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Michigan Medicine announces layoffs, salary reductions as part of economic recovery plan

Health care system projected to lose up to $230 million by June 30

ANN ARBOR – Michigan Medicine has announced a series of cost-saving measures as it faces losses of up to $230 million by the end of the fiscal year ending June 30.

With more financial losses expected to continue into fiscal year 2021, the health care system has announced an economic recovery plan that includes furloughs and layoffs of roughly 1,400 full-time employees, organizational restructuring and salary reductions for its leaders -- all in addition to a hiring freeze under which 300 current positions will remain vacant.

Other cost-saving measures include the suspension of employer retirement match, merit increases, tuition reimbursement and reductions to consulting, supplies and discretionary expenses. Non-urgent capital projects have also been put on hold, including construction of Michigan Medicine’s new inpatient facility.

“While we are faced with continuing challenges as a result of this pandemic, we know that our collective effort will result in our successfully navigating this crisis and moving forward on a path of strength and sustainability,” Marschall S. Runge, chief executive officer of Michigan Medicine, dean of the U-M Medical School and executive vice president for Medical Affairs at U-M said in a statement.

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“Our economic recovery plan will help us continue to provide hope and healing to our patients and support our clinical, educational and research missions.”

Runge has agreed to a 20% reduction of his compensation. He has asked department chairs and other leaders across Michigan Medicine to voluntarily reduce their salaries between 5-15%.

The COVID-19 pandemic’s financial impact on the health system began immediately when all elective procedures were canceled and many services temporarily suspended. While Michigan Medicine has safely resumed some clinical services for critical patients, the road to recovery is slow.

“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,” Runge added.

The health system has established a COVID-19 Employee Emergency Needs Fund and plans to give grants to its under-resourced employees who have been hit hard financially by the pandemic.

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