Mass General Brigham Announces Major Layoffs Amid Budget Shortfall and Industry-Wide Pressures

Mass General Brigham (MGB), Massachusetts' largest private employer, has announced plans to conduct the largest layoffs in its history. The health system aims to cut hundreds of non-clinical positions to address a projected $250 million budget shortfall over the next two years. This move comes as the healthcare industry faces significant challenges, including rising costs, capacity issues, and potential cuts to federal research funding.

Layoffs and Financial Challenges

MGB, which employs over 82,000 workers, will be consolidating management and administrative positions throughout the system. The cuts will primarily affect non-clinical and non-patient facing roles, with the goal of enhancing efficiency and maximizing support for frontline clinicians. While the exact number of affected employees has not been disclosed, reports suggest it could be in the hundreds.

The health system reported a $45.7 million operating gain (0.2% operating margin) for the fiscal year ended September 30, 2024. However, when excluding revenues from prior year activities, this figure drops to a $72 million operating loss (-0.4% operating margin). MGB cited "unrelenting pressures" affecting many healthcare systems across the country as the primary reason for the budget shortfall.

Niyum Gandhi, CFO and treasurer of Mass General Brigham, stated in December, "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."

Industry-Wide Challenges and Pressures

The layoffs at MGB are part of a broader trend in the healthcare industry. Outplacement services firm Challenger, Gray & Christmas reported that healthcare cuts peaked in 2023 and remained elevated in 2024. Other major health systems, including Tufts Medicine, Kaiser Permanente, and Jefferson Health, have also announced significant job cuts in recent months.

MGB has highlighted several challenges facing the industry:

1. Overcrowded emergency departments and capacity constraints
2. Backlogs in patient processing, affecting the system's ability to accept transfers and grow revenue
3. Inflationary increases in labor and supply costs
4. Modest annual increases in reimbursement rates

Additionally, the healthcare sector faces potential cuts to federal research funding. The Trump administration recently announced plans to cap National Institutes of Health (NIH) funding, which could significantly impact academic medical centers. The proposed policy would reduce the rate for reimbursing hospitals for indirect research costs from about 27% to 15%.

Rep. Jake Auchincloss, D-Mass., warned that these funding cuts could cost Massachusetts universities and hospitals approximately $2 billion. Last year, MGB recorded $2.9 billion in research and academic revenue, with $1.27 billion coming from the NIH and other federal agencies.

Restructuring and Future Outlook

In response to these challenges, MGB is undertaking several initiatives to improve its financial position and operational efficiency:

1. Integrating the clinical and academic teams of Massachusetts General Hospital and Brigham and Women's Hospital
2. Focusing on responsible resource stewardship
3. Seeking new revenue streams and diversification

Paul Hattis, senior fellow at the Lown Institute, commented on the broader implications of MGB's actions: "The days of easy money are over. 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."

As the healthcare industry continues to navigate these challenges, many systems are looking for internal synergies and preparing for potential headwinds. The actions taken by Mass General Brigham may signal a shift in how large healthcare organizations approach financial management and operational efficiency in the face of ongoing industry pressures.