As the Coronavirus (COVID-19) crisis unfolds, human and economic resources are and will be strained. Hospitals and health systems must be prepared to address the executive and physician compensation, benefits and contract issues that are very likely to follow. We offer a list of such issues and considerations that can help hospitals and health systems anticipate and address current and potential challenges.
Due to the unknown severity and duration of the COVID-19 crisis, including the deepening economic slowdown, the human and financial resources of hospitals and health systems are likely to be under considerable stress. Organizations should prepare for rapid decision-making on a wide range of executive and physician employment issues, including compensation adjustments, retention arrangements, hiring decisions, and procedural changes needed to make these types of decisions with greater speed and with the possibility of a potential shortage of decision-makers.
While all organizations will need to grapple with the impact of a severe economic slowdown, hospitals and health systems will face those impacts while also being under enormous pressure to treat an expected eruption of COVID-19 patients. These are conflicting pressures, and it can be difficult to predict what the most likely challenges will be. Judging from the last economic recession, combined with the pressure to increase patient-care capacity, we believe hospitals and health systems will want to be prepared for the following types of challenges:
- Considering and preparing retention incentives and retention agreements to keep key executive leaders and key physicians in place during the crisis
- Preparing employment agreements and short-term compensation arrangements with physicians who are hired to help in the medical response crisis
- Creating a faster review and approval process for executive and physician employment and compensation decisions, if board members are not available or if time does not allow for the customary review and approval
- Creating new forms of pay for emergency, short-term physician hires
- Maintaining compensation discipline to the greatest extent possible, so that emergency compensation decisions can continue to be defended as reasonable and at fair market value, and so that they do not violate other legal standards
- Making sure incentive compensation plans and arrangements include appropriate discretion to make adjustments, change performance metrics or even suspend awards, until the crisis abates
- Adjusting or suspending supplemental executive retirement plan contributions or accruals until the crisis abates
- Changing or suspending regular employee benefit plan contributions (such as employer matching contributions to 401(k) or 403(b) plans)
- Reviewing paid time-off, leave and short-term disability programs to make sure that employees (including physicians and other direct patient caregivers) have appropriate and sufficient protection, and to make it clear when those programs apply and what they provide
- Reviewing severance benefit agreements and plans to provide the intended levels of protections and to understand the potential cost if reductions in force become necessary
- Having separation agreements and waiver and release agreements ready if reductions in force become necessary
- Navigating potential delays in hiring new employees, in implementing compensation or incentive decisions, and in other employment and pay matters
Hospitals and health systems may wish to be prepared for these types of issues as this crisis unfolds.