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Scott & White announces dramatic employment, health care changes

From small and large businesses to universities and even now labor unions, the Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act (ACA) or Obamacare – is reshaping the landscape of both U.S. employment and health care. An employee email last week from Dr. Robert Pryor, president and CEO of central Texas-based Scott & White Healthcare, prompts asking if the “bad news about some changes we need to make to some of our pay and benefit programs” is more fallout as PPACA implementation moves forward.

Termed as “one of the most difficult messages I have ever had to deliver to you,” Pryor first provided context for his remarks:

As many of you know, the healthcare industry is under tremendous financial pressure. We have seen a number of our competitors layoff large numbers of employees, halt construction projects, and freeze all hiring. Like our competitors, Scott & White has also experienced significant financial challenges. While Clinic visits have increased 28% over the last five years, the reimbursements we receive per visit have decreased by 15%. Translated another way – we receive $64 million dollars less today, for this year’s Clinic visits than we would have received five years ago. Another example is our commitment to provide care for those who cannot afford it – charity care.  This is an important part of our mission and our heritage as a non-profit organization, but we do absorb this growing expense which is projected to exceed $77 million dollars in 2014.

In the next decade, competition for new revenue, new markets, new products and new services will continue to intensify. We know we need new ways of operating to sustain our organization in the future. Sustainability at Scott & White means becoming laser focused on evolving our business model, while delivering uncompromised patient care. We have succeeded for over 116 years because we innovate, and that will continue.

Dwindling reimbursement rates coupled with rising patient counts are indeed industry trends. The Daily Caller reports how hospitals providing charitable care can expect “new levels of scrutiny of their nonprofit status and could face sizable new fines under Obamacare.”

Pryor further explains the organization has reduced operating expenses by more than $15 million through eliminating executive positions systemwide, consolidating responsibilities, reviewing even eliminating wasteful service contracts and reducing reliance on contract labor and consultants.

He goes on to outline, however, these additional expense reductions:

  • Effective January 1, 2014, we will reduce non-provider staff and executive (AVPs and above) retirement plan contributions to 5% of eligible compensation. APPs and Anesthesia Assistants will receive 7% of eligible compensation. Practicing Scott & White physicians will continue to receive 13% of eligible compensation.
  • We will not increase staff or executive salaries for 2014. We implemented a new base pay strategy effective January 1, 2013. This allowed us to “catch up” many of our staff to market pay rates at that time, but we cannot afford to increase base pay again in 2014.
  • Each year, our executives have a portion of their compensation that is at risk based on achievement of personal and organizational goals. We will not pay any of those payments to executives for the 2013 fiscal year. Combined with the retirement plan changes, this means our executives will essentially see a 15% – 35% pay cut to their total compensation relative to a “normal” year at Scott & White.
  • If you are not eligible to receive pre-65 retiree medical benefits from Scott & White by December 31, 2013, you will not receive pre-65 retiree medical coverage if you retire from Scott & White.
  • While Scott & White will still pay more for the Staff Medical Plan coverage in 2014 than we have in 2013, your premiums will also increase (exact premiums will be available in October).

Recognizing the unpopular reception with which these changes will be met, Pryor notes “the alternatives to these kinds of cuts would have been several hundred job eliminations.”

He describes ongoing construction and advertising expenses as investments in the future explaining “sustainability means we have to make strategic investments that will support our long-term growth and success, even if it means we have to suffer through some short-term pain to get there.”

Pryor assures employees these changes are not related to the potential merger with Baylor Health Care System, that “these changes would occur regardless of any future merger, and are due to the conditions of our industry.”

In closing the email, Pryor announces a series of town hall meetings will be scheduled throughout the Scott & White system and says that while he cannot promise more changes will not be necessary, he can promise “we are doing all we can to save jobs in our communities, while keeping our patients at the center of our focus.”

PPACA, ACA, Obamacare – these terms are used nowhere in the email. People will have to judge for themselves.

Meanwhile, Scott & White’s organizational intersection with Obamacare dates back several years. Dr. J. James Rohack, a Scott & White cardiologist, served as president of the American Medical Association (AMA) from June 2009 into 2010.

In his inaugural address as AMA president, Dr. Rohack spoke to the nation’s physician leaders assembled for the AMA Annual Meeting and pledged to embrace the challenges of this extraordinary moment in history and lead the profession’s efforts to provide health insurance coverage for all Americans.

Dr. Rohack stressed that a uniquely American solution to health system reform must deliver “evolutionary change” and renewed the AMA’s commitment to health care reform that improves access to high-quality, affordable health care for all patients.

“I can promise that our AMA is committed to offering guidance, our expertise, the benefits of our relationship with patients, and the powerful voice of our profession, to help the powers that be make the right decisions,” said Dr. Rohack. “This is an effort that will define our organization, define our nation and define each and every one of us.”

Per the Scott & White web site, Rohack also serves as director of the organization’s Center for Healthcare Policy and medical director for System Improvement at the Scott & White Health Plan.

In March 2010, Rohack shared with The Texas Tribune “why Texas has so much to gain from the health care overhaul.”

The Tribune opened the article describing Rohack as:

Dr. J. James Rohack isn’t just the president of the influential American Medical Association, an organization that carried the torch for the health care reform bill the U.S. House of Representatives passed this week. He’s a Texan.

Rohack is a senior staff cardiologist at Scott & White Clinic in Temple, and a professor at the Texas A&M Health Science Center College of Medicine. He’s also the former president of the Texas Medical Association, which very publicly opposed the health care legislation.

Rohack’s words foretelling of “evolutionary change” seem to be ringing true. Whether Obamacare or changes due to some other unnamed source, Scott & White employees are gaining much – and the health care overhaul must be viewed as a likely factor. At this point, gains appear to include new job insecurity, reduced employment compensation, diminished retirement benefits, uncertain health care coverage and more expensive health care premium costs.

Indeed these employees and other Texans are gaining. Too bad it’s nothing anyone wants.

Lou Ann Anderson

Lou Ann Anderson is an information activist. As a contributor at Raging Elephants Radio and Examiner Austin, she writes and speaks on a variety of public policy topics. Lou Ann is the creator and online producer at Estate of Denial®, a website that addresses probate abuse via wills, trusts, guardianships and powers of attorney as well as other taxpayer advocacy issues.

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