Plumas District Hospital employees will be receiving pay raises ranging from 3.5 to 20 percent effective Jan. 30 — for most employees it is the first increase that they have seen in seven years.
The decision didn’t come easy for hospital officials and the board of directors, because it’s a lot of money — about $600,000 annually — but they feared not doing so could be even more costly.
“Some of it is a risk for sure,” said Dr. Jeff Kepple, the hospital’s chief executive officer during an interview last week. “But the risk of not doing anything is worse.”
That’s partly due to how the hospital is reimbursed for services rendered and partly due to the high price tag associated with contract labor, which the hospital relies on when it’s unable to hire needed employees, a circumstance partially caused by a lower pay scale.
“If we retain our employees as opposed to hiring contract labor — contract labor is way more expensive,” Kepple said. The hospital paid $210,425 in contract labor costs last October and $241,811 last November.
Contract labor is used predominantly to fill nursing and laboratory positions.
The discussion regarding reimbursements that the hospital receives is more complicated.
Caleb Johnson, the hospital’s chief financial officer, outlined this issue in a letter to the hospital’s board members and management council.
“What’s particularly pernicious about our situation is that a large portion of our reimbursement is directly linked to costs we must incur before we receive payment,” he wrote. “This means that by abstaining from providing wage increases, we forego additional reimbursement from Medicare and a higher return via supplemental programs,” and then listed a number of examples of such repayments.
Johnson described a “negative spiral” that the hospital can become caught in by not spending.
“I would argue that we’ve been in that spiral for years now — we don’t update or upgrade our facilities and equipment because we don’t have the money, and we haven’t increased wages (generally) in seven-plus years because we don’t have the money, and expenses have remained flat and we feel good about that, except that volumes increase and revenue increases, but cash doesn’t.
“So we wait for our people and our equipment to burn out then we replace them, sometimes with the only and costliest alternate, and offset the additional cost by expecting the remaining loyal employees to go an additional mile with an older machine on the same dollar. Yet it’s the same dollar that’s used to calculate how much we’ll get paid by Medicare and what extent our losses will be offset by supplemental programs.”
Johnson determined that now is the time to break the cycle. He said that the second issuance of the Measure A bonds can be invested in the facilities and equipment, and an anticipated $900,000 via an intergovernmental transfer payment makes it possible to invest in the hospital’s employees.
The pay increases vary by position and were established by comparing Plumas District’s rates with similar hospitals’ pay scales.
“Every job title, job description and corresponding pay scale has been examined and compared to positions in hospitals similar to our own,” Kepple said.
Though most employees haven’t had a raise in seven years, some staff members in hard-to-fill and high turnover positions have had more recent increases.
“We have set a minimum floor of a 3.5 percent increase for nearly every employee, even to those near goal, while some employees will see as much as a 20 percent increase,” Kepple wrote in a letter to all employees. The overall average is 7 percent.
“Seven percent isn’t huge, but it’s still a lot of money for our organization,” said John Kimmel, chairman of the hospital board. He admitted that it caused him some concern, but ultimately is confident that based on forecasted revenues and reimbursements the hospital can afford it. “There is so much down the pike that will help us,” he said.
Kimmel added that he thought it was a very well thought out plan and it was the right thing to do for the employees.
Skip Alexander, who has been a citizen watchdog of the hospital, said that he supports the pay raise decision. Alexander regularly attends the board and finance committee meetings and serves on the Measure A oversight committee.
“I think they have to do it,” Alexander said. “Contract labor is killing them.”
Alexander went on to say that he knew that Johnson “has worked on this very intensely, and while they are certainly not in a position to spend money that they don’t have, he’s included it in the budget and it shows it can work if they meet their revenue goals.”