The healthcare industry, like many other sectors, has experienced periods of workforce reductions and layoffs over the years. Healthcare organizations face ongoing pressures to control costs and operate efficiently, which can lead executives to make difficult staffing decisions. However, layoffs are not an industry-wide trend and many healthcare companies continue to grow and hire new workers. This article will examine the factors that can contribute to layoffs at some healthcare companies, while also highlighting areas of healthcare job growth.
Cost Control and Financial Pressures
One of the biggest factors that can lead healthcare companies to conduct layoffs is the need to control costs and maintain financial stability. The healthcare industry faces rising expenses in areas like new medical technologies, drug costs, regulatory compliance, and insurance reimbursements. At the same time, government programs like Medicare and Medicaid are trying to curb spending on healthcare services. This can squeeze the profit margins of hospitals, insurers, pharmaceutical companies, and other players in the healthcare sector. When profits decline, companies may look to workforce reductions as a way to immediately reduce personnel expenses. Layoffs and eliminating open positions can help healthcare organizations quickly align staffing levels with patient utilization trends and revenue realities.
Hospitals account for a large share of jobs in the healthcare industry and are especially vulnerable to financial pressures that can lead to layoffs. The American Hospital Association reports that labor expenses account for about 60% of hospital costs. If patient volumes decline or reimbursements are reduced, hospitals can face major revenue shortfalls that may prompt job cuts. Rural hospitals with small operating margins are particularly at risk. A 2019 report found that nearly 20 rural hospitals had closed across the U.S. that year, with more facing financial jeopardy. When hospitals close or merge, layoffs frequently follow since acquired facilities may have duplicative staff positions that need to be consolidated.
Some recent examples of hospital layoffs include:
- Mercyhealth announcing plans to cut 131 jobs across its hospitals in Wisconsin and Illinois in 2020.
- Steward Health Care System laying off 500 employees, about 2% of its workforce, citing financial pressures from the COVID-19 pandemic in 2021.
- Northern Light Health conducting layoffs at hospitals in Maine which resulted in 330 jobs cut in 2020.
However, while some hospitals are making cuts, others are still in growth mode. Major systems like Mayo Clinic, Cleveland Clinic, and Johns Hopkins continue expanding facilities and hiring healthcare workers.
Health Insurance Industry Layoffs
The health insurance industry has also conducted layoffs over the past several years as companies adjust to financial trends and consolidate positions after mergers & acquisitions. Health insurers with heavy exposure to Affordable Care Act plans have had to adapt to losses stemming from higher-risk patients and other factors. Some examples include:
- Highmark Health cut 350 jobs in 2020 attributing the cuts to $223 million in losses on individual ACA plans.
- Oscar Health cut about 400 jobs in 2022, around 10% of staff, after experiencing larger than expected losses on ACA plan premium pricing.
- After acquiring WellCare Health Plans in 2020, Centene eliminated around 3,000 positions. The insurer cited redundant corporate services roles.
Despite these layoffs, the health insurance sector also continues to see areas of employment growth and hiring demand. The Bureau of Labor Statistics projects employment of insurance claims and policy processing staff to grow 8% from 2021-2031 as medical billing increases. Major insurers like UnitedHealth Group, Anthem, CVS Health, and Humana also continue expanding headcount in many regions and business lines.
Pharmaceutical Company Layoffs
Pharmaceutical manufacturers have implemented job cuts over the past several years to reduce costs and refocus R&D pipelines. Drugs going off patent and experiencing generic competition can significantly impact pharmaceutical revenues. When blockbuster medications face declining sales, companies may look to layoffs in associated marketing, sales, manufacturing, and even R&D positions.
Some recent examples include:
- Bristol Myers Squibb cut 5% of its workforce or around 900 jobs after its blood thinner medication Eliquis began facing generic competition in 2022.
- Novartis eliminated around 2,000 positions in 2020 following completion of spinoffs for its Alcon and Sandoz divisions.
- GlaxoSmithKline conducted layoffs impacting 720 jobs in R&D and manufacturing in 2020 as part of restructuring.
However, pharmaceutical companies also plan to continue investing heavily in new drug development. The industry supports over 4 million jobs across the U.S. when accounting for direct, indirect, and induced impacts, according to the Pharmaceutical Research and Manufacturers of America. Demand remains strong for skilled pharmaceutical researchers, technicians, sales reps and more to develop innovative new therapies.
