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New rounds of cuts and organizational shifts for HHS staff and operating divisions could dramatically impact the healthcare and life sciences industry.

By Nathan A. Beaton, Joseph C. Hudzik, Elizabeth M. Richards, and Anton Lesaca

On April 1, 2025, the US Department of Health and Human Services (HHS) began implementing a significant reduction in force (RIF) of staff, five days after HHS Secretary Robert F. Kennedy, Jr. announced plans for a “dramatic restructuring” of the department and its subagencies. The announcement was HHS’s first detailed statement1 on its approach to implementing directives from President Trump to reduce the size of the federal workforce in coordination with the Office of Management and Budget (OMB) and the Department of Government Efficiency (DOGE).

These plans could impact the day-to-day operations of HHS and its subagencies, including the Food and Drug Administration (FDA), the Centers for Medicare & Medicaid Services (CMS), the Centers for Disease Control and Prevention (CDC), and the National Institutes of Health (NIH).

Background

The HHS announcement and implementation of the RIF follows several steps from the Trump administration aimed to streamline government operations by reducing the size of the federal workforce.

On February 11, 2025, President Trump issued an executive order directing OMB to submit a plan to the White House to reduce the number of employees in the federal workforce. The Order also directs agency heads, including the HHS Secretary, to “undertake preparations to initiate large-scale [RIFs],” prioritizing offices and functions “not mandated by statute or other law” or “not typically designated as essential during a lapse in appropriations,” with certain limited exceptions. The Order directed agency heads to submit to OMB by March 13, 2025 “Agency Reorganization Plans,” which “discuss whether the agency or any of its subcomponents should be eliminated or consolidated.”

OMB and the Office of Personnel Management (OPM) then issued a Memorandum on February 26, 2025, (Memorandum) with several recommendations for agency heads to consider in developing their respective RIF and reorganization plans. The Memorandum states that agencies should carry out significant reductions in full-time positions such that they focus on “the maximum elimination of functions that are not statutorily mandated while driving the highest-quality, most efficient delivery of their statutorily-required functions.” OMB and OPM directed agencies to consolidate functions when possible, including eliminating duplicative entities, unnecessary management layers, and non-critical components and positions. The Memorandum further recommends that agencies adopt automation and technology for routine tasks, close field offices, and maximally reduce outside contractor use.

The Memorandum also established a staged approach to implementing President Trump’s Order. First, the Memorandum reiterated the March 13, 2025 deadline for initial Agency Reorganization Plans. The Memorandum refers to these submissions as “Phase 1” Agency RIF and Reorganization Plans (ARRPs). The Memorandum also calls for agency heads to submit a “Phase 2” ARRP to OMB and OPM by April 14, 2025, detailing steps the agency will take to streamline its operations, with planned implementation by September 30, 2025. Agencies must also submit monthly progress reports on May 14, 2025, June 16, 2025, and July 16, 2025.

HHS Reorganization Plan

In its March 27, 2025, public announcement, HHS outlined certain details of its Phase 1 ARRP:

  • Consolidation of HHS divisions and functions. The announcement sets forth a restructuring plan to consolidate the 28 divisions of HHS into 15 new divisions to “centralize core functions” like human resources, information technology, procurement, external affairs, and policy. Among these changes, HHS plans to create a new Administration for a Healthy America (AHA), which will combine several HHS offices and subagencies into a single entity to “improve coordination of health resources for low-income Americans.”2 Other offices and subagencies would be transferred under the plan. For example, the plan calls for the Administration for Strategic Preparedness and Response (ASPR) to be transferred to the CDC.
  • RIF. HHS announced “a [RIF] of about 10,000 full-time employees who are part of this most recent transformation” that, “[w]hen combined with HHS’ other efforts, including early retirement and Fork in the Road, results in a total downsizing from 82,000 to 62,000 full-time employees.” The FDA, CDC, NIH, and CMS will reduce their workforces by approximately 3,500 employees, 2,400 employees, 1,200 employees, and 300 employees, respectively. The announcement states that these reductions “will not impact Medicare and Medicaid services” and “will not affect [FDA’s] drug, medical device, or food reviewers, nor will it impact [FDA] inspectors.”
  • Assistant Secretary for Enforcement. The plan would establish a new Assistant Secretary for Enforcement to oversee the HHS Departmental Appeals Board, Office of Medicare Hearings and Appeal, and the Office of Civil Rights.

The HHS announcement states that these changes will make HHS “more responsive and efficient, while ensuring that Medicare, Medicaid, and other essential health services remain intact.” It further states that “[n]o additional cuts are currently planned” but that HHS “will continue to look for further ways to streamline its operations and agencies.”

On April 1, 2025, HHS began implementing its Phase 1 ARRP.

Takeaways

The HHS announcement details plans for meaningful changes to HHS and its subagencies’ personnel and operations, and the April 1, 2025 actions follow through on HHS’s promise for a substantial reorganization and slimming of the workforce. As HHS continues to implement these plans, additional details will emerge concerning the specific functions, offices, and divisions affected.

Any disruptions in agency operations connected to the reorganization and RIFs, even if HHS does not expect impacts to certain agency services and functions, are likely to meaningfully impact the healthcare and life sciences industries. For example, while HHS does not expect impacts to Medicare and Medicaid claims reimbursement or provider enrollment operations, the new Assistant Secretary for Enforcement’s impact on provider and suppliers administrative appeals remain to be seen. In addition, while the HHS announcement suggests that these reductions at FDA will not affect inspectors or drug, medical device, or food reviewers, the administration’s actions to date that are intended to reduce the federal workforce, such as buyout offers for federal employees and the ongoing implementation of HHS’s Phase 1 ARRP, have reportedly led to product review delays, canceled meetings, and loss of institutional knowledge from departing staff. Further, the HHS announcement indicates that HHS will consider further ways to streamline its operations.

Regulated entities should consider these changes and their potential impacts as part of their overall product development and compliance strategies. The healthcare and life sciences industry should closely monitor the administration’s ongoing efforts to streamline operations and reduce the federal workforce, including any public announcements regarding the Phase 2 ARRPs that HHS and other federal agencies must submit to OMB and OPM by April 14, 2025.

  1. The announcement included a fact sheet with more details on the RIF and reorganization plan. ↩︎
  2. The plan calls for AHA to include the Office of the Assistant Secretary for Health, the Health Resources and Services Administration, the Substance Abuse and Mental Health Services Administration, the Agency for Toxic Substances and Disease Registry, and the National Institute for Occupational Safety and Health. ↩︎