Ochsner to lay off 770 employees across Louisiana, Mississippi as health care costs soar

Ochsner Health, the state’s largest hospital system and one of its largest private employers, plans to lay off 770 employees across its 42 hospitals and more than 200 urgent care and health centers in Louisiana and Mississippi.

The layoffs, which are the largest in Ochsner's history, represent 2% of the system's 38,000-person workforce.

The cuts will not affect doctors, nurses and other patient-facing staff, according to Ochsner CEO Pete November. Employees in management, administrative jobs and clerical positions will see the bulk of the cuts, which will be spread evenly across the institution’s facilities in both states.

Ochsner is not closing or consolidating any of its facilities, which are concentrated in New Orleans and include Baton Rouge, Lafayette, Lake Charles, Shreveport and the Mississippi Gulf Coast.

The cuts, which are expected to save the system between $125 million and $150 million a year, come amid skyrocketing health care costs in the wake of the COVID-19 pandemic and on the heels of Ochsner’s first unprofitable year in more than a decade.

November notified employees of the pending layoffs in a companywide email Thursday morning.

"This is not a decision our executive leadership team takes lightly or one we ever wanted to make," the email said. "It is the hardest change we have ever had to make at Ochsner, but one we must to ensure we continue to be a strong organization."

November, who took the top job at the nonprofit hospital system last year, vowed that these cuts will be the first and the last.

“We want everyone to know that when we are finished with this round we are done. This is it,” said November in an interview. “Folks do not have to come to work every day worried about what comes next.”

National trend

Ochsner is the latest of some three dozen health systems in the U.S. to implement layoffs since the beginning of the year. That’s on top of some three dozen systems that reduced their workforce in the latter half of 2022, according to national industry reports.

Experts say Ochsner won't be the last to make cuts as soaring labor and drug costs, coupled with meager growth in Medicare and Medicaid reimbursement rates, push hospital systems to slash jobs and expenses.

Wage increases, driven in part by the need for temporary or travel nurses since the pandemic began, have played a large role in driving up costs, according to San Diego-based health care consultant Nate Kaufman.

Meanwhile, since 2014, Medicaid reimbursement rates have increased just 1% on average, while Medicare rates have increased just 2%, said Kaufman.

“Medicare and Medicaid are not keeping up with hyperinflation and personnel costs are increasing,” Kaufman said. “Health systems are trying to balance that formula, and the only way to do that is to keep costs under control.”

From 2019 through 2022, Ochsner’s cost of medical supplies, equipment and drugs increased 10%, according to hospital officials. Overall labor costs have increased 9%. Starting last summer, the federal government stopped covering the cost of travel nurses, which have increased eightfold.

Though Ochsner's revenues grew to $6.4 billion in 2022 from $5.9 billion in 2021, it lost $96 million last year and its expenses exceeded revenues by 1.5%.

Cuts and shortages

The layoffs at Ochsner are happening at the same time that it is struggling to find nurses and other medical staff. The system currently has some 800 unfilled nursing positions, which November said has increased the cost of providing patient care.

The cuts also come after years of aggressive growth at the health system. Under November’s predecessor, Warner Thomas, who stepped down last fall to run California-based Sutter Health, Ochsner grew from eight hospitals a decade ago to over 40 hospitals today, and expanded from its base in the New Orleans area across Louisiana and into Mississippi.

As recently as February, it cut the ribbon on a new $110 million three-story medical complex at Clearview Shopping Center.

November said the system’s expansion has helped sustain it through difficult times like the present.

"This is not a result of the growth," he said. "Our growth allows us to scale and adapt."

Local impact

While the layoffs will be spread across the facilities Ochsner owns and manages, they will not affect the hospitals that have affiliation agreements with Ochsner.

Those include: St. Tammany Parish Hospital, Slidell Memorial Hospital, Terrebonne General Health System and Christus Health in Lake Charles.

Ochsner is giving laid off employees 60 days plus a severance package. 

“We recognize this will be difficult on people impacted and people here and we will do the best we can to support them," November said.