Medical Device Company Layoffs
Medical device manufacturers have also been through periods of restructuring and layoffs as they navigate changing industry dynamics. Pricing pressure, mergers, and product portfolio changes can all factor into workforce reductions.
Some recent examples among medical device firms include:
- Medtronic cut around 2% of its global workforce impacting around 1,600 employees in 2020. The company cited integrating acquisitions and eliminating redundancies.
- Boston Scientific eliminated about 1,600 positions in 2020 linked to plans to exit two business lines.
- Johnson & Johnson conducted layoffs totaling around 6% of the workforce across its medical device division in 2022 amounting to about 5,000 positions.
However, medical device companies also foresee areas of strong hiring demand ahead. With the aging of the baby boomer generation, products like pacemakers, joint replacements, and other devices to treat chronic conditions are expected to see robust growth. Employment of medical equipment technicians and technologists is projected to increase 15% over the next decade per the Bureau of Labor Statistics.
Healthcare Job Growth Outlook
While some healthcare companies conduct targeted layoffs, the industry overall continues experiencing labor shortages and strong employment demand in many occupations.
The Bureau of Labor Statistics projects healthcare sector employment to grow 15% from 2021-2031, adding about 2.6 million jobs. This growth significantly outpaces the average for all occupations at 7.7% over the decade.
Several factors contributing to ongoing healthcare job creation include:
- Demographics – The population is aging and requiring more healthcare services. People over 65 are projected to make up 21.6% of the population by 2030 versus just 15.2% in 2016.
- Increased Chronic Disease – More people are living with chronic illnesses like diabetes and heart disease that require regular treatment.
- Medical Innovation – Advances in technology, therapies, drugs and more allow treatment of more health conditions, increasing demand for healthcare services.
- Insurance Coverage – More people have health insurance since passage of the Affordable Care Act, enabling increased utilization of healthcare services.
- Consumer Preferences – People are demanding more healthcare services including certain elective and preventive medicine procedures.
Strong employment demand exists for roles like:
- Registered Nurses – Projected to add 221,900 jobs from 2021 to 2031.
- Nurse Practitioners – Projected to grow 45% with 39,000 new positions over the decade.
- Home Health and Personal Care Aides – Expected to add around 1.1 million new jobs supporting aging populations.
- Physicians and Surgeons – Projected to add 104,100 physician jobs through 2031.
- Physical Therapists – Anticipated to grow 21% or by 85,700 jobs this decade.
The COVID-19 pandemic also highlighted the essential importance of healthcare workers. While the crisis put major financial strain on many healthcare providers, it also reinforced that demand for healthcare services and workers remains strong overall. Government pandemic relief funding offered many hospitals and medical companies support through the downturn as well.
The healthcare industry has certainly experienced periods of restructuring, mergers, financial pressures and layoffs over the years like other business sectors. Hospitals, insurers, pharmaceutical firms, and medical device companies have all gone through workforce reductions to cut costs and adapt to industry changes. However, the healthcare field overall still projects strong job growth ahead. Demographic trends, chronic disease rates, new innovations, expanded insurance access, and consumer preferences for healthcare services will continue driving employment demand. While some individual companies make job cuts at times, the healthcare industry remains a vital source of jobs and opportunity.
|Factors Contributing to Layoffs
|Examples of Recent Layoffs
|Declining patient volumes, reduced reimbursements
|Mercyhealth – 131 jobs
Steward Health – 500 jobs
Northern Light Health – 330 jobs
|Financial losses on ACA plans, redundant positions after mergers
|Highmark – 350 jobs
Oscar Health – 400 jobs
Centene – 3,000 jobs
|Drugs losing patent protection, restructuring
|Bristol Myers Squibb – 900 jobs
Novartis – 2,000 jobs
GlaxoSmithKline – 720 jobs
|Medical Device Companies
|Pricing pressures, portfolio changes, mergers
|Medtronic – 1,600 jobs
Boston Scientific – 1,600 jobs
Johnson & Johnson – 5,000 jobs
Strong Healthcare Job Growth Areas
- Registered Nurses
- Nurse Practitioners
- Home Health Aides
- Physical Therapists