The job cuts will improve efficiency and allow frontline workers more access to leadership, according to the health system.
Coming on the heels of an announcement that it would conduct the largest layoffs in its history, Mass General Brigham (MGB) released its first quarter earnings, which showed a sluggish start to the fiscal year.
The Sommerville, Massachusetts-based health system experienced increased labor and supply costs, along with capacity constraints, but expects to save more than $200 million per year from the job cuts.
In its earnings filing, MGB said it is "accelerating action plans to reduce the rate of expense growth through a strategic reorganization of management and administrative positions."
Earlier this month, the hospital operator stated it would eliminate hundreds of non-clinical workers due to a projected $250 million budget gap over the next two years. MGB has reportedly been working to trim down administrative roles after studies revealed that it had an inefficient management structure.
When reporting its first quarter finances, MGB said that the reorganization strives to "reduce bureaucracy, enhance decision-making, improve communication and foster a more agile environment." Additionally, it will create more transparency and accountability by giving frontline staff more access to leadership.
For the quarter, the system recorded an operating loss of $53.8 million (-1% operating margin), which was a decline from the $32 million operating loss (-0.7% operating margin), excluding $114 million of prior year revenue, over the same period the previous year.
MGB brought in $282 million in net income, which more than halved the net income of $579 million in same quarter last year.
Both operating revenue and operating expenses increased around 11% year over year, with the former jumping to $5.44 billion and the latter to $5.49 billion.
Key to the increase in operating revenue was an 8% climb in patient care revenues, including a 2% rise in discharges and outpatient growth.
Meanwhile, costs swelled in large part due to wages going up by 9% and supplies and other expenses increasing 17%.
MGB also reiterated the "unrelenting capacity crisis" it continues to face, which it previously highlighted in its reporting of its fiscal year results. The capacity constraints are stemming from overcrowded emergency departments, causing the system's academic medical centers to treat more patients, reducing bed capacity, the MGB said.
More hospitals could be dealing with a bed shortage in the coming years, with the national hospital occupancy rate expected to reach 85% by 2032, according to a recent study published in JAMA Network Open.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Mass General Brigham reported a $53.8 million operating loss in the first quarter as it dealt with higher labor and supply costs.
The health system said it expects to yield annualized savings of more than $200 million by eliminating and consolidating management and administrative roles.
Capacity constraints are also curtailing the operator's revenue by creating a shortage of beds at its academic medical centers.