Employee Benefits Best Practice Ochsner Health System

By: AARP Outreach & Service | Source: AARP.org | February 16, 2009

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Organization Profile

Ochsner Health System includes seven hospitals and more than 35 health centers located throughout Southeast Louisiana. The nonprofit organization employs more than 10,000 employees, who provide services in more than 80 medical specialties and sub-specialties.

Business Overview

In 2005, Ochsner employed approximately 6,000 people. As a result of Hurricane Katrina, many workers lost their homes and relocated to other parts of the state or country. The organization watched its employee-turnover rate more than double from the previous year. At the same time, Ochsner also began caring for more patients who were not insured or were under-insured. This seriously drained its finances.

To stabilize its workforce and retain more of its experienced workers, the health system helped managers develop and implement retention strategies, which included promoting Ochsner's extensive menu of benefits. Since then, the turnover rate has significantly dropped, and more experienced employees are staying on the job.

Business Challenge: A Hurricane and Bear Market

Despite the national shortage of nurses and other skilled labor, Ochsner enjoyed a fairly low employee-turnover rate compared to other health care organizations around the country. In 2002, for instance, turnover was 11 percent. But as the shortage escalated, so did the system's attrition rate. The following year, turnover climbed to 12 percent, then to 14.8 percent in 2004. Still, the national average was much higher than that—around 20 percent— said Joan Mollohan, the senior vice president of human resources at Ochsner in New Orleans.

During the 2005 storm, more than 50 levees failed, putting 85 percent of the city under water. More than 3,000 of the health system's employees lived in areas that were completely destroyed by the storm, while the homes of another 2,000 were seriously damaged. Some employees tried to find livable housing nearby and needed time off from work to rebuild or repair their houses. Others simply left town, starting their lives over again in other cities or states.

By the end of 2005, Mollohan says employee turnover soared from almost 15 percent to an estimated 35 percent. The storm also bumped up the number of patients being treated at the hospital, which negatively affected the system's patient mix. While treating more patients, the hospital was treating many who lacked insurance or were under-insured, she recalled. "The state didn't pay us for these patients," Mollohan said. "It was a huge economic drain on our organization."

Meanwhile, the stock market was also performing poorly. That required the health care system to make up losses by providing additional money to its pension plan. "In 2005, we found ourselves having to put in a lot of money into that plan," reported Mollohan. "The older workers—older physicians and hospital employees—would have been devastated if they lost their pension plans."

Business Solution: Full Benefits Plus Flexibility

To avoid losing more talent and money, the health system evaluated and strengthened its benefits and workplace practices. It implemented a series of workplace changes, including offering employees over the age of 40 the option to keep their pension plans or to switch to 401(k) retirement plans, and introducing voluntary life and accidental-death insurance, enabling employees the opportunity to obtain more coverage. Employees could increase their life insurance benefit beyond what was already offered by Ochsner.

Part-time staff received the same benefits. That was especially appealing to Ochsner's older workforce and to retirees who returned to the workplace. Those working just 10 hours a week received the same benefits as those working 40 hours a week, except that part-timers had to pay higher premiums. But the insurance was offered at a discounted, or group, rate, so the premiums were lower than if the employees had purchased the same insurance plans on their own.

When employees were short on cash, the company also allowed them to "sell" back their paid time off, such as vacation time. But what also appealed to older workers was the opportunity to protect their incomes through short- and long-term disability insurance. The short-term policy provided injured employees with 60 percent of their pay for up to six months. For those with the company for three years, Ochsner pays the entire premiums for long term-disability. This ensures that employees receive at least half their salaries. What's more, employees can purchase the same long-term policy for other members of their families, such as their mothers or fathers.

Unlike other organizations, the health system provided its retirees with different medical-plan options. Employees at least 55 years of age with 10 years of service who wanted to retire could remain on the company’s health plan, if they paid the full cost of the premiums. But when they reached age 65, employees had a choice—pay for the same plan, an HMO, or a Medicare-supplemental plan at a greatly reduced cost.

Mollohan says most organizations don't offer these choices to older workers. "They say if you retire before 65, you get nothing," she says, adding that the health plan for employees over 65 years of age is a much better policy than Medicare.

Nurses at Ochsner have the added benefit of expanded career opportunities if they want to leave patient bedsides. Ochsner was able to offer these additional career paths when it acquired six hospitals and 35 health care centers that were put up for sale after Katrina. For example, nurses could transfer to other facilities, such as physician practices or home-health care agencies. Nurses who wanted to retire could also return to work on an as-needed basis.

At the same time, the system began training its managers—via the Ochsner Leadership Institute—on a variety of issues that the company was facing. Retention-strategy courses became part of the curriculum. Mollohan explained that managers now have their own retention plans, which include promoting employee benefits and nurse transfers.

Considering all of Ochsner’s benefits, a good health plan and flexible work schedule seem to be the most important perks for older workers, added Brenda Chighizola, a professional technical recruiter with Ochsner.

Out of the almost 50,000 applications the health system received last year, roughly one-third were from older workers seeking second careers or coming out of retirement, reported Chighizola. Some applicants had medical benefits and were interested in earning extra pocket money, or they wanted to return to work to help others or to expand their social networks by being engaged with others. The returning retirees filled odd shifts, such as from 2 p.m. to 6 p.m. or from 11 a.m. to 4 p.m.

Other -seekers between the ages of 50 and 65 had worked at companies that were destroyed by the storm. Having lost their jobs along with their medical benefits, they came to Ochsner in hopes of finding a good job with health insurance.

Outcomes: Strong Benefits, High Retention

While the employee turnover hasn’t yet returned to the pre-Katrina rate, it has significantly dropped. Mollohan asserted that giving older workers benefits that appealed to their lifestyles contributed to lowering the rate to 18 percent.

Instead of leaving, 270 (or 20 percent) of the nursing staff also transferred to other jobs within the Ochsner system last year. During the first quarter of 2008, she added, 300 people quit their jobs. Of those, 16 employees had at least 15 years of service. That number is far less than the same quarter in 2007, when 24 who had more than 15 years of service resigned.

Employee satisfaction with the company also keeps rising. Employees are consistently asked to rate how satisfied they are with the company on a one-to-five scale, five being the highest score. On average, employee ratings climbed from 3.6 to 4 during recent years.

"We’ve always had a very stable workforce because of the benefits we offer," said Mollohan, adding that the system has achieved "magnet" status for nursing excellence with the American Nurses Credentialing Center. "[Ochsner] lends itself to a good employee culture, good work environment, and high employee satisfaction."