WILLMAR -- By eliminating an open position and paring down projected spending in areas such as supplies and travel expenses, Rice Memorial Hospital has come up with enough money to grant step increases in pay to eligible employees.
The revision to the 2006 budget was approved Wednesday by the city-owned hospital's board of directors.
Hospital officials and members of the board said they hoped it would send a positive message to employees.
"This is a small amount but I think it's meaningful," said Lorry Massa, Rice CEO.
Just three weeks ago, the board approved a $94 million budget that freezes employee salaries for next year and allows the hospital to break even.
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Officials said that without aggressive measures to curb spending, the hospital would end the year with a $3 million loss.
At the same time, they said they would continue to evaluate the situation and would consider giving pay increases if the hospital's finances improve.
"We've been going back through the budget. Every level in every department has been asked to reconsider their expenses," Massa said.
The savings that are being applied to the step increases amount to about $185,000. They come from a variety of categories, such as travel, supplies, a service contract for ultrasound equipment, and a position for the surgery department that was budgeted but will be left unfilled.
The hospital has traditionally given step increases in pay to both its union and non-union employees. The increases are typically given at intervals, such as after one year of employment, after five years, after 10 years and so forth. They range from 1.75 percent to 2 or 2.5 percent, depending on whether the employee is non-contract or, for union employees, what the bargaining agreement specifies.
Next year, about 40 percent of Rice's employees -- about 350 people -- will qualify for a step increase, said Leroy Meyering, chief financial officer.
Hospital officials said Wednesday that they'll continue to scrutinize the budget for any chance of lifting the overall pay freeze.
"We don't know where that money will come from at this point in time," Massa said.
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Since last month's announcement of the pay freeze, employees have come forward with numerous suggestions for reducing expenses and saving money, he said. Officials plan to set up a process to help ensure suggestions are heard and evaluated.
"That's really what the budget process is about -- making choices," Massa said. "The difficulty for us is we work in such a fluid environment. It's hard for us to project how many patients we'll see."
Hospital officials have said the tight financial situation is the result of several factors -- relatively flat patient volume, increased staffing and increased depreciation and operating costs for the hospital's new $50 million-plus addition which opened this past year. Finances are expected to improve slightly in future years, once the full impact of the construction project is absorbed.
