Mass General Brigham said Monday it will let go of hundreds of employees in the next two months, the largest layoff in the organization’s history, as the health system grapples with anticipated financial shortfalls and ongoing operational challenges at its 12 hospitals.
With roughly 82,000 employees, MGB is easily the state’s largest private employer. Executives declined to say how many people would be let go, but said the target is to save at least $200 million annually, or approximately 2 percent of its salary and benefits costs. The cuts, which will occur this week and then again in a second round in March, would likely have rolled out more slowly over the course of years as the health system more closely integrates its hospitals, executives said, but have been sped up because of financial pressures.
“We are … facing the same unrelenting pressures affecting many health care systems across the country that are contributing to a projected budget gap of a quarter of a billion dollars within the next two years,” Jennifer Street, senior vice president of communications at Mass General Brigham, said in a statement. “We are acting now to allow us to continue with planned and future investments.”
Reductions will be focused on administrative and management levels of the sprawling organization, Street said, and will not affect front-line clinical workers or staff that supports patient-facing care. The system will also consolidate some roles and eliminate some vacant positions.
“If we do not take definitive action now to stabilize our financial health, we compromise our ability to continue to invest in our mission,” said MGB chief executive Dr. Anne Klibanski, in an email to employees that was obtained by the Globe.
The reductions may seem surprising for a health system that has posted positive operating margins each of the last two years, buoyed by a robust investment portfolio. In the 12 months ending in September, the most recent financials that are available, MGB reported a $45 million margin from operations, and a $2 billion net margin, on $20.6 billion in total revenue.
Experts looking at the system’s financials said its recent performance points to a level of resilience to face future challenges, at least compared to other Massachusetts hospitals that have less cash and smaller investment portfolios. In that context, said David Rosenbloom, professor emeritus at the Boston University School of Public Health, reductions may have more to do with becoming more efficient than to make up for losses.
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“They are not currently challenged,” he said. “Are they worried about the future? Yes. When I taught hospital finance, I said the primary and virtually only rule of a hospital is maximize your revenue today because you don’t know what the bastards will do to you tomorrow … There may be (also) inefficiencies of scale, when you get as big as MGB.”
MGB executives have put forth a drumbeat of concern about their core operations, saying that much of their operating margin over the last two years has come from federal financial support lingering from COVID or other one-time federal payments, while they face a problematic long-term outlook.
They describe a system where costs are steadily rising faster than revenues — which mainly come from private and public insurers who are themselves under pressure to keep health costs in check. And while MGB is able to save some money through improved efficiency, they’ve reached a point where they need to rein in labor costs.
At the same time, like many health systems across the state, MGB’s hospitals are crowded, with demand for inpatient beds exacerbating backups that spill over into the emergency room. That has financial consequences too, as hospitals are largely reimbursed once for each discharge, regardless of how long the patient stays in the hospital. So while MGB’s hospitals are busier than ever, its revenue growth has been held in check.
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One bright spot for the hospital system is the billions of dollars it has seen in investment gains over the past years. But earnings on that money are largely either restricted by donors to certain uses or earmarked to capital projects, such as a $2 billion expansion at Massachusetts General Hospital. It’s not available, they said, to plug financial holes in the core business.
Rosenbloom, who several years ago sat on the audit and finance committee of what was then known as Partners HealthCare, said it makes sense why the organization isn’t dipping into its reserves to routinely cover its expenses. But he also noted that was a choice the institution was making with its money, only to invest it into capital projects and not to cover potential future shortfalls.
Dr. John Freedman, CEO of Freedman HealthCare, a national health policy consulting firm based in Massachusetts, also pointed at MGB’s cash and investments as a boon to weather what comes next.
“Any multi-billion dollar organization has struggles and challenges in running itself,” Freedman said. “The question is, are they somehow worse off than all the other provider organizations in Massachusetts? The answer is a clear no. They are doing much better. They have rich reserves.”
Beyond current financial pressures, reductions will also help to achieve efficiencies as part of a long-running effort to better integrate across its system, and in particular across its two flagship institutions — Massachusetts General Hospital and Brigham and Women’s Hospital.
That has been underway for sometime, with leadership slowing rethinking jobs and eliminating roles through attrition. Executives acknowledged that the mounting financial challenges accelerated the process, and prompted a wider reorganization plan. In November, executives began having conversations with ultimately over 100 senior leaders across the organization to discuss ways to streamline MGB’s administrative structure.
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Studies of Mass General Brigham’s management structure also revealed that Mass General Brigham had more managers per front-line worker than industry benchmarks, duplicative management roles, and many layers of managers, executives said. While high performing organizations may have maybe seven or eight layers of management between the front line worker and the CEO, in some places at Mass General Brigham, there were 15.
“Mass General Brigham is clearly trying to consolidate, become more efficient, cut costs, and dramatically change how it’s organized internally,” said Dr. David Blumenthal, former president of the Commonwealth Fund, a national group that does research on health and social policy issues. “Whether it will result in a stronger, more consolidated, premier [academic medical center] remains to be seen. I think it’s a big gamble for this community and we will have to see what the outcome is”
There has already been some pushback to MGB’s integration work, especially among doctors. A 2022 plan to bring together large medical services across hospitals stirred anxiety among some clinicians, who worried about being shut out from decision making and increasing corporatization of the system.
Then in March 2024, the system announced broader clinical consolidations, merging 34 departments across Mass General and Brigham and Women’s. At the time, executives said they did not expect job cuts.
That announcement ignited a firestorm within the workforce, who spoke out in town meetings and voiced ongoing frustration about the changes. Unionizations followed, first at MGB-owned Salem Hospital, and then 300 more primary care physicians employed by Mass General Brigham.
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While these layoffs are focused on managers and administrative staff, they could further strain morale.
And big health care institutions like MGB have encountered fresh challenges in the last few weeks, with threats to everything from federal research dollars to Medicaid funding. On Friday, the National Institutes of Health, which funds much of the country’s basic biomedical research, announced it would slash support for “indirect costs” for research funding — money that hospitals, universities, and other research institutions rely on for basic operating expenses.
Executives said they did not plan budget cuts in response to possible reductions in federal money, but said creating a healthier organization now builds financial resilience to weather whatever comes next.
Jessica Bartlett can be reached at [email protected]. Follow her @ByJessBartlett.