Tower Health said it is cutting salaries of executives and managers amid financial losses linked to the COVID-19 pandemic.
The West Reading, Pa.-based health system has struggled financially in the last two fiscal years. It recorded an operating loss of $378.2 million in fiscal year 2020, as well as an operating deficit of $178.8 million the year prior. And last November, the health system said it would consider selling six of its Philadelphia-area hospitals, including those it has purchased since 2017 from Franklin, Tenn.-based Community Health Systems, as part of a financial turnaround plan.
To help offset the financial damage, about 400 Tower Health executives and managers will have their pay cut, beginning in their Feb. 19 paychecks, according to The Philadelphia Inquirer, which cites a letter CEO Clint Matthews wrote to staff. Executives will have their pay cut by 15 percent, and directors, senior directors and associate vice presidents will have their pay cut by 10 percent.
In a statement shared with Becker’s on Feb. 8, the health system said it “is undertaking several initiatives as part of a coordinated plan to improve operations, strengthen care delivery and address the ongoing financial impact of COVID-19.”
“These actions include compensation reductions for executives and managerial employees, along with operational improvements to reduce costs and enhance revenue,” according to the Tower Health statement.
The salary cuts will be in effect until June 30, and do not affect front-line clinical or support staff, who received merit increases in January.
Tower Health projects cost savings of about $11.6 million because of the pay cuts.
“Reducing management compensation is a difficult but necessary decision that will stabilize and strengthen our financial performance as we continue to meet the challenges of the COVID-19 pandemic, as well as our ongoing mission of providing compassionate, accessible, high-quality, cost-effective healthcare to our communities,” the health system said.