DETROIT (WWJ/AP) – The Detroit Medical Center says it will lay off 300 employees and cut pay to top executives because of the automatic reduction in the federal budget.

The eight-hospital health system announced the plans Tuesday in a letter to employees, physicians and board members, citing reductions in Medicare funding.

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The job cuts are expected to be for non-medical staff. According to reports, the 300 DMC layoffs represent about two percent of DMC’s full-time-equivalent positions.

In the letter, CEO Joe Mullany said the health system is facing a revenue shortfall and needs to cut costs. He said salaries for corporate executives, at the vice president level and above, would be reduced after DMC’s current fiscal quarter ends on June 30.

“Health care providers across the country currently are facing revenue shortfalls as a result of the two percent sequestration of Medicare funds and further reductions in payments from the State of Michigan Medicaid programs to our hospitals,” Mullany said.

The federal budget reduction is expected to cost the Detroit Medical Center $12 million to $15 million. In all, the Michigan Health and Hospital Association estimates the federal reductions will cost Michigan hospitals $143 million this year and $1.4 billion over 10 years.

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“DMC needs to address the magnitude of these financial shortfalls this year and in the next several years, finding expense reductions equal to our anticipated revenue reductions,” Mullany said.

Late last month, Mullany told employees in a company newsletter to expect budget cuts and employee downsizing as the DMC prepares for the “new normal.”

The DMC is one of the largest employers in Detroit, with over 12,000 employees and more than 3,000 affiliated physicians working at nine different hospitals and institutes.

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