Editor’s note: This story has been changed to update a quote from Rich Sheehan, Boulder Community Health’s director of marketing and public relations.

BOULDER —  Employees of Boulder Community Health will take an annualized 5% cut in pay — 10% each month for the remaining six months of the year — to help the Boulder health system respond to financial pressure caused by the COVID-19 pandemic.

The health system, an independent nonprofit organization, will temporarily cut costs by $3 million a month for the remainder of the year to account for the loss of revenue caused by the pandemic, it said in a public statement. The plan goes into effect July 19.

BCH had a steep drop in revenues caused by having to temporarily suspend all non-urgent outpatient visits and elective surgical procedures while also needing to buy personal protective equipment, testing supplies and other equipment needed to care for pandemic patients.

“We are taking action now so we can continue to provide our community with the high quality, personalized care it expects and deserves,” said Dr. Robert Vissers, BCH president and CEO. “We need to take significant actions to lower our costs and create a financial structure that is economically sustainable while preserving our most valuable resource —  our employees — as much as possible.”

While maintaining the system’s status as an independent, nonprofit organization — the only in the region not part of a larger hospital system — BCH is also concerned about its bond rating, which declined based on an April 30 report from Moody’s Investors Service. The bond rating agency downgraded BCH revenue bonds from A3 to A2. The institution has $103 million in bond debt subject to that rating.

The A3 rating means that the organization has financial backing and cash reserves with a low risk of default, and therefore is considered a good rating.

Moody’s said that the COVID-19 impacts on revenue were largely responsible for the downgrade although the institution is considered stable at that rating. Stability depends upon performance, starting with how the organization did in the second quarter that ended June 30.

“BCH is subject to a 1.25 times maximum annual debt service coverage covenant measured quarterly based on rolling 12-month results, and the failure to pass it is considered an event of default,” Moody’s said in its report about the rating. The March 30 calculation came in at 2.72 times debt service, “which represents somewhat thin headroom for the rating category,” Moody’s said.

Rich Sheehan, director of marketing and public relations for BCH, said the second quarter test will occur in August; hospital books for the second quarter will not be closed until mid-July.

The cuts announced this week will have no impact on Q2 financial performance but will impact the remainder of the year. Sheehan said that hospital administrators were heartened by Moody’s description of the institution as “stable” given the circumstances.

He said that the reductions in pay rates and hours will have no impact on patient care. “Clinical managers and their employees will work together to maintain the high quality of care people expect from BCH,” he said.

Over the past three months, patient care areas at BCH have had to furlough or reduce hours for some employees due to the decline in patients. In addition to the pay cuts, other elements of the cost-reduction plan include mandatory vacation days and canceling market pay adjustments and a contribution to the employee retirement plan.

The pay cut equals a 5% cut in annual pay for most employees. However, Vissers said the plan was designed to have a greater impact on BCH leadership.  Vice presidents and the CEO will take a 20% reduction in compensation.

“We often talk of BCH as being a family. Family members strive to help each other in tough times,” Vissers said. “Each BCH employee is making a personal sacrifice that supports our co-workers across the organization.”

The cost-reduction measures will end in January 2021. At that point, pay rates and work hours will return to current levels.

“I’m confident that these important cost-cutting actions, along with other initiatives in development, will enable BCH to attain the consistently strong financial results needed to maintain our independence,” Vissers said.

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