Employee Benefits Best Practice: Ochsner Health System

by: AARP Outreach & Service, from: AARP, February 16, 2009

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