How to Control Costs Without Cutting Staff

Healthcare is under pressure from shrinking Medicaid reimbursements and increasing labor expenses, but do staff cuts need to be the default strategy?

The pressure is on for CFOs as they navigate massive reimbursement cuts and deepening industry uncertainty. In response, some health systems have turned to staff reductions, especially in non-clinical areas, to reduce costs.

For example, Lenox Hill Hospital (Northwell Health) in New York City is cutting 18 EMS roles and shuttering three 911 units. Kaiser Permanente is also laying off 216 workers across IT and food services in multiple California counties. Meanwhile, Powell Valley Healthcare in Wyoming is ending oncology services and closing its internal medicine clinic in Cody.

Northern Light Health, which had a financial turnaround earlier this year, plans to close its Waterville walk-in clinic, affecting 30 staff. Select Specialty Hospital in South Dakota is set to close, laying off 90 employees. Providence Health, who has grappled with staffing conflicts for some time now, will also cut 128 jobs across its Oregon facilities.
 

These aren’t isolated events. Many of these decisions stem from a shared root cause: Medicaid funding challenges, particularly for safety-net and rural hospitals. For some CFOs, service and staff reductions are seen as the only immediate lever available.

But layoffs don’t have to be the go-to strategy. Several CFOs are pursuing alternative cost-saving measures that preserve workforce stability and long-term operational viability.

Rethinking Labor Costs

A major financial burden in recent years has come from the growing reliance on contract labor, particularly post-pandemic. At UW Health, vice president of finance Jodilynn Vitello described the cost strain:

“The levels of contracted labor that we're using remain significantly higher than pre-pandemic—five to 10 times higher. It’s a significant impact on margins.”

To address this, UW Health took a multi-faceted approach to reduce dependency on contract workers, instead focusing on in-house workforce development. Tactics included launching apprenticeship programs and offering targeted retention bonuses to stabilize staffing without long-term overspending.

Tech and Collaboration Offer New Paths

Some organizations are using technology to cut costs without cutting staff. Saint Peter’s University Hospital, for instance, improved its revenue stream by partnering with Escher Health on an AI-driven Medicaid enrollment program, leading to increased enrollment and a notable financial boost.

Additionally, CFOs can also look inward to assess and cut non-clinical spending, which can account for up to 30% of a hospital’s budget. Cost-saving opportunities include switching vendors for supplies like gowns and gloves, reevaluating contracts for signage, landscaping, and maintenance, and streamlining administrative tools and subscriptions
 

Collaboration Is Key

Ultimately, sustainable cost control requires more than reactive layoffs. CFOs should work closely with clinical and operational teams to identify financial pressure points and build tailored, strategic solutions. Open dialogue across departments can surface underused programs, inefficient processes, or overlooked spending patterns, offering savings without sacrificing staff or patient care.

Cutting staff may offer short-term relief, but it’s not always the wisest long-term strategy. From optimizing contract labor and using AI, to slashing non-clinical spend and investing in workforce development, healthcare CFOs have options. In a time of reimbursement uncertainty, creativity and collaboration, not just cuts, could be the best path forward.