Hospital margins have improved slightly in recent months as patient volumes rebounded but high labor costs and inflation continue to challenge bottom lines, forcing CFOs to continue to curb costs through various means, including workforce cuts.
Chicago-based CommonSpirit reported an operating loss of $1.4 billion (-3.9 percent operating margin) in fiscal year 2023 as improving patient volumes failed to offset rising expenses due to labor costs and unfavorable reimbursement rates, according to the health system.
The 142-hospital system laid off about 2,000 full-time positions in the fiscal fourth quarter — which ended June 30 — and is also restructuring its portfolio into five geographical regions rather than the current eight.
"Like the rest of the healthcare industry, CommonSpirit continues to be affected by inflation, the continued labor shortage, and challenging dynamics with payers,” CommonSpirit CFO Dan Morissette said. "Given those headwinds, we continue to focus on initiatives and opportunities that allow us to pursue growth, reduce costs and increase efficiency, while at the same time investing appropriately in developing the workforce of the future."
Kaiser Foundation Hospitals plans to cut jobs in two East Bay cities and in Southern California. WARN notices filed with the state disclose plans to cut jobs in six cities, including Oakland, where Kaiser is based.
The cuts, effective Nov. 10, include 28 jobs in the East Bay and 21 jobs affecting workers in Southern California. The cuts do not affect union jobs, with affected workers offered the opportunity to pursue other jobs within Kaiser, according to the health system.
"To ensure that Kaiser Permanente can continue to deliver on its mission of providing high-quality, affordable healthcare to our members and communities, we must strengthen our capabilities and be flexible in the current environment," Kaiser said in a statement shared with Becker's.
Kaiser Permanente and a labor coalition have also reached a tentative four-year deal after a strike that began Oct. 4 involved tens of thousands of workers in multiple states, including California, Colorado, Washington, Oregon, Virginia and the District of Columbia. The Coalition of Kaiser Permanente Unions deemed the strike as the largest healthcare worker strike in the U.S.
Winston-Salem, N.C.-based Novant Health laid off 160 employees — primarily affecting those in management and administrative positions — as part of an "organizational redesign plan," spokesperson for the system told Becker's.
"In a challenging healthcare environment, we are focused on how we can work differently to prioritize direct patient care, operate more efficiently and reimagine how we serve our patients," the health system said in a statement.
Hospitals and health systems in rural areas are especially feeling the pinch.
Farmers Branch, Texas-based Southwestern Health Resources, a 31-hospital joint venture between UT Southwestern Medical Center and Texas Health Resources, is also laying off employees, but it is unclear how many workers or positions will be affected or when layoffs take effect.
"After careful consideration, we are adjusting our organizational structure and aligning our staffing model to meet current needs in our evolving health care market while also maximizing value, quality, and service for our patients," Southwestern Health Resources said in a statement to The Dallas Morning News. "We are providing support and resources for employees whose positions are impacted."
Workforce challenges, inflation, rising costs and lower reimbursement are likely to carry over into 2024, but hospital executives are hellbent on hitting their fiscal year targets and continuing to move the needle in the right direction despite these challenges.
"It is really tough out there financially right now. I anticipate this tough environment – inflation, workforce challenges, and slower growth to name just a few – to be with us for the next 24 to 36 months," Peter Banko, division president of CommonSpirit, said. "But, despite all this, the future is exceptionally bright. Meeting budget expectations, to fuel and fund growth, will require a turnaround mindset. Saying it and doing it."