Oregon Health & Science University (OHSU) informed employees on June 6, 2024, that it plans to lay off at least 500 people during the next 90 days. The institution is attempting to overcome a financial shortfall, which has caused it to spend tens of millions more than it receives.
“Our expenses, notably supplies and labor costs, keep outpacing rises in revenue,” said OHSU President Danny Jacobs in an email to employees.
OHSU is planning a merger with Legacy Health. However, Jacobs acknowledged the university’s financial difficulties. Thus, this raises concerns about how the university can afford what is needed. In this article, learn more about the layoffs at OHSU.
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OHSU planned a merger
OHSU is a public research university in Portland, Oregon, focusing on health sciences. The main campus includes two hospitals.
On May 30, the healthcare giant stated that it would proceed with its planned merger with Legacy Health. On Thursday, June 6 (OHSU), Jacobs stated in an email that this news may cause concerns about OHSU’s financial status. The legacy investment is supported by borrowing using 30-year bonds. However, it “cannot be utilized to fill gaps in our fiscal year 2025 OHSU budget or make payments to our members,” he added.
In April, the university recorded a $44 million loss for the previous nine months. At the time, there were warnings of potential job layoffs.
OHSU and Legacy inked a merger agreement last week. However, they have yet to reveal much about how the merger will occur.
As part of the arrangement, OHSU will transfer $350 million in cash from Legacy’s accounts to the Legacy Health Foundation. Also, it will spend $1 billion on capital upgrades to Legacy’s properties. Legacy stated that its foundation intends to concentrate on health equity.
OHSU intends to issue 30-year bonds to finance the transaction. However, Jacobs stated that the funds cannot cover the institution’s budget shortfall.
OHSU’s deal with Legacy allows it to exit if it finds that the merger’s expenses or lost revenue will surpass $200 million in five years. If the institution ends the agreement, it has to pay Legacy a $25 million breakup fee.
In the long run, Jacobs believes the Legacy arrangement will help the institution financially by
Expanding OHSU’s presence and capacity. He invited staff to a town hall next week to discuss the Legacy acquisition. Meanwhile, Jacobs stated that OHSU’s budget problem needs them to make “difficult decisions now.”
Sources reported in May that the system strives to cut expenses. However, Jacobs’ retirement benefits will grow by $350,000 per year as part of a two-year contract renewal. This will increase OHSU’s annual contribution to his retirement fund to more than half a million dollars.
The Oregon Nurses Association said it is “deeply worried” about the layoff announcement. “Recent publications indicated that OHSU asked each department to make cuts. This includes cuts to employee benefits. But, at the same time, they offered their president a $350,000 raise for his retirement on top of his $1.65 million salary,” said the statement.
Layoffs at OHSU
One week after disclosing fresh details about its planned merger with Legacy Health, OHSU informed employees that it plans to lay off more than 500 people. The news has sparked frustration from unions representing employees at the healthcare giant.
Danny Jacobs explained in an internal email that the layoffs were due to expenses overtaking costs. Jacobs stated in the email sent on Thursday,
“We are working to boost revenue. Yet, we must make tough decisions about our internal structures, workforce, and programs. This guarantees that we fulfill our state-mandated missions and prosper in the long run.”
An OHSU spokesperson stated that the exact number of layoffs would be disclosed in the coming weeks.
It was stated that talks about employee cutbacks will begin after the annual review and contract renewal process. More layoffs will be happening over the next few months.
OHSU’s notifications under the Worker Adjustment and Retraining, or WARN, Act require 60 days notice before significant layoffs. It will also be included in those updates. OHSU plans to notify employees if their employment contracts will not be renewed.
The American Federation of State, County, and Municipal Employees, representing thousands of OHSU employees, also criticized the action.
What will happen after the merger?
In 2023, the two companies announced plans for a merger. Last week, they reached a binding deal. With over 30,000 employees, the combined business will be Portland’s largest employer.
According to a brief of the merger terms posted on OHSU’s website, every current OHSU and Legacy employee will become an employee of the combined system. OHSU will agree to no staff cuts for at least the first six months after the deal closes. However, the document does not rule out future layoffs.
The deal is currently going through regulatory procedures. It is not expected to be finalized for some months. The latest layoffs at OHSU will occur before that time.
Conclusion
OHSU is Portland’s largest employer, with a staff of 21,300. The majority of them work on two campuses south of downtown. The business’s annual budget is $4.3 billion.
Oregon AFSCME is a union that represents 11,000 OHSU employees. It referred to the planned layoffs as “outrageous and unlawful,” noting the institution’s recent executive bonuses.
“OHSU must focus on patients and people rather than lining the pockets of people in ivory towers,” AFSCME Local President Jennie Olson said.