The University of Pennsylvania Health System (Penn Medicine) and Crozer Health are both undergoing reorganizations that include job eliminations and layoffs, according to statements and internal memos cited this week by local press.
Penn Medicine is aiming to save $40 million in annual costs by, among other moves, eliminating an undisclosed number of administrative positions, CEO Kevin Mahoney reportedly wrote to the academic system’s employees last week. While “many” of those affected will be shifted into other positions within the organization, he said that others will be let go and provided assistance as they seek a new employer.
Penn Medicine did not respond to Fierce Healthcare’s requests for confirmation or comment.
The system runs eight hospitals largely concentrated in southeast Pennsylvania and employs nearly 50,000 people. It reported $147.5 million in operating income in fiscal 2022 as well as a $103.6 million operating profit for the six months ended Dec. 31.
"As a result of your continued dedication to our mission, we remain one of the few health systems in the region that continues to have a positive operating margin,” Mahoney wrote in the internal memo obtained by the Philadelphia Business Journal. “We continue to reinvest that margin in our workforce, including a planned pay raise for [Penn Medicine] employees later this spring. However, like health systems across the nation, inflation-related costs have contributed to expenses that outpace our earnings.”
Other cost-cutting measures cited by Mahoney include vendor contract renegotiation, consolidation of enterprisewide corporate services and the elimination of unneeded administrative systems, according to the Journal. The system also reportedly hopes to bring in more revenue by negotiating higher rates from commercial employers this summer.
Crozer Health, meanwhile, shared an announcement Wednesday that the positions of “approximately” 215 employees, or 4% of its total workforce, will be impacted by “immediate steps to restructure certain aspects of its operations.”
The four-hospital system owned by Prospect Medical Holdings pointed to economywide rising costs and “the refusal of contracted health insurance plans to renegotiate the terms of their agreements to reflect this changed economic reality,” Crozer Health wrote in the announcement.
As such, the system will be “removing duplication in administrative oversight,” ending underutilized health services, renegotiating contracts, scrutinizing its clinical affiliations and continuing its negotiations with health plans, it said.
Employees impacted by the position closures will be considered for other open positions, Crozer Health said, and those who leave will be given access to outplacement services.
“We made the difficult decision to restructure our operations in order to ensure that resources are properly allocated to meet our patients’ and our communities’ most pressing health care needs, while at the same time allowing us to stem the financial losses that threaten our ability to continue serving [Pennsylvania’s] Delaware County,” CEO Anthony Esposito said in the announcement.
Crozer Health has been on hard times as of late. After a planned sale to Delaware’s ChristianaCare Health System fell through last August, the system announced a controversial plan to shutter its Delaware County Memorial Hospital and convert it into a behavioral health facility.
In this week’s statement, Crozer Health said that it was losing roughly $12 million each month in September when it chose to shut down the hospital, which, along with other moves, has trimmed the losses to $7 million per month. Plans to convert the building into a behavioral health facility have since been held up in court by a nonprofit that contested the move.
“Litigation has prevented Crozer Health from moving ahead with its plan to re-purpose underutilized Delaware County Memorial Hospital and convert it into a much-needed behavioral health facility with an urgent care center,” the system said Wednesday. “… These losses are clearly unsustainable in the long run, which underscores the need for the organization to take these actions now to help secure its future.”
Crozer Health’s restructuring and job elimination announcement was panned by the state’s Democratic lawmakers. In a joint statement, Sen. Amanda M. Cappelletti, D- Delaware/Montgomery, Sen. John Kane, D-Delaware/Chester, and Sen. Tim Kearney, D-Delaware, acknowledged the economic headwinds faced by hospitals but pointed the finger at owner Prospect Medical Holdings.
“Today’s announcement is another disingenuous attempt by Prospect Medical Holdings to avoid taking accountability for further crippling the Crozer Health system,” they said. “Instead of recognizing Prospect’s decision to raid Crozer’s assets and saddle the system with hundreds of millions of dollars of debt, as well as its failure to uphold its duty to provide health services to our communities, Crozer is choosing to reduce access to healthcare in Delaware County and harm hundreds of its dedicated staff in the process.”
News of the two health systems' restructuring plans and layoffs land about two months after nearby Jefferson Health announced it was launching a similar effort to reverse its $126 million 2022 operating loss.
Another local system, West Reading, Pennsylvania-based Tower Health, laid off dozens of corporate employees in November as it worked to sell off two of its hospitals and reverse severe financial struggles.
Elsewhere in the country, 23-hospital Adventist Health said in February that it would be laying off 52 administrative employees as part of a reorganization that would save the religious organization more than $100 million in costs.
Earnings released last week by Renton, Washington-based Providence placed a $247 million price tag on its own operations overhaul that was announced last summer. The Catholic giant capped off a tough fiscal 2022 with a $6.1 billion net loss.