The Beaumont Spectrum Health System confirmed Friday that it is laying off 400 employees, blaming the move mostly on inflation and the expiration of COVID-19 federal aid.
It was a “difficult decision” to cut 400 workers out of a workforce of 64,000, according to a BHSH statement issued Friday. The layoffs are aimed at management positions and workers who don’t care for patients, the 22-hospital company said.
“The eliminations are not confined to any one area of our organization,” spokeswoman Ellen Bristol said in a Friday email.
The layoffs come seven months after the Southfield-based Beaumont and west Michigan-based Spectrum merged. Business mergers often result in workforce reductions.
“Our health system, like others around the nation, is facing significant financial pressures from historic inflation, rising pharmaceutical and labor costs, COVID 19, expiration of CARES Act funding and reimbursement not proportional with expenses,” the health system said in a statement.
“We are grateful for the contributions and years of dedicated service provided by our impacted team members and are working to help them find employment within our health system and elsewhere,” according to a BHSH statement. “We remain deeply committed to caring for our team members and our community.
The move came after Beaumont Spectrum reported in August that the nonprofit health system’s operating margin through the first six months of the year was 1.8%, which was lower than expected. Officials said in the consolidated financial statement that “leaders are focused on cost containment initiatives” as well as “acceleration of integration savings.”
“The organization has seen deterioration in its operating results through the first six months of the year,” Chief Financial Officer Matthew Cox said in the health system’s consolidated financial statement. “This is the result of lower volumes and higher agency and critical staffing costs in our care delivery divisions.”
Health systems around the country have had mixed financial results this year, said Allan Baumgarten, a health industry analyst in Minneapolis who follows the Michigan hospital industry. InterMountain Healthcare in Utah merged with SCL Health and reported higher profits, he said, while other systems are reporting losses resulting from higher labor costs, investment losses and other reasons.
“It’s not surprising that two large systems merge and soon discover that they had a lot of duplication in certain jobs,” Baumgarten said about Beaumont and Spectrum. “Four hundred jobs in an organization that size is not a big cut, but it’s likely that more cuts will follow.”
In the company’s Friday statement, officials attempted to soften the blow of the layoffs by noting the joint health system had “recruited around 10,000 people, predominately into open roles directly serving our patients and health plan members,” since the start of the year.
Experts had predicted that the merged hospital system would likely avoid consolidations in service lines while creating purchasing clout to reduce costs because of the distinct footprints with Spectrum on the state’s west side and Beaumont in southeast Michigan. The merger included Grand Rapids-based Spectrum’s Michigan-based health insurance plan, Priority Health, which enrolls 1.2 million customers.