Michigan Medicine will undertake an economic recovery plan that includes furloughs or layoffs for hundreds of employees as well as other measures to cover hundreds of millions of dollars in projected losses related to the COVID-19 pandemic.

Marschall S. Runge, chief executive officer of Michigan Medicine, dean of the Medical School and executive vice president for medical affairs, announced the plan May 5 in an email message to Michigan Medicine employees.

It includes organizational restructuring and a combination of furloughs and layoffs totaling approximately 1,400 full-time employees at the University of Michigan’s academic medical center. A hiring freeze will leave an additional 300 current vacancies unfilled. Michigan Medicine has a total work force of about 29,000.

Also on hold until further notice is construction of the new 12-story adult inpatient facility that was announced last September, along with all capital projects that are not required for safety or regulatory compliance.

Runge told employees he will take a 20 percent salary cut, and he has asked his direct reports, department chairs and other leaders to voluntarily reduce their compensation on a scale between 5 percent and 15 percent.

Michigan Medicine faces projected losses of up to $230 million in fiscal year 2020, which ends June 30, and similar losses in fiscal year 2021. The economic recovery plan’s goal is to save $400 million over the next 14 months, Runge told employees.

Like many health care organizations that had to suddenly cancel all elective procedures and temporarily suspend many services, Michigan Medicine has immediately felt the financial implications of caring for patients during the COVID-19 pandemic.

“While we are faced with continuing challenges as a result of this pandemic, we know that our collective effort will result in our successfully navigating this crisis and moving forward on a path of strength and sustainability,” Runge said in a press release.

“Our economic recovery plan will help us continue to provide hope and healing to our patients and support our clinical, educational and research missions.”

Following Runge’s email to Michigan Medicine employees, President Mark Schlissel sent a related message to the remaining faculty and staff on all three campuses.

He credited U-M’s health professionals who have “courageously stepped up on the front lines of the COVID-19 pandemic and worked around the clock” to take actions that “are a quintessential part of the University of Michigan’s mission to serve the public,” but which were also extremely costly.

“The measures taken by Michigan Medicine today reflect both the severity and rapid onset of financial difficulties from the COVID-19 pandemic,” Schlissel wrote.

“Every part of our university is being challenged differently, at varying speeds and with outlooks based on their unique circumstances. And while some of our actions will necessarily be specific to a part of our institution such as those outlined by Michigan Medicine, others such as those I described in my previous messages affect the entire university.”

The president previously announced several measures, including salary and hiring freezes and the suspension of all non-essential expenditures, to preserve financial resources in the face of anticipated losses estimated at $400 million to $1 billion universitywide through the end of the 2020 calendar year.

Schlissel’s earlier message included voluntary programs for temporary furloughs and reduced hours across the rest of the university, and he reminded employees in his latest email that the deadline for non-Michigan Medicine staff to apply is May 8.

Runge’s email message updated employees about new information that follows last week’s introduction of the economic recovery plan. Other measures include:

  • No salary increases in FY 2021, including the elimination of merit pay. Exceptions include bargained-for staff, faculty promotions in process, and staff promotions in process or part of a “ladder” track.
  • The FY 2021 retirement match for Michigan Medicine faculty and staff, which includes the Medical School, will be suspended. Some exclusions may apply for faculty and staff with multiple appointments.
  • The paid-time-off sellback program, which would have been available in May, is on hold until further notice.
  • Tuition reimbursement for continuing education will not be provided for FY 2021. If managerial approval was received before May 1, tuition may be covered if all requirements are met.
  • Job offers that already have been extended will be honored. Other exceptions to the hiring freeze must be approved by the area’s executive vice dean, or the dean in the case of faculty hiring. Positions funded by external grants will likely proceed, with approvals.

A COVID-19 Employee Emergency Needs Fund has been established to help support employees in need of financial assistance due to the pandemic. Information on how to access this direct financial support will be forthcoming and online donations will be accepted soon.

 “While we don’t take any of these decisions lightly, we believe it is a preferable outcome to broad salary reductions and allows us to preserve as many jobs as possible,” Runge said in the press release. “The important decisions we are making at this critical juncture of the pandemic are to ensure a strong and more secure future for the health system, the Medical School, and our partners and affiliates.”

In his email to employees, Runge credited them for rising to the challenges posed by the pandemic over the last few months.

“This includes all of the tremendous efforts on the front lines, in support roles, and from those working remotely to maintain the safest environment possible for our patients and work force. The collective teamwork and contributions have been nothing short of amazing,” Runge wrote.

Michigan Medicine has begun safely resuming some clinical services, starting with patients in most critical need of care, and the Ann Arbor, Dearborn and Flint campuses will continue to plan for a public health-informed fall semester on campus.

“It may seem incongruous to be taking these (cost-saving) actions while all parts of our university, including Michigan Medicine, continue to plan for the gradual resumption of more normal activity,” Schlissel said in his email.

“This is the reality we are facing amid the uncertain future presented by the pandemic, even as we remain hopeful in our work. All of our efforts will help the institution weather this crisis and continue delivering its mission as we ramp up our research, education and patient care.”

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