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.
New analysis by Chartis reveals how vulnerable rural hospitals are across the country, especially in certain states.
The number of rural hospitals in danger of closing is increasing, placing greater stress on the health of those communities.
Loss of access to care, combined with the decline in rural population health and growing "care deserts," is creating an unstable ground for rural hospitals to operate on, according to a report by Chartis.
The study found that 46% of rural hospitals are in the red, while 432 facilities are at risk of closure. In comparison, the advisory firm's research from a year ago reported that 50% of rural hospitals were losing money and 418 locations were teetering on closing.
While the national median operating margin for rural hospitals is 1%, that figure is negative within 16 states, the report stated. States with the highest percentage of rural hospitals in the red are Connecticut (100%), Kansas (87%), Washington (76%), Oklahoma (70%), and Wyoming (70%).
There's also a significant discrepancy between states that have expanded Medicaid under the Affordable Care Act and that 10 states that haven't, the report highlighted. In expansion states, the median rural hospital operating is 1.5% and 43% of hospitals are in a deficit. In non-expansion states, which represent nearly 30% of all rural hospitals, the median operating margin is -1.5% and over half of hospitals are in the red (53%).
Overall, 182 rural hospitals since 2010 have either closed or converted to a model that does not provide inpatient care, including hospitals that switched to a long-term care model or a Rural Emergency Hospital designation.
Even when rural hospitals continue to offer inpatient care, it's often with reduced services. For example, the analysis found that between 2011 and 2023, 293 rural hospitals stopped providing obstetrics, which accounts for 24% of the country's rural OB units.
Rural hospitals are more susceptible to policies like reimbursement cuts, the study noted. According to the research, the 2% cut in Medicare reimbursement under sequestration will cost rural hospitals more than $509 million this year and result in over 8,000 jobs lost.
"Our analysis of population health domains indicates that rural hospitals will be challenged to meet the needs of vulnerable communities in the years ahead," Michael Topchik, executive director for The Chartis Center for Rural Health, said in the report.
However, researchers also pointed to programs and initiatives that are improving the viability of rural hospitals.
The Innovation for Maternal Health Outcomes in Minnesota " is improving outcomes in communities experiencing the highest rates of disparities, including rural communities," while the University of Rochester Medical Center's launch of telehealth stations in banks has improved access to care.
Saum Sutaria told investors that the organization has "differentiated" itself from its peers, allowing it to better navigate the regulatory climate.
Tenet Healthcare's leadership believes the hospital operator is prepared to deal with policy changes that could be coming from Washington.
CEO Saum Sutaria spoke on a call with investors after the health system reported its fourth quarter and year-end earnings, expressing some optimism that Tenet's portfolio realignment has it in a better position to handle regulatory headwinds.
Tenet recorded $3.2 billion in net profit for 2024, compared to $611 million in 2023, while bringing $20.7 billion in net operating revenue. The company called the full-year financial performance "outstanding."
On the earnings call, Sutaria stated that the system continued to shift its portfolio by selling 14 hospitals and adding nearly 70 ambulatory surgical centers in 2024. Tenet plans to invest approximately $250 million each year towards the ambulatory space and expects to add 10 to 12 centers in 2025.
By moving its focus away from hospitals and towards the ambulatory surgery center (ASC) business, the system is likely to be less impacted by changes like site-neutral payments, Sutaria noted.
"We have demonstrated an ability to perform well in a variety of operating environments, and believe we are differentiated from our peer set as we navigate potential changes going forward," Sutaria said. "For example, our ASCs operate with freestanding ASC rates, which insulates that important part of our business from potential changes in site neutrality rules."
Meanwhile, Tenet's ASC business, United Surgical Partners International (USPI), has minimal exposure to Medicaid, putting it at less risk of being significantly affected by Medicaid reimbursement rate cuts or other alterations to the program, according to Sutaria.
"So, from a USPI perspective, this is all about an important tailwind of moving things into a lower-cost setting in an expensive portion of the care industry, which is surgical care, and doing so in a way where we're constantly increasing the acuity of the work at USPI because it creates more value for the purchaser," he said.
Though Sutaria recognized that Medicaid policies will have a greater impact on the hospital side, he stated that restructuring the acute care businesses in anticipation of changes would not be the right move.
