Hospitals across the country are laying off workers, restructuring and even shuttering facilities as financial pressures mount and the threat of Medicaid cuts looms larger in federal budget negotiations. The wave of cost-cutting measures reflects a growing urgency among health system leaders to shore up operations and tighten operations as budgetary pressures mount.
UC San Diego Health has eliminated about 230 positions, less than 2% of its 14,000-person workforce, citing mounting financial pressures driven by federal policy changes, regulatory instability, and reimbursements that fail to cover the true cost of care. Despite reporting a 4.1% operating margin for the first nine months of the fiscal year, CEO Patricia Maysent emphasized that growth alone is no longer enough to close the widening financial gap.
“Every single year we have had to figure out where we’re going to come up with about $150 million in order to match inflation,” she told The San Diego Union-Tribune. “You can get those improvements through better payer contracts and through growth, which has always been our magic because, as long as we’re growing, it’s easier to cover that gap.”
The cuts are not isolated. Vanderbilt University Medical Center in Nashville, Tenn., is laying off up to 650 employees to reduce operating costs by more than $300 million in response to anticipated cuts in Medicaid reimbursement and government-sponsored medical research. While the layoffs primarily affect research, administrative and support staff, Vanderbilt said it will continue hiring frontline clinical workers as it prepares to open its new 180-bed Jim Ayers Tower later this year.
Other hospitals and health systems are making similar moves. DuBois, Pa.-based Penn Highlands Healthcare cut dozens of positions across two of its hospitals, most of which were in nonclinical roles. Fountain Valley Calif.-based MemorialCare eliminated 58 jobs, including roles in administrative support, interpreter services and respiratory care. Middletown, N.Y.-based Garnet Health has initiated a restructuring plan that includes workforce reductions, outpatient service closures and leadership changes affecting 42 employees.
Renton, Wash.-based Providence, one of the country’s largest health systems, is implementing workforce cuts affecting 600 full-time-equivalent positions across seven states, primarily in nonclinical and administrative areas.
In some cases, the financial strain is leading to full hospital closures. St. Luke’s Des Peres Hospital in St. Louis, a 143-bed acute care facility, will close on Aug. 1 due to low patient volumes and sustained financial pressure. Stilwell (Okla.) Memorial Hospital is also set to shut down on June 27, along with its affiliated clinic a month later.
The timing of these decisions coincides with heightened anxiety about federal spending cuts, particularly around Medicaid. Even the prospect of reduced reimbursement is prompting health systems to act now in an effort to preserve financial stability. Many hospital leaders have warned that potential cuts could push vulnerable hospitals — especially community and rural providers — past their breaking point.
