Clarian Health slices executives salaries, delays $475 million Riley project

By J.K. Wall, The IBJ

jwall@ibj.com

Clarian Health announced today that it is cutting executive salaries by 10 percent and delaying the start of a building project in response to worsening economic conditions.

Clarian also will delay bonus payments earned in 2008 and try to renegotiate its supply and drug prices.

The large hospital chain's revenue has been pinched on two fronts. Higher unemployment means fewer patients coming to Clarian have employer-sponsored insurance, which is the most profitable form of payment for hospitals.

Also, Clarian sustained heavy investment losses in 2008, which crimped its ability to pay for capital projects.

That's why Clarian is delaying the start of construction on the $475 million Simon Family Tower at its Riley Hospital for Children in downtown Indianapolis. Clarian did not, however, move back the opening date of the tower, which is set for 2013.

In December, Clarian said investment losses would force it to cut 5 percent from 2009 operating expenses, including an undetermined number of jobs. Clarian has more than 12,000 employees in Indiana, according to IBJ research.

During the first nine months of 2008, Clarian sustained investment losses of $203 million, according to its most recent financial filing released to bondholders. During the same period of 2007, Clarian posted investment gains of $115 million.

"As unemployment rates have risen and markets have declined, increasing pressure has been placed on our operating revenues and our ability to fund capital expenditures," Clarian CEO Dan Evans said in a statement. "Therefore I have determined it necessary to take additional proactive measures to reduce costs while maintaining high-quality care for our patients and our long-standing commitment to charity care."