Unions, Management Cooperate to Save NJ Hospital

News last week that St. Mary's Hospital in Passaic, NJ, was emerging from bankruptcy after declaring about $100 million in debts last March provides an excellent example of what can happen when unions and management work together.

A key component of the reorganization plan was the unions' ratification in December of a plan to cut pay by 5%, with an understanding that the cuts would be restored incrementally in the coming months.

"Initially we fought court-ordered concessions," says Virginia Treacy, RN, executive director of JNESO District 1, which represents about 450 nurses at St. Mary's. "We'd represented RNs in this hospital since 1981, and we have seen three administrations come and go in the last seven years, two of whom went bankrupt. We didn't have much faith in the management to actually use financial concessions from us to turn things around."

The unions' intransigence shifted, however, after St. Mary's hired Michael J. Sniffen as president/CEO in July.

"I've been doing this for 32 years and I'm not easily swayed, but I find him to be a very credible administrator—honest, and very transparent," Treacy says.

"He was very credible, even on simple things," she says. "We had people who had not received a correct pay check in more than three years. We brought the problem to him, he said he would fix it, and he did! That is the first time in a good 10 years that I could have said somebody in administration listened, heard what the problem was, and said: ‘That is not acceptable. I will get it fixed.'"

Sniffen says he has worked very hard to earn the unions' trust. "I was very transparent with them about what I was doing, how I planned to do it, and the data I was using to make the decisions," he says. "I pledged a partnership and demonstrated that by being open to their suggestions, meeting with their members, listening to the issues they were dealing with daily, and trying to—in small ways—be responsive to the day-to-day issues."

While trying to find a big picture way to keep the hospital afloat, Sniffen says he also took time to address employees' basic grievances. "It really wasn't big earth shattering stuff, but the little things add up. It was a litany of things that would sound trivial if you heard them in isolation of one another," he says.

"On a global, more strategic bankruptcy issues, I'd show them the economics that we have to work through. At the end of the day, I'd tell them, ‘We either all rise or fall together. I'd like to hope we can figure out a way to do this together.'"

Recognizing that there was nothing he could to do correct the bad relations with previous administrations, Sniffen focused on what he could do going forward to build trust.

"I'm a firm believer that relationships are key in any situation, but you have to invest in the little things to understand who you are working with so it's not based purely on the black and white of a number," he says. "Spend time getting to know who the person is and what drives them. If you show an honest interest in the person and the overall situation, people will have a dialog with you."

To build staff unity, Sniffen created a "gain sharing" bonus based on productivity and cash flow that would be divided equally among all of the hospital's employees. "Under the formula, if there is money to be distributed, I don't want it weighted by salary. I want all of us together. If it is $1 million and there are 1,000 people, divide it," he says. "That was an important commitment that the unions made, which made me believe we could work together. Even though they weren't representing all employees, they understood it had to be equal for everyone."

Treacy says giving every employee an equal share in the gain sharing solidified a sense of commitment from all the stakeholders, even if no money is ever paid out. "It sounds kind of hokey, but there is a very nice sense that we are all on the same team and if we do well together we will all share the reward. And if we don't, we won't," she says. "The fact that the CEO's share of any economic windfall is identical to the housekeeper or the nurse—that there is no distinction based on title or department—we found that to be very attractive."

Challenges still remain and the future of the 292-bed nonprofit acute care hospital–the only remaining hospital in urban, working-class Passaic—remains cloudy. The track record for other financially troubled hospitals in the Garden State is not encouraging. St. Mary's is the first hospital to emerge from Chapter 11 bankruptcy in New Jersey. Since 2007, six New Jersey hospitals have filed for bankruptcy, five of which have either closed or sold their assets in bankruptcy.

Treacy concedes that unions and management likely would not have been so flexible in better times, if the hospital wasn't teetering on insolvency, leaving the city without a hospital, and employees without a job in a rough economy. "Out of desperation comes innovation, and I think everybody was desperate here—the community, the hospital, and the employees, and therefore the unions," she says. "Being desperate, we decided we would try to pull out together.

Even with considerable hurdles ahead, Sniffen is optimistic about the future of St. Mary's. "I'm very confident because there is an understanding to continue to be solid we have work together," he says.

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