Penn Med eliminates administrative jobs in reorganization effort, saving $40 million annually

Penn Medicine announced the elimination of several administrative jobs as a part of an ongoing reorganization effort.

In an internal memo obtained by The Daily Pennsylvanian titled "Going Forward Together," CEO of the University of Pennsylvania Health System Kevin Mahoney shared that Penn Med would lay off a “small number of administrative positions which no longer align with our key objectives.” The full reorganization plan will reduce "administrative overhead" by $40 million annually, according to the memo. 

"The nation’s healthcare economy has been completely reshaped by the effects of the COVID-19 pandemic, bringing monumental changes unlike anything we’ve seen in our lifetime," Mahoney wrote in the memo. "We have planned carefully to ensure that our 49,000-person strong organization can withstand these turbulent market forces, but we are not immune to their impact."

Mahoney told the DP in an interview that Penn Med, as with other national hospital systems, is currently facing macroeconomic pressure. 

“We need to go through and trim the overall expenses of running the health system,” Mahoney said. He added that the cuts are not random, but rather “looking at programs that we don't need to continue.”

Mahoney added that this will include the renegotiation of vendor contracts, the combination of corporate services, and the elimination of duplicative administrative systems and positions. In particular, strategic planning and marketing models will be consolidated, Mahoney said.

Mahoney told the DP that the “overwhelming majority” of employees in affected positions are being redirected to open positions in the health system. He said that others will either receive a severance package or aid with finding a new position. Penn Med has 49,000 staffers; the DP could not verify exactly how many jobs were cut. 

“Many individuals have already moved into open corporate positions," a Penn Med spokesperson wrote. "Those leaving the health system will be provided with severance and continuation of benefits based on length of service."

Mahoney said that patient care remains Penn Med’s priority, and that some areas will see an increase in clinical positions as a result of the reorganization efforts.

“I’m not taking away positions at bedside, I’m not taking away clinical positions,” Mahoney told the DP. 

Penn Med also said that it believes that technology will fill in for many of the administrative positions. Mahoney said that, in the future, he hopes that patients can conduct much of their medical payments, appointment making, and insurance setup online without having to make phone calls. He also said that he hopes to use a portion of the saved funds to invest in research, which is one of the defining aspects of Penn Med. 

In 2020, Penn Medicine predicted a loss of $317 million due to the suspension of non-urgent care, greater costs for COVID-19 patient care such as personal protective equipment, and low payment charges for patients. 

Mahoney also told the DP that he plans to give salary increases and grow financially in the future, including a planned pay raise this spring.

“These are prudent steps to protect our future, and not desperation,” Mahoney said. “There’s no panic.”