Citing financial challenges, Cleveland-based University Hospitals is reducing its leadership structure by more than 10% as part of more than 300 layoffs.
Rising costs of supplies, labor and purchase services, and reduced Medicare reimbursement rates, have affected UH and various other systems, according to COO Paul Hinchey, MD.
"All of that's creating significant downward pressure on our revenue," Dr. Hinchey told Becker's.
The news from UH follows a national trend of hospitals facing significant headwinds. Kaufman Hall found in early June that 40% of hospitals in the U.S. are still losing money.
At UH, revenue has increased nearly 9% year over year due to various changes, such as increased access for patients and implementing a new EHR system, according to UH.
"[However], in spite of our efforts and being successful in growth, that downward pressure on revenue and the increasing prices is pinching our margin," said Dr. Hinchey.
Dr. Hinchey said the health system has been optimizing operations since the end of the pandemic.
"We took a look at our cost structure and recognized we needed to get our cost structure down," he said. "We've done a couple initiatives that we put under the auspices of a Medicare break-even initiative to try to drive down our cost structure."
Some actions already taken have included increasing efficiency, consolidating service lines and closing hospitals in Bedford and Richmond Heights, according to UH.
Most recently, the health system identified an opportunity to make cuts to leadership. Dr. Hinchey said C-suite level leaders and vice presidents were included in the cuts.
"These decisions are never easy," Cliff Megerian, MD, CEO and Jane and Henry Meyer Chief Executive Officer Distinguished Chair, said in a news release. "The important thing is that we make these strategic moves now so we can continue to serve our community and fulfill our mission for decades to come. We are thankful for our hometown team that delivers lifesaving care to our neighbors, friends and relatives each and every day."
Dr. Hinchey said UH began notifying employees of the layoffs on June 17. Affected workers will receive a severance package aligned with their roles and tenure.