Many executives to take a pay cut

Tower Health expects to save $11.6 million by cutting pay of about 400 executives as the financially troubled nonprofit health care system tries to recover from the impact of the COVID-19 pandemic.

Directors, senior directors and associate vice presidents will see a 10% reduction while vice presidents and above will see a 15% reduction taking effect in their Feb. 19 paychecks. The reductions remain effective until June 30.

The cuts do not impact front line clinical or support staff, who received merit increases in January, Tower Health said in a statement to the Reading Eagle. The cuts were announced Monday and first reported by The Philadelphia Inquirer.

“Tower Health 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,” Reading Hospital-based

Tower said in an email statement. “These actions include compensation reductions for executives and managerial employees, along with operational improvements to reduce costs and enhance revenue.”

In Tower’s most recent tax return, hospital CEO pay ranges from about $300,000 to $700,000. The return reflects salaries for July 2018 to June 2019.

Pay for system CEO and executive vice presidents ranged from $1.2 million to $2.8 million, according to the tax return. Vice presidents’ pay ranged from $200,000 to $400,000, according to the nonprofit’s tax return.

The cuts come has Tower tries to recover from operating losses and debt exacerbated by shutdowns early in the pandemic.

In addition to anchor Reading Hospital, Tower operates six hospitals in the Philadelphia region. Tower purchased five from the Franklin, Tenn.-based Community Health Systems in 2017. The other, St. Christopher’s Hospital for Children, was purchased in partnership with Drexel University in Philadelphia in 2019.

Executives had said Tower might have to sell hospitals or other assets in Chester, Montgomery and Philadelphia counties as soon as the first calendar quarter of 2021.

“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 health care to our communities,” Tower said in an email statement.

Among the financial measures, Tower asked doctors in its medical group to see one more patient a day. Other avenues of focus for turnaround are revenue cycle (including cash acceleration), supply chain, pharmacy, physician services, and managed care contracting. Tower closed its cardiac catherization lab at Brandywine Hospital on Dec. 11.

In April, Tower cut 1,000 positions.