The move affects about 1,400 nonunion employees, including management positions, and will be effective for all of the hospital's operating units, including its off-site functions.
The news comes just three months after the hospital opened a $69 million expansion, the largest in its history.
In a May 14 letter to employees, which was sent anonomously to the Observer-Reporter, Washington Hospital Chief Executive Officer Telford Thomas wrote that the recession "has caused a temporary flattening of patient volumes, decreases in payments from government sources and increases in delinquent accounts as people have either lost insurance altogether or had it reduced.
"Pension plans have been negatively impacted as well as our cash reserves on hand to meet operating costs and new practices. As a result, we have made the decision to freeze the pension plan for all nonunion participants effective July 1, 2009."
The hospital has 1,853 full-time employees, and about 400 of those are unionized. Thomas said the hospital is contractually bound to contribute toward the pensions of union employees, whose current contract expires Jan. 31.
Thomas noted the hospital expansion, which included a new emergency department, four new operating rooms and a 26-bed critical care unit, "was undertaken in response to steady increases in our service area population; the aging of the population and increasing utilization of (the emergency department); surgical and critical care services; and to remain competitive. We are confident that those trends will continue in the long run."
Thomas said Monday that while the hospital has seen an upturn in its census recently, "that doesn't cover what you have invested and the covenants you have on bonds." He added that both the state and the federal government are threatening to further reduce reimbursements for Medicare and Medicaid patients.
"It's nothing that anyone here did," Thomas said. "We have to respond to what's happening out there." Noting that the hospital industry tends to lag behind what's happening in the general economy by about six months, Thomas said hospitals across the country are undergoing similar cost-cutting measures.
"It's not about sharing the wealth; it's about sharing the pain," he said in describing measures being taken in the industry.
The hospital's pension is a defined benefit plan, paid as a single life annuity at the time of an employee's retirement.
Thomas told employees that they will not lose any benefit they have earned through June 30, and that it will be paid at the time of their retirement. He said employees will receive a benefit statement showing their estimated frozen accrued benefit as of July 1. Employee meetings also will be scheduled within the next several weeks.
"We are currently exploring other retirement plan options that balance the need of managing costs while providing you with a measure of future retirement security," Thomas wrote, adding that the hospital is also exploring other cost management initiatives.
He said Monday that employees can continue to make voluntary contributions to a retirement savings plan, but that the hospital does not make contributions to it.