published Tuesday, November 19th, 2013

Erlanger Health System closer to outsourcing services

Erlanger in the black for October

After posting two months of losses, Erlanger reported a $183,160 profit for October at its Budget and Finance Committee on Thursday.

"This was a really terrific month. It would have been better if you took my recommendation and stopped the month in the middle of the month," joked CEO Kevin Spiegel. "But the performance of holding expense meant it turned out to be a very good month."

July: $1.5 million profit

August: $1.5 million loss

September: $700,000 loss

October: $183,160 profit

INDIGENT CARE

Four months into the fiscal year, Erlanger has provided more than $28.5 million in uncompensated care, which includes charity care, bad debt and outstanding TennCare costs. $7.8 million of that amount was provided in October.

Source: Erlanger Health System

IF YOU GO

Erlanger's Board of Trustees meets at 6:30 p.m. Thursday at 975 E. Third St.

Citing savings and a need to focus more exclusively on medical services, Erlanger Health System is one step closer to outsourcing all of its food and housekeeping services.

The hospital board's Budget and Finance Committee unanimously approved a $12.5 million contract with Aramark Healthcare Support Services to handle all such facility services, meaning 250 Erlanger employees could be moved off Erlanger's payroll.

But hospital officials have said all housekeeping and food service employees will keep their jobs under the new contract, as it requires Aramark to hire all current Erlanger employees at their current salaries and level of seniority.

Three large companies submitted bids for the contract, and six companies submitted bids for housekeeping services.

Aramark was the lowest bidder, hospital officials said.

The shift is expected to save the hospital about $3 million in both material and personnel costs, officials said. Aramark has also pledged to bring roughly $10.5 million in capital improvements, such as an expansion and overhaul of the kitchen.

Before settling on Aramark, Erlanger officials flew to Ohio to visit the renowned Cleveland Clinic, which had recently contracted its services out to Aramark.

"We were kind of surprised that Cleveland Clinic was outsourcing," said Erlanger CEO Kevin Spiegel. "But right now every health care institute in the U.S. is trying to lower costs. They are wanting to focus on the business of health care, not these extremities."

While the hospital currently spends about $31.50 per patient per day on food, Spiegel said the new contract would see the hospital spending $24.50 per patient per day.

Spiegel said he hopes the food's nutritional quality will be upped, and that the hospital's food services will be able to form partnerships with local restaurants and chefs to add local variety to the menu.

"I have not seen a deal this good in my career," said Spiegel.

Locally, Aramark already contracts with University of Tennessee at Chattanooga and with Unum.

While Erlanger's housekeeping and food service employees' accrued benefits will be paid out during the potential switch, they will be moved over to Aramark's health insurance plan and benefits structure.

Those in management positions may not be able to keep their roles, though their years of service will apply in seniority-based benefits like vacation time, Chief Administrative Officer Gregg Gentry said.

Aramark plans to hire additional employees, hospital officials said. Any new employees hired by Aramark would be subject to that company's salary and benefits policies.

Employees of Sodexo -- the 27-year contractor for a portion of Erlanger's current food services -- and other contracted janitorial services will not be guaranteed a job with Aramark, though the company plans to hold a job fair within the hospital for such employees if the contract is approved.

In his presentation to the committee, Gentry said Aramark would provide more opportunity for career training and promotion for its employees than Erlanger could. Aramark also would ensure its employees subscribed to the Erlanger "brand" in its uniforms and labels.

Erlanger already outsourced its security services in a controversial vote in 2011. At Monday's meeting, no employees protested the potential change.

None of the board's committee members voiced opposition to the contract. The hospital's full board of trustees will vote on the contract on Thursday.

Contact staff writer Kate Harrison at kharrison@timesfreepress.com or 423-757-6673.

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