Erlanger team dedication leads to positive bottom line and stable outlook

Chattanooga, Tenn. – During the October Board Budget & Finance Committee, Erlanger Health System reported that net income from operations, including stimulus funds, for Fiscal Year 2019-2020 totaled $35.3 million, compared to a budgeted operating income of $13.2 million. The health system also reported net income from operations for the first quarter of Fiscal Year 2020-2021 of $12.6 million. These first quarter results significantly outperformed budget, and are even more impressive when viewed in comparison to Erlanger’s historical first quarter performance. Additionally, the credit rating agency Fitch Ratings affirmed Erlanger’s current bond rating and strategic direction, while also removing the organization from a ratings watch negative status to a stable outlook status. These accomplishments, made all the more remarkable in the setting of the COVID-19 pandemic, national economic challenges, and industry pressures, would not have been possible without thoughtful leadership, decisive action, and the unparalleled dedication of Erlanger associates.

Erlanger Trustee Jim Coleman said, “It’s a true testament to the Erlanger team and leadership that they never faltered while facing the uncertainty of this pandemic, and the financials show the organization is not just surviving but thriving. Some might look at the stimulus funds and say that they are a short-term impact, but in truth such funding was a necessity for almost every hospital in the country, as the impact of COVID will not be truly realized for years to come.”

Erlanger’s Fiscal Year 2019-2020 Journey

At the beginning of Fiscal Year 2019-2020, July and August results reflected a slow start after organizational losses of $3.9 million the previous fiscal year. The Board of Trustees elected to make a change in System leadership, charged with righting the course of the health system. On September 18, 2019, Dr. William Jackson was named President and CEO of Erlanger, and he was immediately tasked by the Board to accomplish three goals felt to be pivotal to success. These goals were aligned with Dr. Jackson’s priorities: Our People; Quality, Safety, and Service Excellence; and Financial Stewardship.

Prompt and thorough implementation of a management action plan developed to improve operations and eliminate waste required full engagement and attention to detail. The effects of these expense management decisions started positively impacting the financial reports in December 2019, with Erlanger’s first positive quarter in over two years occurring in March 2020. In January 2020, the team’s hard work was rewarded with an across-the-board raise for all eligible employees, the first in several years. Financial stewardship efforts, continued throughout the pandemic to date, yielded almost $49 million in year-over-year savings. Throughout this time, Erlanger staff continued to live the mission by compassionately caring for our patients and making quality and safety paramount.

As COVID-19 advanced around the world, Erlanger planned tirelessly for a novel and enigmatic disease that was leaving many hospitals and communities in catastrophic situations. In late March, a moratorium on elective surgeries and procedures was issued in Tennessee, seriously imperiling the financial standing of hospitals across the state. This development, coupled with the increasing cost of providing safe care to all patients regardless of ability to pay in the setting of a pandemic, threatened Erlanger’s ability to fulfill its mission.

The system took swift action to mitigate the financial and personnel impact by implementing furloughs, encouraging those who could work from home to do so, freezing selected benefits, and reducing leadership pay almost immediately after announcement of the moratorium. Erlanger Medical Group physicians volunteered a proportionate pay reduction, sharing in the combined efforts to support the region’s essential health system. Through these preventive measures, Erlanger was able to furlough staff for a minimal amount of time, preventing larger cuts later. Moreover, through collective sacrifice and innovation, Erlanger was able to continue serving all members of our community with excellence. Many physician practices utilized telemedicine to ensure their patients continued to receive the care they needed in a safe manner, limiting possible exposures.

On May 1, a semblance of normalcy edged back into the health system with the return of elective surgeries, and the team developed innovative processes to safeguard the health and wellbeing of all patients needing care. In June, earlier than many hospitals across the country, Dr. Jackson announced the lifting of furloughs and the return of suspended employee benefits, as well as a plan to reinstate the pay reductions.

“I am extremely proud of the efforts and devotion of the entire organization,” said Dr. Jackson. “By any objective standard, the results of the past twelve months are simply extraordinary. Erlanger is an essential civic asset for Chattanooga and the region, and our associates took this to heart, sacrificing personally, and often at risk of their own health, to ensure the sustainability of the enterprise for their family, friends and neighbors. While uncertainty around the economy and pandemic remains, we have done everything possible to continue the mission, and I am grateful for the faithfulness of our staff.”