Dive Brief:
Renton, Washington-based nonprofit Providence cut 600 jobs this week in a business-wide restructuring.
In a statement Thursday, the troubled system said proposed cuts to Medicare and Medicaid, ongoing payment denials and delays from insurers, and higher labor and supply costs necessitated the cuts.
The layoffs affect less than 1% of Providence’s total workforce and impact mostly nonclinical, administrative functions, Providence said. However, some patient care roles were impacted.
Dive Insight:
By its own account, Providence has had a difficult start to 2025.
The 51-hospital system began the year by streamlining and reducing its executive team by 46 positions. Providence’s new CEO, Erik Wexler, said the cuts were necessary as the system prioritized “focus and discipline.”
Then in April, the health system said it would freeze nonclinical hiring and cut some discretionary spending, including nonessential travel and future sponsorship of major league sports teams, due to a “perfect storm” of economic pressures. At the time, Wexler said he had hoped Providence, which hasn’t posted a profit in four years, would break even in 2025.
“We were on track to finally break even this year. But just as we were nearing that goal, the external economic conditions in 2025 took a sudden turn,” Wexler said in an April email to staff.
Pressures include cuts to Medicare and Medicaid, which Wexler said have cost the health system $500 million. Additional cuts proposed by Congress could cost the system an additional $1 billion annually. Tariffs could also cause supply costs to shoot up by tens of millions of dollars.
The health system is also taking a hit from new state-level regulations, including stronger charity care laws and staffing legislation in Oregon, according to a financial report. The regulations have decreased revenue and driven up staffing costs. Other one-time costs include impacts from a 46-day nurses strike in Oregon and lost revenue from the Los Angeles wildfires.
The expenses have taken a toll: Operating revenues rose by 1% year over year during the first quarter, while operating expenses increased by 6%.
Providence said the most recent layoffs are part of the health system’s effort to restore its finances.
“These difficult but necessary steps are part of a comprehensive approach to financial sustainability that will enable our family of organizations to better reinvest in and revitalize the front lines of care, including the people, programs, equipment and facilities needed to serve our communities,” Providence COO Darryl Elmouchi said in a statement.
Other nonprofits have recently conducted large, swift rounds of layoffs. Boston-based Mass General Brigham laid off 1,500 employees in two rounds conducted over a matter of weeks.
In contrast, Providence cut executive roles and froze hiring before conducting its own mass layoffs. The phased-in approach may have allowed the health system to be more precise about where it reduced headcount, however, drawing out workforce changes over several months holds risks for employee morale, said Andy Challenger, senior vice president of outplacement firm Challenger, Gray & Christmas.
“It does have a legitimate effect on people’s psyche, on their morale and on their willingness to stay at the company,” Challenger said. “While you can be a lot more precise as an organization if you do your cuts that way — you can take the scalpel to [layoffs] instead of a butcher’s knife and make sure that you’re not overcutting… you can also create a real culture of panic for months and months on end.”
