Michigan Medicine to lay off 1400, delay construction projects with $230M shortfall looming amid COVID-19

Michigan Medicine announced on Tuesday it is taking several drastic steps to attempt to make up for a $230 million budget shortfall in the middle of the COVID-19 crisis.

In a press release from Michigan Medicine, the hospital network said it is projected to lose $230 million by the end of June and expected to lose even more in the fiscal year 2021, which starts in July.

To try to make up for the shortfall, the hospital said it is taking several steps to  'minimize' the impact on employees. 

Those steps include restructuring leading to furloughs and layoffs of 1,400 full-time employees plus institute a hiring freeze for the current 300 vacant positions.

Additionally, leaders at Michigan Medicine will take a reduction in salary with chief executive officer of Michigan Medicine, dean of the U-M Medical School and executive vice president for Medical Affairs Marschall S. Runge taking a 20% cut. His direct reports, department chairs, and other leaders are also being asked to reduce their compensation on a scale between 5-15%.

The health network will also suspend merit increases, employer retirement match, tuition reimbursement, and reductions to supplies consulting and discretionary expenses. The organization will also delay capital projects that are not needed for safety or regulatory compliance or meet an urgent strategic need. This includes the construction of the new inpatient facility. 

"While we don't take any of these decisions lightly, we believe it is a preferable outcome to broad salary reductions and allows us to preserve as many jobs as possible," said Runge.

The organization has also established a COVID-19 Employee Emergency Needs Fund and will provide grants for lowest-resourced employees in need of financial assistance as a result of the pandemic.

"The important decisions we are making at this critical juncture of the pandemic are to ensure a strong and more secure future for the health system, the medical school, and our partners and affiliates," Runge said.