With Surging Revenue, OHSU Wants Pay Restored For 4,500 Staff

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Happier days have returned to Oregon Health & Science University.

Just six months after it began bracing for a brutal and potentially long COVID-19-induced financial drop, the institution is now doing so well that it wants to spend tens of millions of dollars restoring all the pay cuts it imposed on 4,500 faculty and administrators as a pandemic austerity measure.

Those workers would be put back at their full salaries starting in October if OHSU’s board of directors approves the proposal at its Friday meeting. The proposal follows an uptick in revenue since June.

If revenues continue to grow, the institution’s top priority should be restoring some or all of the paycheck losses those staff members incurred July-September, OHSU’s chief financial officer said in a memo to the board.

Looking back on the start of the COVID-19 crisis in March, Lawrence Furnstahl noted, the institution quickly crimped down on expenses, using salary cuts instead of wide layoffs.

Now, with June-August financial reports in hand, results have “trended positive across patient activity, payer mix, state funding, expenditures and investment return,” Furnstahl said. For example, an expected increase in Medicaid patients and decline in commercially insured patients has not materialized, he wrote. Commercial insurance typically pays a hospital about twice what Medicaid does for the same service or procedure.

Restoring all salaries effective Oct. 1 would cost OHSU about $69 million in the fiscal year that started July 1, Furnstahl wrote. It would cost OHSU an additional $23 million to restore the pay losses the faculty and administrators experienced July-September, he wrote.

On a much smaller financial matter, the administration is recommending a 2% tuition increase for students, and retention of the tuition-freeze program for incoming students. This summer, the administration had insisted tuition needed to be raised 5% to 7%, and the Tuition Promise program dropped. Scrapping the big hike and keeping the Tuition Promise program are not particularly expensive, costing $1.2 million for the current fiscal year, or a total of $4.5 million over a three-year span, according to Furnstahl’s memo to the board.

Furnstahl recommended  the board adjust the adopted budget for the current fiscal year to absorb those expenses and also to reflect higher anticipated revenues.

A number of factors have driven OHSU’s rapidly improving financial fortunes.

Furnstahl pointed to a substantial uptick in revenues from patient care starting in late June and extending, with a few dips, into September. Gross patient charges for the week ending Sept. 19 were $93 million, getting close to the pre-COVID-19 levels, Furnstahl’s memo said.

The expected erosion of commercially-insured patients and growth in Medicaid-insured patients has not yet materialized, Furnstahl wrote to the board. Many Oregon businesses have laid off workers, and observers expected those workers and their families to lose employer-provided commercial health insurance and switch to Medicaid. But OHSU’s payer mix has barely budged. As of August, Medicaid had 23% of the payer mix, and commercial insurance 34%. Pre-COVID-19, Medicaid was 23% and commercial insurance 33%.

Also, OHSU has received $48 million in CARES Act money from the federal government, which dished out billions of dollars in taxpayer money to hospitals around the nation to make up for COVID-19 losses.

Plus, OHSU’s massive investment portfolio has picked up with the recovery of the stock market from the COVID-19-induced slump.

For the fiscal year ended June 30, investment returns were an estimated $62 million. Cash and investments, held by OHSU and its foundations, totaled $2.9 billion at the end of August, up from $2.7 billion at the end of 2019.

At this point, though, Furnstahl told the board, a number of uncertainties lie ahead.

“Will the current trends in (patient) volume, mix and revenues hold, improve or worsen,” he asked in his memo.

“There may be a difficult mix of gains and losses across (OHSU) missions and years. The clinical enterprise (hospital services) incurred significant losses last (fiscal) year, while other university areas ended (the fiscal year) above budget,” he noted.

“OHSU may approach breakeven due to recovering clinical volume and stable (insurance) payer mix, only to then incur a large cut to state funding for research and education in” the fiscal year starting July 1, 2021, or the fiscal year starting July 1, 2022, he warned. 

You can reach Christian Wihtol at [email protected].

 

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