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Hospital workers face insurance cost hike

| Wednesday, Oct. 15, 2003

In an effort to offset the rising cost of health care insurance, the Westmoreland Health System in Greensburg is asking employees to contribute more toward their health care coverage.

Meanwhile, the health system will continue a policy of boosting salaries for some jobs to achieve a wage and salary structure competitive in the market.

An Oct. 8 internal memo signed by acting Chief Executive Officer David Gallatin explained that contributions toward health care insurance will be weighted so more highly compensated employees will pay a higher percentage of their health care premiums. The measure is slated to take effect later this month, according to the document.

The health system, with a work force of about 2,400, operates Westmoreland Regional Hospital in Greensburg and Frick Hospital in Mt. Pleasant.

All employers are facing higher health insurance costs; they come at a particularly critical time for the health system, which had an $8.5 million operating loss in the last fiscal year, including a $4 million deficit at Frick Hospital. In addition, the system laid off 24 employees — essentially an entire level of management — as part of an effort to reduce costs after a study by a hospital consultant.

The hospital also parted ways in January with longtime CEO Joseph Peluso, who was earning nearly $344,000 annually, according to the hospital's 2002 income tax report.

Peluso is threatening to sue the health system for earnings he believes are owed to him. Attorneys on both sides of the case have refused to comment.

In his memo, Gallatin indicates that the financial situation at the hospital seems to be improving.

“We can express cautious optimism” that the system is “starting to reverse the financial tailspin we encountered last year,” he said.

In order to continue the hospital's financial recovery, the system must find other ways to reduce costs, Gallatin wrote. Health care is one of the expenses that threaten the hospital's bottom line.

Between 2002 and the current 2003-04 fiscal year, Westmoreland's costs for health care coverage for its employees increased by nearly $2.2 million, he said.

“Such extraordinary increases in expenses unfortunately offset many savings that we were able to make in other areas and tax our ability to maintain a balanced budget,” Gallatin said in the memo. “Increasing your contribution to offset the escalating cost of the health benefit premium is a difficult decision. But it is a necessary step.”

Beginning Oct. 26, employees earning less than $30,000 a year will make a 12 percent contribution toward their health care premiums. Employees earning between $30,000 and $60,000 will pay 16 percent of the new premium, while those earning more than $60,000 will pay 20 percent. Currently, all full-time employees pay 10 percent of their total premium costs.

Based on a full-time employee who chooses a primary-care physician on staff at Westmoreland Regional or Frick hospitals, here's what workers will have to pay for health care coverage:

  • An employee earning less than $30,000 will pay more than $1,000 annually for coverage for himself and his family.

  • For an employee in the middle range, the same cost will be more than $1,400, while employers in the upper-income bracket will pay nearly $1,800.

    There is some good news for workers.

    Some, but “not all,” will get a raise this month, Gallatin said.

    Larry Sedlemeyer, vice president of marketing and strategic development for the health system, said this is being done to bring lower-paid workers in line with wages paid for similar jobs at other hospitals.

    The health system has been implementing staggered raises for different groups of workers during the past two years.

    Registered nurses received raises in September 2001. The wages of licensed practical nurses and surgical technicians were increased two months later.

    Clinical technicians received a pay hike in March 2002, while nurses aides and unit clerks saw their wages boosted in September of that year.

    Some executives — some already earning six-figure salaries — received raises because of last summer's reorganization, Gallatin said.

    The health system is continuing to review ways to cut costs, he said. Although it laid off employees as a cost-cutting measure earlier this year, he said the system has been hiring and still has vacancies.

    The system's financial problems surfaced earlier this year when its board of trustees discovered an unexpected deficit. That financial setback, along with others that officials refuse to discuss, created tension between Peluso and the trustees, sources said at the time.

    In May, the trustees, acting on the advice of their consultant Scott Mason, reorganized its management team and named Gallatin, who had been chairman of the board, to his current post.

    Peluso is threatening to sue Gallatin, Mason and the system if he is not paid for remaining years of his contract. He has officially put them on notice although Peluso has yet to file an actual complaint.

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