Michigan hospital to cut physician pay

Beaumont Hospitals in suburban Detroit will reduce the salaries of staff physicians as part of a plan to cut costs by $10 million, according to a statement issued Sept. 29. Managers and executives also will see pay cuts.

"Through outstanding expense management and better revenue management, we had gone from a $30 million loss last year to a positive $13.8 million net operating income through the end of June this year," said Kenneth J. Matzick, Beaumont president and CEO. "But our progress has been eroded by market conditions, such as continued job and insurance loss, below-budget patient volumes and a continued shift to government insurers that pay us less. We were at risk of losing money for a second year and can't let that happen."

Layoffs of clinical staff are still rare, and even rarer are reports of salaries, including those of physicians, either being frozen or reduced across the board.

Physician pay cuts "are probably the last thing [hospitals] want to do," said F. Remington Sprague, MD, a member of the board of the Michigan State Medical Society. "You really risk the alignment and loyalty of your medical staff." Dr. Sprague is also vice president and chief medical officer of Mercy Health Partners in Muskegon, Mich.

Beaumont eliminated about 500 positions in November 2008 when the turnaround process started. Another 425 full and part-time employees were let go in September 2009. Approximately 130 jobs were saved by reducing paid time off from 33 to 30 days per year.

No physicians were laid off, but 40 of the 600 directly employed by Beaumont will see pay cuts of 5% to 10%, depending on their level within the organization.

"It is unfortunate that we are living in such difficult economic times and that to survive, such drastic measures are needed," said Marc Weisman, DO, medical director of the Beaumont Physician Organization. He is not affected by the pay cuts because his group is independent, although it works closely with the institution.

No statistics are available on how many companies have cut physician pay, although doctors at Beth Israel Deaconess Medical Center in Boston volunteered to do so earlier this year to reduce staff layoffs.

According to the Bureau of Labor Statistics, 112 layoffs involving at least 50 people occurred at hospitals in 2008. As of the end of August, there already have been 117 such layoffs this year.