Memorial Hermann Health System in Houston announced it is laying off 350 employees from its 25,000-employee workforce, Houston Chronicle reported. The system laid off 112 employees in January.
Memorial Hermann’s interim President Chuck Stokes pointed to uncertainty in the healthcare industry, escalating costs, declining reimbursements and a softened local economy as the reasons for the layoffs. Stokes took over for former CEO Benjamin Chu, who abruptly left the system last week after serving in the position for about a year.
Stokes said the system is profitable and the cuts do not affect patient care. Instead, the layoffs are a result of needing to “prosper under the new normal in healthcare.”
Stokes’ talk of “the new normal in healthcare” is something all health systems are facing. Hospitals are merging, acquiring other hospitals and shedding facilities in an attempt to compete in a healthcare system that has fewer hospital admissions, rising costs and lower reimbursements.
Memorial Hermann is one of a growing number of health systems that have decided to cut staff as a way to cope. Recently, other major systems shed employees. Summa Health cut 300 positions, Sutter Health closed a nursing unit and laid off 72 employees, NYC Health + Hospitals cut 476 positions and Banner Health offered severance packages to employees.
No hospitals are immune to these cuts. For-profit health systems are dealing with similar financial problems as nonprofits. Rural and safety-net hospitals might be more at-risk, but large metro systems are also facing issues.
In addition to layoffs, healthcare has seen its share of M&A activity of late as a reaction to the "new normal."
Over the past month, Palmetto Health and Greenville Health System, both in South Carolina, announced a new nonprofit company that will combine the two systems into one 13-hospital company with 1.2 million patients and $3.9 billion in annual net revenue. Also, Quorum Health recently sold two hospitals to UPMC Susquehanna and Mayo Clinic’s announced it plans to consolidate two hospitals. On the flip side, HCA is looking to buy more hospitals.
Richard Gundling, senior vice president of healthcare financial practices at the Healthcare Financial Management Association, recently told Healthcare Dive that the trend of healthcare M&A will continue as hospitals figure out ways to handle risk-based contracting and other Medicare changes. He said for-profits will likely look for M&A options, especially in rural areas, in hopes of bringing scale, which he said all hospitals want.
Hospitals that transition to new payment models while increasing quality and safety measures, and lowering expenses will be a better position to deal with future changes, he said. “Focusing on increasing value to patients and purchasers is a no-fail strategy,” Gundling said.