Rather, Sutaria stressed the importance of advocating for Medicaid and how it improves access to care, so federal and state regulators feel compelled to preserve it.
Issues that the government has over Medicaid, such as fraud and abuse, were also likely helped by the Medicaid redetermination process, Sutaria highlighted.
"I think one thing that people may find is that Medicaid redeterminations over the last couple of years have probably done a lot to reduce the number of people eligible or not eligible who happen to be on Medicaid," he said. "So no way to predict for sure, but I'm somewhat comforted by the fact that some of that work has already been done through this redetermination process."
Changes in the hospitalization rate or staffed hospital bed supply are needed to avoid reaching concerning thresholds, a new study finds.
Hospital occupancy rates may be trending in a dangerous direction as healthcare is tasked with caring for an aging population in the coming years.
The average US hospital occupancy rate is 11% higher after the pandemic and without changes to the hospitalization rate or staffed hospital bed supply, that figure could grow to the point hospitals experience a bed shortage, according to a study published in JAMA Network Open.
Researchers highlighted that the mean hospital occupancy jumped from 63.9% between 2009 and 2019 to 75.3% between May 2023 and April 2024. The rise in occupancy was mostly driven by a 16% decrease in the number of staffed hospital beds, resulting in a drop from the steady state of 802,000 beds between 2009 and 2019 to 674,000 between May 2023 and April 2024.
Unless staffed hospital bed supply increases by 10%, hospitalization rate reduces by 10%, or some combination of the two occurs, the study's findings show that the national hospital occupancy could reach 85% as soon as 2032, with some states likely hitting that mark sooner. A national hospital occupancy of 85% would constitute a bed shortage.
As the American population gets older, more hospitalizations are expected to occur to care for adults with chronic and complex illnesses.
"I've been doing this for almost 40 years now and I've been hearing about how everybody's going to be cared for at home and we don't need hospital beds anymore, but I've got 100 people holding in my ED that tell me very differently about what their needs are and how they're going to be cared for," Amy Mansue, Inspira Health president and CEO, recently told HealthLeaders.
"We underestimate the level of complexity that comes from caring for people who have chronic illnesses, so while it seems like a simple pneumonia or a simple whatever, when you've got COPD and everything else added in that bucket, it requires a tremendous amount of care and people can't do that on their own."
How CEOs are strategizing
To deal with higher occupancy rates, hospital and health system leaders are utilizing M&A, particularly on the outpatient side.
By offering outpatient services, organizations can cut down on expenses, reach more patients in need of care, and free up hospital beds.
Kaufman Hall's latest National Hospital Flash Reportrevealed that the increase in outpatient revenue per calendar day outpaced the rise in inpatient revenue per calendar day in 2024 versus 2023, 9% to 8%, respectively.
"Driving the cost down is very, very important and when you can treat a patient in an ambulatory setting or even through population health and public health, you can try and manage illness and well-being before it becomes an acute issue," Ed Banos, University Health president and CEO, said in HealthLeaders' The Winning Edge for Transforming Through M&A.
Outpatient investment alone, however, won't solve the problem of hospitals not having enough beds. That's why organizations are also looking at ways to expand their inpatient sites of care through expansion and integration.
"It was a little surprising for us as we were heavily for years pushing to the outpatient market as everybody's talked about and now we're finding that the aging population is starting to overwhelm people's perspectives of how many beds are needed and we're actually having to try to catch up on that," Matthew Heywood, Aspirus Health president and CEO, said.
The trend and its impact will be worth watching in the coming months, Kaufman Hall analysts say.
Hospital financial performance in the past year has been a mixed bag.
Though a jump in revenue and manageable expense growth have helped hospital margins stabilize, a rise in bad debt and volume of charity care have kept bottom lines in check, according to Kaufman Hall's latest National Hospital Flash Report.
The analysis, which reflects data from more than 1,300 hospitals nationwide through December, revealed that hospitals finished 2024 with a 4.9% median operating margin after a strong close to the year that included a 7.6% figure for the final month. Compared to 2023, the 4.9% median operating margin represented a 9% year-over-year increase.
Hospitals, however, experienced swelling bad debt and charity care, likely stemming from the continued Medicaid redetermination process and health insurers bumping up denials, Kaufman Hall analysts stated.
