Weekly Health Updates 3rd May 2025

Hospitals in Crisis: Navigating Funding Cuts, Mergers, and Layoffs in 2025

In 2025, U.S. hospitals face a storm of federal funding cuts, soaring drug costs, layoffs, and mergers, threatening innovation and care quality. Here's how they're fighting back.

When I read about Baylor College of Medicine laying off 122 staff due to slashed federal funding, my heart sank. As someone who’s seen loved ones rely on cutting-edge treatments, the idea of fewer researchers and drugs hits hard. In 2025, U.S. hospitals and health systems are battling a perfect storm: federal budget cuts, skyrocketing drug expenditures, layoffs, C-suite shakeups, and a wave of mergers. A Harvard professor warned, “Fewer researchers, less research, less innovation, fewer drugs, fewer treatments” (The New York Times, May 3, 2025). This article dives into these challenges, offering insights from CFOs, executives, and researchers on how hospitals are fighting to survive—and what it means for patients like us.

Federal Funding Cuts: A Blow to Innovation

The Trump administration’s budget blueprint is slashing health agency budgets, with the Department of Health and Human Services (HHS) facing a 30% cut, from $116.8 billion to $80.4 billion (POLITICO, April 17, 2025). The CDC lost 2,400 jobs, and Duke University anticipates “hundreds of millions” in losses (Higher Ed Dive, May 1, 2025). These cuts threaten programs for chronic disease, mental health, and drug abuse. A Harvard professor’s words echo: less funding means fewer breakthroughs (The New York Times, May 3, 2025).

Impact: Baylor College of Medicine laid off 122 employees, citing “uncertainty of federal funding support” (Houston Public Media, May 1, 2025). Johns Hopkins University cut over 2,000 jobs after losing $800 million from USAID (Business Insider, April 30, 2025). Patients may face delays in new treatments as research stalls.

Hospital Response: CFOs are implementing hiring freezes and cutting discretionary budgets. Duke is offering voluntary buyouts to reduce future layoffs (Higher Ed Dive, May 1, 2025). Some are exploring public-private partnerships to fund research.

Soaring Drug Costs: A Financial Strain

Hospitals are bracing for an 11–13% increase in prescription drug costs in 2025, while clinics face a 2–4% hike (Becker’s Hospital Review, 2025). The top 25 drugs by nonfederal hospital expenditure in 2024, including cancer and autoimmune therapies, are driving this surge. For cash-strapped hospitals, this is a gut punch.

Impact: Higher drug costs strain budgets already hit by funding cuts. Smaller hospitals may limit access to expensive treatments, affecting patient care.

Hospital Response: Pharmacies are leveraging 340B program oversight to secure drug discounts, though evolving regulations add complexity (Becker’s Hospital Review, 2025). CFOs are negotiating bulk purchasing agreements to offset costs.

Layoffs and Workforce Challenges

Layoffs are sweeping healthcare. Baystate Health cut 43 jobs, Kaiser Permanente 38, and UNM Health System eliminated 53 leadership roles (Fierce Healthcare, April 30, 2025). Sanford Health laid off 96 employees post-merger with Marshfield Clinic (MedCity News, May 1, 2025). These cuts, often tied to mergers or funding losses, erode workforce morale.

Impact: Staff shortages increase burnout, risking care quality. Patients may face longer wait times or reduced services.

Hospital Response: Executives are prioritizing workforce resilience, with some applying AI to streamline tasks and reduce labor costs (Becker’s Hospital Review, 2025). UNM Health is reviewing its organizational structure to align with funding realities (Fierce Healthcare, April 30, 2025).

C-Suite Shakeups: Leadership in Flux

Hospitals are restructuring leadership to navigate the crisis. UNM Health System and Orlando Health have cut, combined, or expanded C-suite roles in Q1 2025 (Becker’s Hospital Review, 2025). AdventHealth named David Banks as CEO, while Crozer Health and UNC Health saw CEO exits (MedCity News, May 1, 2025).

Impact: Leadership changes can disrupt strategy, but fresh perspectives may drive innovation.

Hospital Response: New CEOs are focusing on AI adoption and cost-cutting, though electronic prior authorization adoption lags due to regulatory hurdles (Becker’s Hospital Review, 2025).

Hospital Mergers: A Survival Strategy

Mergers are reshaping healthcare, with 14 tracked in 2025 (Becker’s Hospital Review, 2025). HCA expanded in New Hampshire and Florida, while Sanford Health and Marshfield Clinic finalized a 56-hospital merger. Only five M&A deals occurred in Q1, slowed by Trump’s policies on Medicaid, 340B, and drug pricing (MedCity News, April 27, 2025).

Impact: Mergers can stabilize finances but risk reducing competition, potentially raising costs for patients. Smaller hospitals may struggle to stay independent.

Hospital Response: Hospitals are forming joint ventures as a defensive tactic, avoiding full mergers while sharing resources (MedCity News, April 27, 2025).