Layoffs & Reduction in Force: What Healthcare Leaders Should Know Before Making Cuts

With nearly 100  hospitals and health systems announcing workforce reductions in 2025, healthcare leaders across the nation are navigating one of the toughest decisions they'll ever make. For many organizations, these layoffs are an inevitable response to the unprecedented financial and operational pressures facing the healthcare industry. But while reducing staffing costs may be necessary for survival, the hidden cost of layoffs can overshadow the immediate savings — unless you manage them strategically.

Layoffs don't just affect those who leave. They create a ripple effect that touches every corner of your organization, from the emergency department to the C-suite. Here’s what leaders should know to prepare for (and minimize the impact of) healthcare layoffs.

Understanding the Indirect Risks of Layoffs

When planning for workforce reductions, healthcare leaders weigh a wide range of factors to decide where, and how many, employees to let go. The direct impact of reduced staffing is always a consideration in these decisions. But often, there’s less thought about how layoffs affect the employees who remain.

For the rest of your workforce, the negative impact of “survivor guilt” is a serious concern. This is a term coined for the guilt, anxiety, and frustration employees feel after surviving a round of layoffs. And it can directly impact productivity and patient care. According to data from Leadership IQ:

• 74% of employees who kept their jobs say their productivity declined following layoffs
• 64% believe their colleagues' productivity has also declined
• 77% of surviving workers see more errors and mistakes made

In healthcare settings, where every decision impacts patient lives, this isn't just an HR concern — it's a patient safety issue.

As a result of layoffs, it’s not uncommon to see:

• Decreased engagement and morale: Staff who once went above and beyond may now do only what's required. 
• Heightened turnover: Your best remaining talent may start looking for work elsewhere, fearing instability and more cuts.
• Loss of institutional knowledge: As experienced staff depart, critical expertise walks out the door with them.
• Compromised patient care: Mistakes may increase, attributed to a combination of reduced staffing and less attention to detail (a factor that defines quality care).

Healthcare workers are particularly vulnerable to the mental health and well-being impact of layoffs. They entered this field to heal and help others. When they witness colleagues losing their livelihoods while shouldering increased workloads themselves, the moral distress compounds their stress — increasing the likelihood of burnout.  

To minimize the potential negative effects of survivor guilt, healthcare leaders must ensure the proper support is available for employees before layoffs are announced. 

4 Steps to Take Before You Announce Layoffs

As a healthcare leader, the decisions you make before layoffs occur will largely determine whether your organization recovers or falls into dysfunction. Consider the following actions as part of your layoff planning process.

1. Be Transparent. When healthcare organizations face significant disruption and drops in morale after a round of layoffs, poor communication from leadership is often to blame.
   
   According to the Society for Human Resource Management, “there should be a theme about the layoff that clearly and succinctly articulates the reasons for it.”
   
   If layoffs seem arbitrary or opaque, trust in leadership can be lost quickly. Clearly articulate the "why" behind your layoff. Connect the decision to maintain organizational sustainability and future patient care capacity. 
   
   Explain the criteria for layoff decisions, including how you decide which roles to eliminate. And be transparent about your financial realities, which may include budget pressures, declining reimbursements, or operational challenges. Being upfront and honest with your staff will help them understand the reasons behind your choices and help alleviate fears that there may be more rounds of cuts coming soon. 
   
   
2. Carefully Plan Your Communications. Once clear messaging is established, your organization should develop an internal communication plan to share the information with employees.
   
   Distribute the news through multiple communication channels. Think beyond email and town hall meetings to include face-to-face conversations with management, team huddles, and department-specific meetings. 
   
   Encourage your managers to have honest discussions with employees, acknowledging the difficulty of the situation and leaving space for them to ask questions or voice their concerns. Even during layoffs, staff need to feel they can speak up about concerns, report near-misses, and question decisions without retaliation. Safety culture erodes quickly when fear dominates.
   
   
3. Offer Comprehensive Employee Well-Being Support. As an organization, commit to supporting your remaining employees through this difficult transition. Connect with your Employee Assistance Program (EAP) in advance of the layoff announcement to see what support services they can offer. For example, VITAL WorkLife offers Leadership Consultation to help managers and supervisors prepare messaging that includes anticipated employee reactions. Individual support like counseling and coaching can help  mitigate the long-term psychological impact of stressful situations like layoffs. 
   
   
4. Proactively Redistribute Workloads. One of the fastest ways to destroy survivor morale is piling the work of laid-off employees onto their already-overburdened colleagues without acknowledgment or adjustment. Before layoffs occur, have a plan for how this extra work will be managed. Some steps you can take include:
   
   
   • Conduct realistic workload assessments: What work can be eliminated? What processes can be streamlined? What truly cannot be absorbed?
   • Prioritize the essentials: Not everything that was done before can continue. Make conscious choices about what matters most for patient care and safety.
   • Set clear expectations: Be honest about increased workloads while also establishing boundaries. Healthcare workers need permission to adjust their standards when resources shrink. 
   • Create feedback mechanisms: Establish ways for staff to report when workloads become unsafe or unsustainable. 

   Building Long-Term Organizational Resilience

   Layoffs in healthcare are sometimes unavoidable. Financial pressures are real, and leaders must make difficult decisions to ensure organizational survival. But how you navigate these reductions determines whether your organization emerges stronger or suffers additional loss.

   The employees who remain will be watching you. As time passes, they'll decide whether to stay or search for a new employer that demonstrates genuine commitment to their workforce. They're assessing whether your organizational values match your actions. They're determining if they can trust you with their careers and their well-being.

   Your decisions at this moment can impact your organization's trajectory for years to come. Communicate openly. Support generously. Lead with empathy. And recognize that the mental health and morale of those who remain is not a secondary concern — it's the foundation upon which your organization's recovery depends.