UW Medicine, which has played a significant role in responding to the coronavirus pandemic on a local and national scale, is now in deep financial trouble due to that very pandemic.
The health care system’s losses could top half a billion dollars by the end of summer, according to a Monday email from UW Medicine CEO Dr. Paul Ramsey that was obtained by The Seattle Times. Staff cuts, furloughs, hiring restrictions and a pay cut for senior leadership could all be in the offing, Ramsey wrote.
“The impact on UW Medicine is an extreme threat to our financial stability,” wrote Ramsey, who oversees a system that includes the University of Washington’s medical school, University of Washington Medical Center (UWMC), Harborview Medical Center and Valley Regional Medical Center.
Ramsey cited three major reasons for the shortfall:
- Less money coming in after nonemergency and elective procedures were canceled to leave room for a surge of patients with COVID-19, the illness caused by the new coronavirus.
- New expenses related to the COVID-19 response, such as personal protective equipment and testing.
- “Lost opportunities to implement new programs designed to improve care in the most cost-effective manner.”
The losses began in March as more COVID-19 cases were discovered in Washington state and the response ramped up throughout the UW Medicine system.
UWMC lost more than $50 million in net revenue in April alone, Ramsey wrote.
Those kinds of revenue shortfalls account for the largest portion of the estimated losses, about $327 million, according to a review of UW Medicine’s operating budget put together for UW regents, who will meet this week. Their approval of the budget for fiscal year 2021, which begins July 1, has been pushed back to September because of the pandemic. UW Medicine’s total budget for fiscal year 2020 was $5.8 billion.
UW Medicine will try to have some of its losses covered by federal and state programs, including FEMA, the CARES Act and the Medicare advance payment program, Ramsey wrote. It will also pursue philanthropic donations through its Emergency Response Fund. And revenue is expected to start flowing in as UW Medicine facilities gradually resume their usual range of clinical services.
But cost-saving measures will have to happen, too, he wrote. That includes voluntary and required furloughs, a reduction in full-time employees, limiting recruitment, postponing capital projects not considered “mission critical,” reducing discretionary expenses and slashing salaries for senior leadership.
“I sincerely regret that our path to financial stability includes reductions in compensation, but I believe the actions we are taking will support the excellence of the UW Medicine clinical, research, and educational programs,” Ramsey said in a news release. “As we develop and implement these measures, we are committed to transparency and will seek input on how we can best support our employees during this challenging time.”
Ramsey and other system executives will host town hall-style meetings with faculty and staff this week to discuss the situation.
The financial trouble and threat of layoffs come as UW Medicine is in protracted contract negotiations with the University of Washington Housestaff Association, a union that represents resident physicians, who are pushing for better working conditions, pay and benefits. The bargaining has produced tensions exacerbated by COVID-19 and the strain it has put on health care workers.
Beyond treating patients at its hospitals, UW Medicine has been in the spotlight for various efforts related to the pandemic.
In early March, the system was among the first in the state to set up drive-thru sites to test its employees and patients, as well as UW students, who were showing symptoms of COVID-19.
Those tests, and samples from health care providers, were processed at UW’s Virology Lab, which now processes a majority of tests done throughout Washington state.
The lab also recently began testing blood samples for antibodies to see who has already had the coronavirus. (The test is available to anyone, but misinformation, confusion and suspicion have made it difficult for patients to access.)
Researchers at UW Medicine are also working on a variety of potential treatments and vaccinations for the virus.
Meanwhile, models from the UW School of Medicine’s Institute for Health Metrics & Evaluation have been cited by local and state governments as well as the White House.