Dive Brief:
- Tufts Medicine will lay off 174 employees — about 1% of its total workforce — related to challenges with high contract labor and supply chain costs, as well as capacity issues.
- The majority of the cuts, which a spokesperson for the Massachusetts-based health system confirmed to Healthcare Dive, will impact administrative and non-patient care roles.
- This is the latest round of cuts for the beleaguered health system. Tufts laid off 70 workers last January and eliminated nearly 600 additional roles later that year when it sold its laboratory business to Labcorp.
Dive Insight:
Tufts has struggled in recent years amid inconsistent patient volumes and inflation driving expenses up.
The system reported a $171 million operating loss in its most recent fiscal year, following a $399 million operating loss in fiscal 2022. As of Sept. 30, Tufts had just 77 days of cash on hand — short of the 200 days credit ratings agency Fitch Ratings recommends healthy systems carry.
“While we continue to make steady progress towards our goal of financial recovery, like many other health systems, we continue to face challenges,” the Tufts spokesperson said over email. “As a result, we are taking steps to reduce the size of our workforce… to help stabilize our financial health.”
It’s the latest system to cut jobs, following similar reductions from Kaiser Permanente, UPMC, Marshfield Clinic and Mass General Brigham.
Operating margins at nonprofits have remained depressed coming out of the COVID-19 pandemic, creating pressures on organizations’ balance sheets, according to Fitch.
While financially healthy systems historically reported operating margins of 3% or higher, in recent quarters systems have struggled to net margins of 1 to 2%. Other systems, like Tufts, have failed to get in the black at all.
Fitch downgraded Tufts in February to reflect the system’s “slower than expected improvement to operating performance, including another year of significant operating losses, coupled with a year over year decline in unrestricted cash and investments.”
The health system told the credit agency it had an “accelerated turnaround plan” that was expected to yield a positive operating earnings before interest, taxes, depreciation and amortization margin run rate this fiscal year. Tufts says it will break even on its operating margin run rate by fiscal year 2025.
The plan is being overseen by a relatively new leadership team. Tufts’ CFO, Andrew DeVoe, began in mid-February and its chief operating officer, Phil Okala, took his post last summer.
