What’s Happening
The COVID-19 pandemic caused significant financial constraints to the healthcare industry. These problems have been exacerbated by inflationary pressures and the recent expiration of $185 billion in Provider Relief Funds allocated through the CARES Act.
One consequence of these strains has been a dramatic rise in operational restructuring layoffs of healthcare professionals within hospital systems and large healthcare providers. In 2023, there were 12,000 such layoffs, while 2024 saw a modest drop in that number to 9,500 reductions. In Q1 of 2025, operational layoffs surged to 67% of 2024’s total, signaling a continuation, if not worsening, of the trend.
Some examples include:
- In November of 2023, Minneapolis based Fairview Health Services announced the elimination of 250 jobs through layoffs and attrition, driven by financial pressures such as inflation and high labor costs.
- North Carolina based UNC Health laid off around 40 leadership-level roles in an effort to move toward a sustainable leadership structure.
- Ohio based Cleveland Clinic announced a reduction of 114 in January of 2025 in an effort to drive operational efficiencies.
Source: Colliers
These restructuring measures are predominantly affecting non-patient-facing roles such as marketing, IT, and finance, with occasional impacts on executive suites. Real estate professionals are often a small component of a healthcare systems staff, but they may present an opportunity for systems to turn a financial constraint into a source of revenue.
Why is it happening:
Many organizations are struggling with post-pandemic economic realities, including the expiration of Provider Relief Funds, which previously helped stabilize finances. By example, in their year-end June 30, 2022, financial statement, OhioHealth reported an operating income of $342 million on net revenues of $5.4 billion, a 5.3% operating margin, at $54.2 million Provider Relief Funds, representing 15.8% of their net revenue. OhioHealth received $0 in Provider Relief Funds in year-end June 30, 2023. But there’s often more to the story, as rising labor costs, inflation, declining reimbursement rates from insurers, and the financial burden of uncompensated care have placed significant pressure on hospital and health system budgets.
Mergers and acquisitions have also contributed to layoffs by creating redundancies within newly merged organizations.
What Options Do Healthcare Systems Have?
Managing a healthcare real estate department is a complex endeavor that demands coordination between multiple teams including operations, finance, facilities, and project management. As healthcare systems continue to reduce their administrative workforce, outsourcing transactional real estate roles to a third party offers an effective solution for managing financial constraints and operational challenges. Of course, even outsourced real estate requires ongoing levels of coordination with a real estate partner that understands the strategic importance of ystem real estate, various accounting implications, physician & patient requirements, and more.
While the bar for an outsourced real estate partner is high for healthcare systems, and generally much higher than the same services provided to larger corporations, such partnerships are not new to healthcare; many systems already utilize them for revenue cycle management, IT support, ASC management, lab work, and more. By strategically outsourcing real estate functions, healthcare providers can reallocate these FTEs from their balance sheets onto a vendor contract, while maintaining strategic control and operational efficiency.
For example, in 2019, a large healthcare system based in the Upper Midwest hired Colliers as an outsourced real estate partner. Over those years, the system has saved approximately $200,000/year in direct personnel expense while increasing its revenue derived from real estate transactions from $0 to $400,000/year, on average. The benefits have extended well beyond cost savings and revenue participation. They and other systems report the advantages of this model include:
Cost Efficiency. Healthcare organizations improve economic overhead by reducing internal roles that traditionally incurred salaried expenses, redirecting those savings towards revenue-generating activities. Often, these roles can be saved by the outsourced real estate provider, ensuring both continuity of experience and function AND salvaging the jobs of tenured professionals.
Value-Added Resources. Healthcare organizations are often burdened with limited budgets and stretched staff. By outsourcing the system gains access to a dedicated team of support, a pool of technology resources, such as market intelligence and tools, to support the organization.
Market Expertise. Healthcare systems can tap into the expertise of their service providers leveraging their relationships and market intelligence to make well-informed short-term and long-term site selection, lease transaction, acquisition and disposition decisions.
Redundancy and Scalability. Outsourcing can also provide consistency in personnel and access to real estate specific recruitment pipeline to fill real estate roles when needed. In certain cases, fractional employment may be sufficient for some positions.
Peer Benchmarking. Outsourcing gains the system access to peer benchmarking allowing the system to review staffing KPI’s against other systems to identify opportunities for restructuring.
If your organization has or is considering workforce reductions, Colliers is ready to engage to see if your real estate department is a good candidate for an outsourced model.
If you’re considering outsourcing your real estate needs, please contact us below for more information. We are happy to demonstrate how this model can reduce workforce overhead by leveraging real estate to unlock a new revenue stream through a strategic real estate partnership.
For More Information:
Brian Bruggeman, CCIM, SIOR
Senior Vice President | Minneapolis
Healthcare Fellow
brian.bruggeman@colliers.com
952.837.3079
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The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
