University Hospitals to cut more than 300 positions

University Hospitals is eliminating more than 300 positions amid challenges in the healthcare industry.

The health system announced Wednesday, June 19, that it was reducing its leadership structure by more than 10% as part of an organizational reset. 

Related: Highmark Health continues layoffs, cuts nearly 100 positions

The move comes at a time when healthcare systems across the U.S. are grappling with rising costs and labor shortages. 

UH Chief Operating Officer Dr. Paul Hinchey said in a phone interview with Crain’s that the cuts focused on leadership and support services, not frontline workers. Affected employees began being notified by the health system on Monday, he said.

The health system said the vast majority of the cuts were non-clinical and will not impact patient care. The move “complements a plan over the past three years to increase efficiency, consolidate service lines and close hospitals in Bedford and Richmond Heights,” according to UH.

UH said that while it has been "competing very well" in a difficult healthcare environment its growth has been offset by “soaring costs.” The health system acknowledged it has dealt with financial challenges over the last few years, citing labor shortages, inflation and Medicare reimbursement rates not keeping up with rising costs as some of the difficulties looming over the industry.

“These decisions are never easy,” UH CEO Dr. Cliff Megerian said in a statement. “The important thing is that we make these strategic moves now so we can continue to serve our community and fulfill our mission for decades to come. We are thankful for our hometown team that delivers lifesaving care to our neighbors, friends and relatives each and every day.”

Hinchey said UH has had to evaluate its cost structure to evolve and adapt in a challenging environment. He said the health system’s prices are either set by the federal government or through periodic negotiations with its commercial payers. Both are trying to reduce rates, he said, driving down the system’s revenue while costs are simultaneously increasing.

Those difficulties, coupled with Northeast Ohio’s aging population, is forcing the health system to deliver more care at a lower price point, which is further compressing its margins, Hinchey said.

He said the issue has been happening since the pandemic and has worsened over time.

Along with reevaluating its leadership and support service infrastructure, UH said it’s focused on “continuing to optimize the organization to reinvest in our caregivers and the care they provide to the community; improving access for all patients and enhancing their experience; and keeping costs as low as possible to add value for patients.” 

Hinchey said while UH will continue to optimize the health system, it does not have other major changes like these cuts planned for the foreseeable future.

UH is the latest of a number of large health systems across the country to make cuts in light of the difficult health care climate. In April, the University of Pittsburgh Medical Center announced it was laying off roughly 1,000 employees, and Oregon Health & Science University recently announced to lay off hundreds of workers. 

This story first appeared in Crain's Cleveland Business.