 memo, Gruber anticipated having a “small but positive bottom line” on Sept. 30, when the fiscal year ends. “Going forward, however,” he wrote, “we are operating with a negative margin unless we make a course correction.” 
Nevertheless, Gruber hasn’t hesitated to hire consultants, paying them millions of dollars over the past several years, according to documents filed with the Justice Department. In 2007, Kurt Salmon Associates, a Salem-based consulting firm, was paid $1,068,956 to help with the construction of the critical care tower, which cost $221 million, of which $163 million was financed through bonds. 
That same year, Avascend Healthcare Hospitality, which provided valet and shuttle services during construction, took home $1,152,555. The company handled more than 500 vehicles a day, according to Ryan Atwood, district manager. Avescend thought its services would still be needed once construction was completed. Instead the hospital terminated its contract four months ago, switching to an automated gate parking system. In 2006, the hospital paid Avescend $1,127,933.
Hospital spokeswoman Julie Howard declined to say how many consultants were hired during 2008. That information won’t be available until next year, she said, when the filings are due. As to whether the budget crisis will impact the consultants, she said the hospital “will outsource and in-source based on the value provided.”
Looking at Salem’s financial picture, in 2007, Gruber took home $645,288 in total compensation, as the hospital’s highest paid employee. Before joining Salem Hospital, Gruber was CEO of Palomar Pomerado in southern California. He was fired from that position three years ago by its board, by a 4-3 vote.
Also, in 2008, Salem Hospital ranked fourth in the state in having the highest net income, $28 million, having a $463 million budget. The previous year it had $388 million in unrestricted reserves. In 2010, the hospital hopes to have an operating margin of $4 million after reducing expenses by $9 million.
News source: