UPMC Cuts 1,000 Jobs to Trim Labor Costs

Reducing labor expenses remains a point of emphasis for hospital leaders.

UPMC is laying off around 1,000 employees, or approximately 1% of its workforce, as the Pittsburgh-based health system aims to slash expenses and improve its bottom line.

As rising labor costs continue to plague hospitals, many operators are downsizing staff, particularly on the non-clinical side.

That’s where UPMC’s layoffs will be focused with the nonprofit mostly cutting non-clinical and administrative staff, UPMC chief communications officer Paul Wood said in a statement. The reductions also entail closing unfilled positions through attrition and eliminating redundancies.

“The entire health care industry continues to face the realities of a still evolving, post-pandemic marketplace,” Wood said.

The 40-hospital system experienced an increase in labor costs by 6.4% to $9.7 billion in 2023, contributing to a $198 million operation loss. It was a significant downturn from the $162.1 million in operating gain UPMC reported for 2022.

One of the primary strategies hospital decision-makers are utilizing to bolster finances is attacking labor expenses. A recent report from the Healthcare Financial Management Association and Eliciting Insights found that of 135 surveyed health system CFOs, 96% said lowering expenses associated with the workforce remains a priority.

However, those costs are still heading in the wrong direction. Kaufman Hall’s latest Physician Flash Report revealed that staffing accounted for 84% of expenses in the first quarter of the year.

The unfortunate reality for hospitals right now is that finding the balance between reducing staff to an efficient level while avoiding workforce turnover is a constant challenge.

When considering layoffs, CEOs must weigh the value of specific roles and understand the impact to the organization of eliminating certain position altogether.