Sparrow Health System plans to lay off hundreds of workers after posting a $90 million loss in the first six months of the year, even as it struggles with a labor shortage.
The Lansing-based hospital system said in a statement that soaring costs left it with no choice but to cut staff mainly in leadership and non-patient care roles. Some removals will have a clinical role as patient numbers decrease.
The system will not make comment beyond its statement and will not determine the exact amount of job losses.
The system wrote in the statement: “Costs have increased across all categories, including supplies and wages, wages and benefits, while patient numbers have decreased and contracted agency labor costs increased. leap”. “Actually, the COVID pandemic may be clinically over, but it has caused a financial pandemic for the nation’s healthcare providers. As a result, we’re making the cut. Staff reduction affects hundreds of roles in the health system.”
Sparrow is not alone in the financial conundrum that is causing systems to lay off non-clinical staff while also trying to fill patient-facing roles such as nurses.
Earlier this month, Beaumont-Spectrum announced it would cut about 400 non-patient care and management roles statewide as part of a cost-cutting measure.
The health system attributed the layoffs to “significant financial pressures from historic inflation, rising pharmaceutical and labor costs, COVID-19, expiration of CARES Act funding, and zero reimbursements.” proportional to the cost.”
Beaumont lost nearly $100 million in the first half of this year, a negative 5% margin. Those losses were offset by the stronger financial performance of BHSH’s Southwest Michigan operations and its insurance arm, Priority Health.
An analysis published earlier this month by the American Hospital Association found that more than half of US hospitals are losing money by 2022, with margins expected to fall between 37% and 133 percent. than before the pandemic.
Health system costs are expected to increase by nearly $135 billion by 2022 from 2021 levels, largely due to labor costs. AHA analysis predicts labor costs will increase by more than $57 billion from last year with contract workers accounting for more than $29 billion of that total. The analysis says contract labor costs are 500% higher than before the pandemic. The remaining costs are attributed to equipment costs due to inflation.
Sparrow told Crain its labor costs have increased by more than 22% this year to $832.3 million from $682.1 million in 2019. Contract labor there has increased 369 percent to 50, 2 million dollars this year.
Laws backed by the healthcare industry were enacted earlier this month in Lansing to try to regulate the cost of commuting nurses.
Republican Representative Sarah Lightner introduced House Bill 6364, which would limit travel nurse agencies from charging hospitals no more than 25% more than they pay to their own nurses. surname. The intent of the law is not to punish nurses but to limit the amount of money these contracting agencies can make from them, Lightner told Crain’s.
Although it remains unclear whether the legislation will be put to the vote before the legislative session ends in Lansing later this year. And it’s also very dim on the impact of the law on hospital profits.
Sparrow said the restructuring plan works to reduce the cost burden, but did not specify how the restructuring will take place.
“Sparrow will adapt to this changing world and will do so quickly,” the system said in a statement. “We’re going to fundamentally change the way we operate our business and how we’re structured so that we’re in a position to serve our community for another 126 years.”