Yale New Haven Health cuts jobs as challenges loom for academic medical centers

CT Insider – Thursday, April 10, 2024
By Liese Klein

For more than a hundred years, operating as an academic medical center ‒ or hospital system attached to a university’s medical school ‒ has worked out great for Yale New Haven Health.

Since the Yale School of Medicine and New Haven Hospital first joined forces in 1913, the system has grown to include five hospitals in two states that employ 30,811 people as of 2023, the most recent figures available.

The partnership has been great synergy: Yale Medical School research helps draw patients from across the world and powers the hospital system toward higher rankings and greater prestige. The hospitals offer training grounds for students and a philanthropic base of support for the medical school’s mission.

But recent actions by the administration of President Trump are shaking up the academic medical center model nationwide. Analysts say threatened cuts to funding on multiple fronts plus a potential “brain drain” due to immigration and other policies could have major implications for the future of nonprofit systems like Yale New Haven Health, Connecticut’s largest private employer.

In a sign of the challenges ahead, Yale New Haven Health announced in late March that it would cut up to 38 administrative jobs as part of a restructuring. The system’s leadership team will be trimmed “to ensure we remain nimble in delivering compassionate, safe, high-quality care to everyone we are privileged to serve,” according to a statement.

“Embracing a structure that has already been adopted by many of our peer institutions, this redesign will allow us to maintain a consistent care signature for the patients we serve today, while growing to serve more patients across our region,” the statement said. The layoffs come after 70 jobs were cut late last year when the system’s in-house recruiting functions were outsourced to a national firm.

Asked about the potential for more layoffs in the near future, Yale New Haven Health responded with a statement pointing to rising costs and potential federal cuts to programs like Medicaid. Medicaid makes up a growing percent of the payer mix for Connecticut hospitals, rising from 44.6% in fiscal 2020 to 46.1% in 2023, according to OHS data. All four of Yale New Haven Health’s four hospitals in the state saw Medicare payer mix based on charges increase in the same time period.

“Like many other systems, Yale New Haven Health is facing significant financial headwinds as inflation increases the cost of delivering care across our organization,” the statement read. “Looming cuts to federal programs could jeopardize our long-term sustainability and strategic growth.”

Quarterly losses come amid annual gains
Rising costs and lagging reimbursements are taxing the finances of all of Connecticut’s 27 acute-care hospitals, even as the state’s health facilities slowly recover from the impact of the COVID-19 pandemic. As a group, Connecticut hospitals saw losses drop and revenues increase in fiscal 2023, according to a recent report by the Office of Health Strategy. Trump’s latest tariffs could boost costs even more for supplies like surgical tools and disposable gloves.

Yale New Haven Health remained in the red in 2023 as far as its operating margin, a measure of financial health. Even so, the system saw its operating margin improve from negative 3.85% in 2022 to negative 2.21% in 2022. Flagship Yale New Hospital improved its margins from negative 5.97% to negative 1.03% in the same period.

Yale New Haven Health’s most recent financial report, filed with bond disclosures in March, shows the system lost $46.7 million from operations in the three months that ended on Dec. 31, 2024, compared to a gain on operations of $72.2 million in the same period of 2023. Non-operating results from investments, donations and other sources showed a $48.9 million loss in 4Q 2024 compared to a $212.5 million gain in 2023.

The quarterly losses come as the system has steadily improved its annual operating performance post-pandemic, from a $240 million loss in fiscal 2022, to a $162 million loss in fiscal 2023, to a $46 million gain in fiscal 2024, which ended on Sept. 30.

Although Yale New Haven Health pulled out of a 2022 deal to spend $435 million to buy three Connecticut hospitals from bankrupt Prospect Medical Holdings, the system is still embroiled in a costly legal fight with the for-profit operator. Prospect has also vowed to continue its court fight over the failed deal with Yale, suggesting in bankruptcy court last month that it could see a multi-million-dollar windfall from the lawsuit that could resolve its financial issues.

System’s finances solid for now, analyst says
Even with the recent losses, Yale New Haven Health’s overall finances are still healthy and earned the system an “A+” and “stable outlook” grade last year from Fitch Ratings, a major credit agency owned by Hearst. The system has enough in the bank to ensure completion of the $838 million new neuroscience tower currently under construction at its Saint Raphael’s camps in New Haven, the report noted.

“The stable outlook considers Fitch’s expectation that (YNHH) will ultimately return to stronger operating results, albeit at a level lower than had been recorded historically,” Fitch said in a statement last May.

But the outlook for Yale New Haven Health and nonprofit hospital systems in general became much more clouded in the aftermath of President Trump’s actions since his inauguration on Jan. 20, said Kevin Holloran, senior director and analyst for Fitch Ratings. Although health care wasn’t a major issue in the 2024 presidential election, Trump has acted aggressively on a number of fronts that threaten the industry, he said.

Announced cuts to federal research funding from sources like the National Institutes of Health puts $150 million at risk across Connecticut and could cost Yale University as a whole at least $131 million, according to a New York Times analysis.

Even more impactful to the system’s bottom line could be hundreds of billions in proposed cuts to Medicaid, a vital funding source for “safety-net” hospitals in low-income areas, like Yale New Haven Hospital and Bridgeport Hospital. Although Connecticut hospitals are seeking higher Medicaid reimbursements from the state, cuts in Washington could erase those gains and more, Holloran said.

“You could potentially see us go negative on the whole sector,” Holloran said.

With additional potential impacts from factors like tariffs on drugs and medical supplies, the entire health-care and hospitals sector is facing “some level of uncertainty,” Holloran said. “Uncertainty for a fragile ecosystem like the health-care sector is never good, period.”

Cuts announced at academic medical centers
The combination of factors have already led to major cuts at academic medical centers in the region. Mass General Brigham, which partners with Harvard University, announced hundreds of layoffs in February due to a projected $250 million deficit over the next two years.

Another Ivy League medical center, the University of Pennsylvania Health System, announced it would eliminate approximately 300 jobs in late March. The cuts were needed to streamline and be more efficient in a “very, very difficult environment,” an executive told the Philadelphia Inquirer.

“I think everybody is nervous, particularly in academic settings,” said David Storto, a Massachusetts-based consultant and former executive at Tufts Medicine. “At the end of the day, there’s only so much they’re going to be able to do to accommodate those kinds of losses.”

Another factor that could have serious long-term impact on academic medical centers are changes in immigration enforcement that could drive away top global talent in medicine and science, worsening a “brain drain” caused by interruptions in funding. Chinese officials have been visiting campuses and making offers to researchers, Massachusetts Gov. Maura Healey said.

“That’s concerning,” Healey said at a MassBio event last month. “You don’t want to give away American assets, intellectual capital.”

Major academic medical centers like Yale New Haven Health are likely to cut more jobs and services in coming months if uncertainty continues and more funding reductions are enacted, Storto said.

“All of that coming together could be a perfect storm of sorts,” Storto said. “I don’t see how, under any scenario, there’s not going to be some programmatic closures outright, hospital closures that are just going to exacerbate the whole access problem with health care.”

Yale New Haven Health and other systems operating safety-net hospitals in Connecticut need to make a strong case for higher payments from the state to mitigate some of the coming federal cuts, said Angela Mattie, professor of management and medical sciences at Quinnipiac University.

“They’re going to have to lobby and advocate for increases in reimbursement in a very tough political climate,” Mattie said. “I don’t have a crystal ball, but it doesn’t look easy or favorable for hospital systems.”

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