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Higher costs, low operating margins lead to 400 layoffs at BSHS health system

by John R. Fischer, Senior Reporter | September 16, 2022
Business Affairs
The Beaumont Spectrum Health System will layoff 400 employees.
The Beaumont Spectrum Health System (BSHS), in Michigan, is laying off 400 workers to reduce operational expenses.

Rising inflation, along with pharmaceutical and labor costs, left the provider with a lower-than-expected operating margin of 1.8% in the first six months of the year, according to The Detroit News. Also contributing were low reimbursement and the expiration of COVID-19 federal aid, according to the newspaper.

This led it to make the “difficult decision” at hand, with cuts aimed primarily at management and workers who do not care for patients, but not confined to just these areas, according to the health system.

"This is the result of lower volumes and higher agency and critical staffing costs in our care delivery divisions,” said chief financial officer Matthew Cox in the company’s consolidated financial statement.

Located in Southeast Michigan, Beaumont Health merged with Spectrum Health, in the state’s western part, in February 2022. Together, they operate 22 hospitals and 305 outpatient locations, and employ over 64,000 team members, including more than 7,500 physicians; and over 15,000 nurses.

Experts initially thought BSHS would not have to combine service lines and have more purchasing clout to reduce costs due to having operations in different parts of the state.

In its announcement, the company said that since the merger, it has “recruited” over 10,000 people into mostly open roles for directly serving patients and health plan members.

Other health systems have also reported mixed financial earnings annually following mergers. While InterMountain Healthcare in Utah has seen higher profits since its merger with SCL Health, others have experienced losses from higher labor costs and investment losses.

"It's not surprising that two large systems merge and soon discover that they had a lot of duplication in certain jobs," Allan Baumgarten, a health industry analyst in Minneapolis, told The Detroit News. "Four hundred jobs in an organization that size is not a big cut, but it's likely that more cuts will follow."

The company says it will help impacted employees find other opportunities within its health system and elsewhere.

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