The second-largest employer in the Philadelphia region is Jefferson Health. It started on July 24, 2023, and is reducing its workforce by 1%, or about 400 employees. The system employs 42,000 people and runs 18 southeastern Pennsylvania and South Jersey hospitals. It has cut back on corporate and managerial duties.
According to a statement from Jefferson CEO Joseph G. Cacchione, the job losses are part of a $300 million cost-cutting strategy. A certain number of open positions will be eliminated as a result.
Thomas Jefferson University Hospital comprises five hospital campuses. Jefferson Health owns it. Additionally, the health system operates more than 50 urgent care and outpatient centers around the area. Let us view the business and its layoffs in detail in this article.
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About Jefferson Health Care
Thomas Jefferson University Hospital in Center City, Philadelphia, is the main hospital of Thomas Jefferson University Hospitals, Inc. It is a multi-state nonprofit health system known as Jefferson Health. Thomas Jefferson University’s academic hospitals are located in the medical centers of the health system. Jefferson Health and Thomas Jefferson University work under the same umbrella. It generates joint financial statements and has a single board of directors.
Restructuring at Jefferson Health makes integration easier
Philadelphia’s Jefferson Health is reorganizing in a way that involves layoffs. According to a hospital spokesperson, Jefferson Health is changing its business structure from five divisions to three “regions”: North, Central, and East.
According to Jefferson, a North Region with six hospitals, a Central Region with seven, and an East Region with three (located in New Jersey). The three regions do not include two more hospitals run by joint ventures.
According to him, further action is being taken to improve the health system’s clinical integration. “This fresh organizational design enables Jefferson Health to improve its processes. It also improves our health system. This is to deliver safe, high-quality, and caring services to our patients and communities,” he added.
According to The Philadelphia Inquirer, the changes will result in an undefined number of job cuts, mainly among executives. Among those leaving are:
1. Richard J. Webster, president of Thomas Jefferson University Hospital in Center City and Magee Rehabilitation Hospital
2. Allison Ferren, president, and chief operating officer of Abington Health
According to the spokesman, each area will have a president who answers to the chief operating officer of Jefferson Health under the new arrangement. Brian Sweeney, the president of the North Region, will act in that role while Jefferson finishes the hunt for a new president. Dixie James serves as the Central Region’s president.
Why is restructuring important?
According to the Inquirer’s reports, the reorganization occurs in the fourth month of the new CEO’s tenure. This is at a time when Jefferson has had operational losses in two of the previous three years. All health systems are currently experiencing financial strain. It happened due to COVID-19, rising labor expenses, a lack of qualified staff, and inflation.
“This change to our organizational structure benefits Jefferson’s ability to carry out our goal of enriching lives. According to Dr. Joe Cacchione, CEO of Jefferson Health and Thomas Jefferson University,
“It adds to genuine clinical integration as ‘One Jefferson.’ Also, it helps Jefferson Health better streamline operations and enhance our health system.”
1% of the staff at Jefferson Health will be laid off
Einstein Healthcare Network was purchased by Thomas Jefferson University, which also controls Jefferson Health, in October 2021. That one was the final of four health system mergers that began in 2015. To return to profitability, Jefferson is currently laying off employees.
Jefferson Health will cut 400 positions from its personnel this week, or 1% of it. This reduces its financial losses by decreasing duplication in the not-for-profit system. This, in turn, developed quickly through acquisitions before the outbreak.
Cacchione cited broad financial strains on health systems and institutions. He says, “This decision was not taken lightly, and Jefferson is not alone in making this difficult choice.”
In addition to double-digit expense increases, Cacchione noted that patient volumes are declining. On Tuesday, Wednesday, and Thursday, affected employees will be informed. According to its web page, Jefferson’s health system employs about 42,000 people.
Credit rating drop in March
The job cuts come four months after Moody’s Investors Service cut Jefferson’s credit score by one notch. They cited increasing debt and higher costs across all areas. This will make it hard for the Center City-based health system to recoup its financial reserves.
The new rating of A3 is still excellent, but this was Jefferson’s second downgrade from Moody’s since it started a significant expansion in 2015–2021. This period saw the growth of three hospitals to 18 hospitals. Along with that, the addition of another institution and the creation of a Medicaid insurance firm
Jefferson’s profitability declined as its size grew throughout the years when previous CEO Stephen K. Klasko led the company. The coronavirus pandemic then broke out due to the increased expenses for labor, medications, and other supplies. Jefferson and many other health systems around the nation suffered economic losses.
Cacchione wrote in a memo to Jefferson employees, “We have never rationalized the size of our staff through four large mergers. It is just one of the reasons why we are at an inflection point today.
One of the main challenges Jefferson and other hospital systems face is a shift toward outpatient treatments. This is according to Cacchione.
Except for unusual circumstances like the sale of companies and federal COVID help, Jefferson has experienced operational deficits for the past four years.
Jefferson informed Standard & Poor’s that it anticipated ending this year with an operating loss of $80 million. Jefferson recorded an operating deficit of $117 million for the nine months ending on March 31, so this should be an improvement. Next month, Jefferson plans to release financial figures for the fiscal year ending on June 30.
To save $300 million, Jefferson Health plans to lay off workers
According to a statement from Cacchione, the health system has spent recent months “thoughtfully and thoroughly assessing our operations. This is to guarantee that our services meet the changing demands of our patients, students, members, and communities in this new era of health care and higher learning.”
He said implementing layoffs followed removing an unspecified number of vacant positions. Also, for a review of the organization for other operational improvements that may be made to achieve efficiency and savings, “Higher educational institutions and medical organizations nationwide are under severe financial strain. It has been well admitted. While patient volumes are declining, expenditures are rising by double digits. Also, the economic models that underpin many payer-provider arrangements do not fully account for all the ways. These are the areas where the environment changes,” said Cacchione.
“Servicing all our communities, particularly those with the greatest need but the least access to high-quality care, depends on our ability to be viable now and in the future. We are committed to continuing to streamline and integrate our business processes. It is done in a manner that enables us to uphold our pledge of providing high-quality patient care and education, research, safety, and health equity.”
According to Jefferson, it intends to save $300 million annually through layoffs, not filling available posts and other as-yet-unidentified cost-saving measures.
Jefferson Health and Thomas Jefferson University reported $8.1 billion in sales and a net deficit of $125.8 million for the fiscal year 2022.
Dr. Mark Tykocinski, president of Thomas Jefferson University, resigned last week. He wishes to concentrate on his work on cancer immunotherapy. The acting president is Dr. Susan Aldridge. Tykocinski will continue to hold a full professorship at the university.
Conclusion
Especially in difficult economic times, streamlined and flattened management structures are the go-to solutions. It is to improve the effectiveness and speed of the health system.
Providence, a company situated in Renton, Washington, started a similar initiative last summer. It experienced operating deficits of $714 million and $306 million in 2021 and 2020, respectively. After that, it changed to a “leaner” functional style for its 52 hospitals and other business lines.