Editorial: Pay cut for UPMC managers proper response

It would be difficult to find an American business today that isn’t feeling the strain of an… It would be difficult to find an American business today that isn’t feeling the strain of an increasingly burdensome market. UPMC ‘mdash; which is our region’s largest employer ‘mdash; is similarly no stranger to the economic burn. According to UPMC’s chief financial officer, Rob DeMichiei, hospitals across the nation are plagued by fewer patients seeking medical care, state and federal reimbursements that are expected to decline and an expected increase in charity-care costs. In an effort to curb these economic barriers, UPMC recently announced it would cut the pay of its top executives and senior managers by as much as 25 percent, according to an article in the Tribune-Review. This measure demonstrates very noble reasoning. A 25 percent pay cut is no small reduction, but because UPMC will take the money from the upper-level bracket of employees, the decrease is more than justifiable. The medical center employs about 50,000 workers, and last year 500 were laid off. There is still a possibility that UPMC will need to cut more jobs in order to keep its economic standing in check, although it would not say if more layoffs are definitely expected. Undoubtedly, however, the pay cut of managerial employees means UPMC will not need to lay off as many employees. Therefore, this action will save jobs within the medical center. The 25 percent pay decrease is part of the medical center’s goal to slash about $150 million, or 2 percent, from its $7 billion in annual operating expenses. While a downsizing of employee salary won’t accomplish this feat alone, it would make a significant contribution to the effort. As a testament to our current economy, every penny counts. Although UPMC is expected to report a good second quarter when it announces its operating and financial results for the first six months of the 2009 fiscal year, this measure demonstrates proactive functioning. The medical center chose to implement this policy in hopes of sparing itself from further hindrances resulting from the national economic downturn, according to an article in the Post-Gazette. The deductions in pay from top-ranking employees aren’t limited to salary alone. UPMC will also take inflated bonuses and other forms of compensation into account. In all earnestness, no one likes a shrink in his paycheck ‘mdash; especially during such a slow economic period. But top management employees aren’t exactly bordering the poverty line. Their pay cuts might induce some gripes or headaches, but the financial strain likely would result in more of a personal economic inconvenience than a full-out financial crisis. Because UPMC is a key employer in both the region and the entire state, it’s imperative to keep the business as financially strong as possible. After all, a reduction in pay is far better than a job loss. Even if the top UPMC managers won’t be able to take that extra vacation this year, their sacrifice is minute compared to the losses potentially incurred by other employees.