Faced with projected financial losses of up to $230 million in the fiscal year ending June 30, 2020, which we expect will continue into fiscal year 2021, Michigan Medicine announced an economic recovery plan that strives to minimize impact on employees and ensures high standards of patient care.

Like many health care organizations that had to suddenly cancel all elective procedures and temporarily suspend many services, Michigan Medicine has immediately begun to experience financial implications from 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,” said Marschall S. Runge, chief executive officer of Michigan Medicine, dean of the U-M Medical School and executive vice president for Medical Affairs at U-M.

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

The plan includes organizational restructuring and a combination of furloughs and layoffs totaling approximately 1,400 full-time employees. This is in addition to a hiring freeze that will leave 300 current vacancies unfilled.

In addition, leaders across Michigan Medicine will be taking a salary reduction. Runge will reduce his compensation by 20% and he has asked his direct reports, department chairs and other leaders to voluntarily reduce their compensation on a scale between 5-15%.

Other expense savings include suspension of merit increases, employer retirement match, tuition reimbursement, and reductions to supplies, consulting and discretionary expenses. The organization will also delay capital projects that are not needed for safety or regulatory compliance or meet an urgent strategic need. This includes construction of the new inpatient facility. 

“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,” said Runge.

Michigan Medicine has begun safely resuming some clinical services, starting with patients in most critical need of care.

The organization has also established a COVID-19 Employee Emergency Needs Fund and will provide grants for lowest-resourced employees in need of financial assistance as a result of the pandemic.

 “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,” Runge said.