VUMC joining a growing number of health systems making tough cuts to stay financially viable.
Vanderbilt University Medical Center (VUMC) will lay off up to 650 employees as part of a broader effort to reduce expenses by $300 million, the organization announced.
The job cuts come in response to significant changes in federal funding and reimbursement, particularly reductions in support for research and patient care programs. The layoffs represent about 2% of VUMC’s workforce and will primarily affect nonclinical roles in research, administration, and support areas.
The layoffs follow an earlier round of budget reductions implemented this spring to slash $250 million, which included hiring freezes and other cost-saving measures. Jeff Balser, president and CEO of VUMC, previously warned that deeper cuts could be necessary if federal funding levels continued to fall.
The latest round of cuts is needed to offset sharp declines in federal research support and other reimbursement reductions, according to the Nashville-based health system. VUMC leaders pointed to proposed cuts in NIH funding and changes to Medicaid and other programs as key drivers behind the decision.
Clinical positions are expected to be largely unaffected by the layoffs. VUMC is moving forward with its patient care expansion plans, including the opening of the new Jim Ayers Tower later this year.
As one of the largest academic medical centers in the Southeast, VUMC has nearly 40,000 employees and sees more than 3.5 million patient visits each year. The cuts underscore the mounting pressure academic medical centers face as they try to balance financial sustainability with their research and clinical missions.
Several health systems across the country have made similar decisions due to financial strain.
PeaceHealth recently stated it would cut 1% of its 16,000-member workforce and freeze nonclinical hiring for the rest of the year “after months of discernment, financial analysis and a thorough review of the dynamic healthcare market.”
Elsewhere, Mass General Brigham announced that it would undertake the largest layoffs in its history to make up ground on a $250 million budget gap and Providence paused nonclinical hiring as a result of low reimbursement and increased expenses.
With many hospitals and health systems already operating under financial duress, federal funding cuts represent a severe blow to organizations’ sustainability.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
VUMC is laying off 650 employees, mainly in nonclinical roles, to reduce expenses by $300 million.
Layoffs stem from federal reimbursement declines, including proposed NIH and Medicaid reductions.
Clinical care and expansion plans remain intact, but the move highlights the wider financial strain being felt by academic medical centers.