American Association of Healthcare Executives

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Approved by the Board of Governors Dec. 5, 2022.

Statement of the Issue

As needs continue to change in healthcare (e.g. shorter lengths of stay, increased use of ambulatory care, new care models, higher productivity, high reliance on technology and other factors), the capacity of some healthcare organizations could significantly exceed demand. As a result, these organizations may be required to reduce their workforce and related costs. Additionally, mergers and consolidations can result in further reductions and reassignments of staff. Financial pressures will continue to fuel this trend. However, patient care needs should not be compromised when determining staffing requirements.

Careful planning, diligent cost controls, effective resource management, transparency and proper consultation can lessen the hardship and stress of a reduction in force. Formal policies and procedures should be developed well in advance of the need to implement them.

The decision to reduce staff necessitates consideration of the short-term and long-term impact on all employees—those leaving and those remaining. Decision-makers should consider the potential ethical conflict between formally stated organizational values and staff reduction actions.

Policy Position

The American College of Healthcare Executives recommends that specific steps be considered by healthcare executives when initiating a workforce reduction to support consistency between stated organizational values and those demonstrated before, during and after the process. Among these steps are the following:

• Consider a workforce reduction to be an option of last resort.
• Recognize that cost-reduction efforts must be appropriate; if they are too aggressive, consequences for patients, staff and the organization can be as harmful as doing too little or proceeding too late.
• Explore and evaluate best practices from similar organizations that could be helpful in designing and implementing a workforce reduction plan; best practices can be identified by conducting a thorough literature review, attending seminars and speaking with colleagues.
• Develop a workforce reduction plan that effectively describes its rationale, objectives, implementation process, timeline and impact assessment techniques.
• Obtain input and advice from senior management and human resources leaders about criteria for the number, type and level of roles to be reduced, which open positions should not be filled, and when and how communication regarding the reduction plan should be made. Include other key components, such as discussing the rationale and process with the organization’s governing body, medical staff leadership and, if necessary, the media.
• Develop a process to review the impact of a workforce reduction on the quality and safety of care delivered by the organization.
• Consult with labor counsel.
• Provide timely, accurate, clear and consistent information—including the reasoning behind the decision—to stakeholders when staff reductions become necessary.
• Review the principles and ideals expressed in vision, mission and value statements, codes of ethics, personnel policies, annual reports, employee orientation materials and other documents to test congruence and conformance with workforce reduction decisions.
• Consider the benefits of consulting with an ethics resource, an ethicist or an ethics advisory group.
• Support, if possible, through retraining and redeployment, employees whose positions have been eliminated. Also consider outplacement assistance, appropriate severance policies and continued support through the organization’s employee assistance program, if possible.
• Address the needs of remaining employees by demonstrating sensitivity to their potential feelings of loss, anger and survivor guilt. Also address their anxiety about the possibility of further workforce reductions and uncertainty regarding changes in workload, work redesign and similar concerns.

Healthcare organizations encounter the same set of challenging issues associated with workforce reductions as do other employers. It cannot be over-emphasized that decisions to reduce the workforce should reflect an institution’s mission, ethics and value statements.

Policy created: August 1995
Last revised: December 2022

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