The health system is set to make cuts at management and administrative levels due to financial pressures, the organization said.
Mass General Brigham (MGB) announced it will conduct the largest layoffs in the health system's history in response to financial headwinds and operational challenges.
The nonprofit organization's decision to eliminate hundreds of non-clinical workers in management and administrative positions is largely being driven by a projected $250 million budget gap over the next two years.
MGB is Massachusetts' largest private employer with around 82,000 employees. The restructuring process is expected to be completed in March.
"These actions are primarily focused on non-clinical and non-patient facing roles in an effort to enhance efficiency, reduce costs, and maximize support for frontline clinicians," an MGB spokesperson said in a statement. "This decision is necessary despite years of diligently promoting a culture of responsible resource stewardship and developing initiatives that generate diversified sources of revenue."
Though MGB reported a healthy bottom line in the most recent fiscal year, a closer look at its earnings revealed financial concerns. The system reported a $45.7 million operating gain and $2 billion in net income for the year ended Sept. 30, but much of that profitability came from investment gains.
When reporting its fiscal year results, MGB also called attention to the "unrelenting capacity crisis" affecting Massachusetts hospitals, leading to stunted revenue growth.
These challenges are coming at a time when MGB is working to integrate the clinical and academic departments of its two flagship facilities, Massachusetts General Hospital and Brigham and Women's Hospital. The system announced the plan last March and said it would take several years to consolidate the hospitals, which have operated independently.
Creating efficiency in its administrative structure has been a focus for MGB leadership for some time, according to The Boston Globe, which first reported the job cuts. Studies of the organization have found that MGB "had more managers per front-line worker than industry benchmarks, duplicative management roles, and many layers of managers," the report noted.
Meanwhile, hospitals everywhere are dealing with slashed support for research funding. MGB's announcement of layoffs came on the heels of news that the National Institutes of Health would reduce reimbursement to hospitals for indirect costs of clinical research to 15%.
MGB executives told The Boston Globe that the layoffs are not in response to federal money drying up, but allow the health system to deal with similar unforeseen obstacles.
"Like healthcare systems everywhere, we face unrelenting pressure that threatens our ability to continue to provide the care, innovation and service that define us," MGB CEO Anne Klibanski wrote in a message to employees. "If we do not take definitive action now to stabilize our financial health, we compromise our ability to continue to invest in our mission."
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Hundreds of non-clinical jobs will be reduced by Mass General Brigham as it works to close an anticipated budget gap of $250 million over the next two years.
MGB's finances outside of investment income, along with capacity constraints, show that the organization's operating margin isn't as strong as it appears.
Overcrowding in MGB's management structure has also reportedly been an issue, causing executives to pursue a trim down.