Bad debt and charity per calendar day rose 14% year to date in 2024 versus 2023, and 20% compared with 2021. As a percent of gross revenue, those areas increased 7% year-over-year for the full calendar year.
"While it’s encouraging to see continued stability in hospitals' financial well-being over the past 12 months, historically slim margins indicate hospitals are not yet in a fully sustainable position," Erik Swanson, senior vice president and data and analytics group leader with Kaufman Hall, said in a statement. "The uptick in bad debt and levels of uncompensated care provided by hospitals will be an indicator to monitor over the next several months. On the workforce front, we continue to see a competitive and tight labor market across the healthcare sector."
Reasons for optimism for hospitals going forward include gross operating revenue per calendar day being up 8% in 2024 versus 2023, with inpatient revenue jumping 8% and outpatient revenue increasing 9%.
Meanwhile, adjusted discharges per calendar day for the year were 5% higher than in 2023, and observation patient days as a percentage of patient days declined by 13% over that period.
Expenses also continue to rise, the report highlighted, but they aren't outpacing inflation on a volume-adjusted basis. Increases for the full year on a calendar day basis were 6% for total expenses, 5% for labor expenses, 7% for non-labor expenses, 9% for supply expenses, 9% for drug expenses, and 8% for purchased service expenses.
Penn State Health's Deborah Addo shares how leaders operating within a short timeframe at the top can make an impact.
Even if an interim CEO's time in the position is short and sweet, they can make the most of the opportunity to advance both the goals of their organization and their career.
Deborah Addo, interim CEO, president, and chief operating officer of Penn State Health, told HealthLeaders about her approach to the role and how others in her position can learn from her experience.
The subsidiary and its growing fleet of health systems had a noticeable impact on Kaiser's year-end financial report.
Less than a year since launching, Risant Health is proving to pay dividends for Kaiser Permanente.
The integrated health system reported its 2024 earnings, which showed the subsidiary and its additions are boosting the bottom line.
In its first earnings report to include consolidated financial results for the health system, health plan, and Risant, Kaiser brought in $115.8 billion in operating revenue across 2024, compared to $100.8 billion in the prior year.
Kaiser's net income for the period was $12.9 billion, with Risant's acquisitions accounting for $6.8 billion of that figure, resulting in a jump from the $4.1 billion reported in 2023.
Operating expenses also increased year-over-year to $115.2 billion, compared to $100.5 billion in the previous period, as Kaiser dealt with "significant financial pressures" such as patient volume and high prescription drug prices, the system stated.
"Our financial performance in 2024 showed a modest improvement in operating income and, like others, we saw gains in nonoperating income driven by investment returns in the financial markets," Kaiser Permanente executive vice president and CFO Kathy Lancaster said in a statement. "This financial performance, along with carefully managing our resources and becoming more effective in our operations, allowed us to maintain investments in our capital and technology programs to drive affordability and enhance the consumer experience."
Risant launched last April after closing its deal for Geisinger Health, giving it its first health system for its value-based network.
Risant then tabbed Cone Health in the summer as its second acquisition before finalizing that transaction in December.
Both Geisinger and Cone were profitable systems before being scooped up by Risant, with the former reporting $367 million in net income in 2023, while the latter recorded $197.6 million.
At least three to four additional systems are expected to be added within the next half-decade, based on the plans Risant has laid out, which includes reaching a total revenue of $30 to $35 billion.
Currently, Kaiser and Risant consist of 55 hospitals, 40 retail and employee clinics, 841 medical offices, and more than 13 million health plan members.
In the finite time Deborah Addo has at the helm of the health system, she's striving to leave her mark while paving the way for a successor.
The lifespan of an interim hospital CEO's tenure can be unpredictable. "It's time-certain, but uncertain," Penn State Health interim CEO Deborah Addo told HealthLeaders.
Shepherding a health system through a transition period between permanent guiding hands brings with it its own set of unique challenges. How much action do you take? Should you operate as a wartime or peacetime general? How long should you plan for the changes you implement to be in place?
It, of course, depends on the context. In the case of Addo, she served as president and chief operating officer of the Hershey, Pennsylvania-based system since 2021 before filling the void left by Steve Massini, who retired as CEO in October.
