Tufts Medicine has laid off 70 people and eliminated another 170 vacant positions, as it works to claw back from a fiscally harrowing year.
The cuts, announced internally last week and confirmed on Monday, are in business development, planning, administrative, and management across the whole health system. They will take effect at the end of the month.
The system — which has more than 1,100 beds and over 13,000 employees across Tufts Medical Center, MelroseWakefield Healthcare, Lowell General, and Tufts Medicine Care at Home — reported a $398.6 million operating loss for the year ended in September. That loss was nearly on par with the losses reported by the state’s largest health system, Mass General Brigham, although Tufts is approximately one-seventh of its size when comparing revenue from patient activities.
The reductions will save the health system $22 million annually, officials said.
“There are financial challenges across the industry, including Tufts,” said David Storto, executive vice president and chief strategy and growth officer for Tufts Medicine. “We have been working hard to try to deal with those. Unfortunately we had to make a tough decision.”
Executives said previously they were “looking at everything” to address financial shortfalls largely caused by backlogs in discharging patients to other institutions, due to staffing shortages prompted by the pandemic, as well as an acute labor shortage that has forced systems to pay handsomely for temporary help. In addition, Tufts was strained last year through the installation of an electronic medical record system, which cost approximately $70 million.
The system has hired hundreds of people to fill vacant clinical roles, reducing its costs on temporary labor, and is looking to fill another 1,000 clinical positions. It also recently recruited a liver transplant surgeon, a new chair of surgery, a new chief of gastroenterology, and an OBGYN as it supports the clinical operations.
While most health systems struggled financially last year, Tufts’ foundation appears to be a bit shakier than competitors. According to numbers from its most recent unaudited financial statement, Tufts could keep paying its bills another 85 days if it did not take in any more revenue. Systems with healthy debt ratings keep well over 100 days cash on hand. By comparison, Boston Children’s Hospital reported in a recent presentation that it had 729 days’ cash on hand.
For Tufts, the limited amount of cash on the balance sheet is concerning given how much debt the organization is carrying.
“They have a lot of debt, they are not generating enough cash from operations to repay the debt, and not enough cash to keep their rating up or repay the debt. Those are all pretty serious,” said Nancy Kane, a retired professor of management in the Department of Health Policy and Management at the Harvard T.H. Chan School of Public Health.
Given the financial hardship, executives had worried about meeting certain metrics required by bondholders over the next two years. But Storto said Monday the system has improved its finances enough that it is now on track to satisfy the requirements of its debt.
Executives said the more difficult financial picture is from years of smaller commercial reimbursements compared to other systems, coupled with a higher percentage of government payers it serves, which traditionally reimburse at lower rates than commercial insurance.
However, the financial outlook is improving, given the hirings and plans to partner with a skilled nursing home to help discharge its patients, executives said.
“After the kind of year we had in 2022, I’m definitely a lot more optimistic,” Storto said. “Everyone is beginning to see a little bit of improvement, and we are as well. I’m feeling much more confident in our performance swinging back to something in the norm.”