Penn Medicine eliminates administrative jobs in cost-cutting move

Philadelphia-based Penn Medicine is eliminating administrative positions as part of a reorganization plan to save the health system $40 million annually, the Philadelphia Business Journal reported March 13. 

Kevin Mahoney, CEO of the University of Pennsylvania Health System, told Penn Medicine's 49,000 employees last week that changes include the elimination of a "small number of administrative positions which no longer align with our key objectives," according to the publication. 

The memo did not indicate the exact number of positions that were eliminated. Mr. Mahoney did note, though, that "many" affected workers will move into other roles within Penn Medicine, according to the Philadelphia Business Journal. He said others will be offered coaching and support to help them find jobs outside of the health system.

Amid today's financial challenges, Penn Medicine is also taking steps to boost revenue, such as renegotiating vendor contracts, standardizing technologies, consolidating enterprisewide corporate services and eliminating duplicative administrative systems, Mr. Mahoney said, according to the Philadelphia Business Journal.

According to the publication, he wrote in his memo: "The nation's healthcare economy has been completely reshaped by the effects of the COVID-19 pandemic, bringing monumental changes unlike anything we've seen in our lifetime. We have planned carefully to ensure that our organization can withstand these turbulent market forces, but we are not immune to their impact.

"As a result of your continued dedication to our mission, we remain one of the few health systems in the region that continues to have a positive operating margin. We continue to reinvest that margin in our workforce, including a planned pay raise for UPHS employees later this spring. However, like health systems across the nation, inflation-related costs have contributed to expenses that outpace our earnings. Our leadership teams at both the system and entity level are working together, leveraging 'One Penn Medicine,' to ensure the stability of our organization to deliver world-class care far into the future."

The changes come as Penn Medicine reported $118 million in net income for the six months ending Dec. 31 as revenues increased to almost $5 billion. Operating income for the 2022 period totaled $103.6 million compared to $152.5 million in the same period in 2021.

Mr. Mahoney also recently said that the health system's expansion has been hampered by "huge macro headwinds." Penn Medicine's planned construction projects include a women's health pavilion, an ambulatory care center, a cancer center and more outpatient care centers.

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