Jefferson Health Announces Major Layoffs Amid Financial Challenges

Jefferson Health, a prominent academic health system based in Philadelphia, has confirmed plans to lay off approximately 650 employees, representing about 1% of its 65,000-person workforce. This decision comes in the wake of significant financial challenges faced by the organization, including a nearly $200 million operating loss in the latest fiscal year.

Financial Headwinds and Strategic Actions

Dr. Joseph G. Cacchione, CEO of Jefferson, cited "significant financial headwinds" as the primary reason for the workforce reduction. The organization aims to align its operations for the future while maintaining its mission to serve the community. This move follows previous cost-cutting measures, including the elimination of 171 positions in January through outsourcing back-office functions.

Jefferson Health's parent organization, Thomas Jefferson University, reported a $195.5 million operating loss (-1.2% operating margin) for the fiscal year ended June 30, 2025. This stands in stark contrast to the $1.3 million operating income (0.0% operating margin) from the previous fiscal year. A substantial factor in this downturn was the performance of the Jefferson Health Plan, which swung from a $100 million gain in fiscal 2024 to a $169.9 million loss in fiscal 2025.

Management attributed this shift to "GLP-1 pharmaceuticals and medical expense trends outpacing premium increases," as well as overall inflation increasing the cost of providing care beyond the rise in payer rates.

Merger Impact and Financial Outlook

The recent layoffs come just months after Jefferson Health completed a major merger with Lehigh Valley Health Network in August 2024. This acquisition was part of a decade-long series of mergers that expanded Jefferson's network to 32 hospitals. Despite the challenges, the merger has contributed to significant growth in Jefferson's operations. Total revenues for Thomas Jefferson University increased from $10 billion to $15.8 billion in fiscal 2025, while licensed beds grew from 3,819 to 5,690, and outpatient visits rose from 1.1 million to 2.8 million.

Fitch Ratings recently affirmed its "A" rating for Jefferson Health's bonds but revised the broader rating outlook from "stable" to "negative." The agency acknowledged the organization's operational pressures and limited near-term ability to improve reimbursement rates. However, Fitch also noted Jefferson's strong market position and described the Lehigh Valley Health Network deal as operationally accretive, expressing expectations for improved performance in the coming years.

As Jefferson Health navigates these financial challenges, the organization remains focused on sustaining its mission and investing in expanding access to care, advancing innovation, and supporting its communities. The impact of these layoffs on patient care and the organization's long-term strategy remains to be seen as the healthcare industry continues to grapple with ongoing financial pressures and evolving market dynamics.