Around 350 people will lose their jobs at Allina Health System under a new “labor reduction” plan implemented on Monday.

In a statement, the Minneapolis-based health system said that most of the jobs are “leadership and non-direct caregiving roles.” The organization said that like many other health systems in the country, it’s facing “unprecedented financial challenges.”

Allina said it will provide severance, health benefits, and outplacement resources for affected employees. The statement said that the reduction “impacts fewer than 350 team members throughout the organization.”

In total, Allina employs 28,500 people, a spokeswoman said via email. That means the job cuts amount to a 1.3% reduction of the company’s total workforce.

“Our focus remains on ensuring we remain a sustainable community asset for years to come,” the health system’s statement read.

The cuts aren’t expected to have any significant impacts on Allina’s facilities or services.

In the wake of Covid-19, health systems of all stripes have continued to struggle financially. Many lost out on a big chunk of revenue when lucrative elective procedures were put on pause.

Allina has encountered many of the same struggles. In 2022, the health system, which operates as a not-for-profit entity, reported a $195 million operating loss. That same year, Allina reported total revenue of $4.887 billion, which marked a slight increase over the prior year.

Still, the lion’s share of that revenue was spent on labor, according to Allina’s 2022 year-end financial documents. In 2022, Allina spent $3.192 billion on salaries and benefits, up from $2.964 billion in the prior year.

Reimbursements from health insurance companies appear to be contributing to Allina’s financial woes, too. The health system has said that insurance reimbursements haven’t been keeping up with inflation, the Star Tribune reported on Monday.

Allina’s layoffs occur against the backdrop of a fragile health care workforce. Last month, the Minnesota Hospital Association said that the state’s health care workforce is “in critical condition” and faces nearly 6,000 unfilled positions.