As Addo took the reins, she first sought out clarity in how she should approach her time in the position and what direction she could take it.
"I had some critical conversations with the president of our university to really ask, 'Hey, are you looking for someone for maintenance or are you looking for someone for movement?' I think you do need to clarify that and both are okay, dependent on where your organization is, but it also needs to align with the person that you're asking to do it," Addo said. "I'm less okay with maintenance, so it would have been hard if that was her answer. Fortunately, it wasn't, and it was for movement, so it really then set the course for what we needed to do."
Pictured: Deborah Addo, interim CEO, president, and chief operating officer, Penn State Health.
That confidence to play a pivotal role, both within herself and from her bosses, was developed over the three-plus years Addo spent working closely with Massini as second in command. She learned firsthand what it takes to grow the system, its legacy, and its pride.
Now, Addo is applying that experience within the confines of the interim CEO position, for as long as she has the opportunity.
"One of the things is ensuring that you still create what will be those measures for success, even if it's a short period of time," Addo said. "You still create what is the strategic plan, even if it's for a short period of time. But you also have to be comfortable with letting go of ownership because there is a reality that some of what you put in place might be changed sooner versus later. So I think if you go into it with that mindset, then it makes it a whole lot easier."
With as much turnover as C-suites in hospitals and health systems across the country are experiencing, it's vital for organizations to have a succession plan in place. "I actually think it's irresponsible if we don't," Addo said.
Addo has undertaken not just one, but two key duties in Penn State Health's succession planning. In addition to serving as interim CEO, she's also very much engaged in the search process for a successor, which she expects to be completed in late spring.
"I'm working with the search company that is going to be leading this up to make sure that the voice of the executive team is also very much heard and understood," Addo said. "I'm realizing that we are going to be the support system for whoever comes in and assumes the helm. And then as we continue, it's looking at how do we not miss a beat? I want that person to be even better positioned because of the time that I've spent in this chair."
Addo, who used to run track, likens the process of creating the right environment for a successor to handing off the baton in the 4x400-meter relay. When you mess up the handoff, she noted, you're unlikely to get the outcome you want.
"For me, it's making sure that I give a smooth handoff and then get out of the way."
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."
It's the latest development in the long saga of troubled Crozer, which has yet to secure a permanent owner.
Prospect Medical Holdings' most recent attempt to divest Crozer Health wasn't completed, putting the long-term fate of the four-hospital health system up in the air.
For now, Crozer's facilities will remain open after a U.S. bankruptcy judge approved a plan to place the turbulent asset into a 30-day receivership with FTI Consulting while Prospect searches for new owners.
The deal between Prospect, which filed for chapter 11 bankruptcy in January, and the Commonwealth of Pennsylvania was signed off on by Judge Stacey Jernigan and came after a proposed sale of Crozer to a nonprofit consortium of healthcare operators was put on hold.
Under the agreement, advisory firm FTI Consulting will receive $20 million in funding from Pennsylvania to keep Crozer's operations running for one month.
Two of Crozer's hospitals remain operational and continue to provide care in Delaware County—Crozer-Chester Medical Center and Taylor Hospital. Crozer previously shut down Springfield Hospital and Delaware County Memorial Hospital.
"Crozer Health looks forward to working constructively with the Commonwealth of Pennsylvania and FTI Consulting to ensure that our communities continue to receive uninterrupted access to the critical health services they require," Crozer Health CEO Anthony Esposito said in a statement. "As always, we remain focused on providing high-quality and personalized care to our patients, and will continue to uphold that commitment throughout this process."
Pennsylvania authorities filed a lawsuit last year against Prospect and its former private equity owner, Leonard Green & Partners, alleging mismanagement that led to the closure of half of Crozer's hospitals.
A recent bipartisan report from the Senate Budget Committee found that Leonard Green collected $424 million of the $645 million in dividends and preferred stock redemption that Prospect paid out to investors. It also revealed that Prospect engaged in a $1.55 billion sale-leaseback deal with Medical Properties Trust, leaving it with crippling debt.
"Prospect has a long track record of reckless, greedy, and irresponsible management of Crozer — and they will not receive a cent of this funding," Gov. Josh Shapiro spokesperson Will Simons said in a statement.
