Dive Brief:
Mass General Brigham will lay off hundreds of non-clinical employees, a spokesperson confirmed on Monday. The health system said it is making the cuts — which are the largest in the health system’s history — to stem a projected financial shortfall of $250 million over the next two years.
The academic medical system has improved its operating margin in recent years and reported a $2 billion net margin in the year ended Sept 30. However, investments drove most of the system’s gains in profitability last year, and a spokesperson said the health system is battling sector-wide headwinds. “We are acting now to allow us to continue with planned and future investments,” they said.
Anticipated cuts to federal research funding, announced Friday, and threats to the Medicaid program could have motivated MGB to act now, said Paul Hattis, senior fellow at the Lown Institute. “The rich … tend to stay rich by managing carefully,” he said.
Dive Insight:
Mass General Brigham is the largest private employer in Massachusetts, with a workforce of more than 82,000. The health system, which is generally considered one of the most financially stable in the state by credit ratings agencies and state regulators, is mostly known for its two flagship hospitals: Massachusetts General and Brigham and Women’s.
The hospitals have operated almost entirely independently from one another for much of the system’s 30 year history. However, MGB laid out plans in March to integrate the hospitals’ clinical and academic teams over several years, citing an opportunity to create efficiencies.
That restructuring could have shed light on role redundancies organization-wide, Hattis said.
The health system has previously been accused of having a bloated management team, he said. MGB executives nodded to this theory in interviews with the Boston Globe, which first reported the layoffs. MGB said studies have shown the health system has more managers per front-line worker than its peers, multiple layers of management and some redundant roles.
The system has also repeatedly warned about the impact of rising expenses and an “unrelenting capacity crisis” on the system’s bottom line. MGB said overcrowded emergency departments and resulting backlogs processing patients through the system were hurting the system’s ability to accept patient transfers and grow its revenue.
“Our response has included an intense focus on cost management while pursuing new sources of revenue, but ongoing headwinds continue to temper the pace of our progress,” Niyum Gandhi, CFO and treasurer of Mass General Brigham, said in December.
Mass General Brigham declined to provide specifics about which roles will be impacted in this round of layoffs. However, the health system said the cuts were unrelated to its former performance improvement plan with Massachusetts regulators. The Health Policy Commission said in December that the performance plan was successful in helping MGB reach its target of $176.7 million in savings.
Still, the decision to cut jobs now may be motivated by more immediate cost pressures, according to Hattis, who has previously served on the Massachusetts Health Policy Commission and has worked with numerous Massachusetts health systems, including MGB.
Last week, the Trump administration announced plans to cap federal research funding from the National Institutes of Health as part of an ongoing push to reduce federal spending. The policy would slash the rate for reimbursing hospitals for indirect research costs from about 27% to 15%.
Although a federal court temporarily blocked the policy from taking effect on Monday, members of Massachusetts’ congressional delegation have sounded the alarm about the possible impact on state academic medical centers.
“Scientific overhead is well more than 15% of the cost of the experiments themselves: facilities, IT, and support personnel are essential elements of cutting-edge research,” said Rep. Jake Auchincloss, D-Mass., in a LinkedIn post on Monday. The congressman warned the funding cuts could cost Massachusetts universities and hospitals approximately $2 billion.
Last year, Mass General Brigham recorded $2.9 billion in research and academic revenue, a 7% increase compared to the year prior. Should the proposed NIH rate cuts ultimately hold up in court, Hattis said the system could lose access to a “significantly huge chunk of dollars.”
There are also worries that Congress could take aim at Medicaid, the public insurance program for low-income Americans, in a bid to cut costs. Regulators could attempt to cap the rate states are reimbursed for services or place restrictions on who qualifies for the program, such as work requirements.
Taken together, Hattis said the flurry of activity likely contributed to the timing of MGB’s layoff announcement. However, he stressed that reducing headcount was likely an idea in the works for a while.
“This wasn’t something that that was cooked up over the weekend,” he said.
Meanwhile, healthcare layoffs are on the rise industry wide. Outplacement services firm Challenger, Gray & Christmas tracks layoffs and found healthcare cuts peaked in 2023 but remained elevated last year. For example, Massachusetts-based Tufts Medicine cut approximately 170 roles in May, Kaiser Permanente slashed more than 450 roles over 2024 and Jefferson Health cut 270 positions last month.
The high rate of layoffs is a bit unusual, according to Andy Challenger, senior vice president of Challenger, Gray & Christmas. The consultant said workforce reductions are usually a lagging indicator of economic pressures; however, in this case, they’re coming even as nation continues to add jobs. In January, the U.S. Bureau of Labor Statistics found the healthcare sector added 44,000 jobs, 14,000 of which were in hospitals.
“It’s not a recession,” Challenger said. “You often see layoffs when the economy goes down, but the economy’s floating along pretty fine right now.”
Challenger said healthcare layoffs could signal systems are looking for synergies in-house to remove operating redundancies or are preparing to weather headwinds on the horizon.
“The days of easy money are over,” Hattis said, reflecting on what the MGB cuts signal about the broader healthcare ecosystem. “Here’s the largest and wealthiest by net worth healthcare organization in our state, and they’re looking at what’s down the road… and saying we need to act accordingly.”
