PORTLAND, Ore. — Oregon Health and Science University is preparing to lay off at least 500 employees, the hospital announced Thursday in a message to staff. The letter says the hospital's revenue has not kept pace with rising supply and labor costs, and that managers will begin discussing workforce reductions after an upcoming annual review and contract renewal process.
The letter doesn't say how many layoffs are expected, but states that the review process will include notifications under the federal Worker Adjustment and Retraining Notification (WARN) Act, which requires employers to provide at least 60 days' notice before any layoffs that will impact 500 or more employees at a single location.
In a WARN Notice posted Monday, OHSU said 142 positions will be permanently eliminated in August in the first wave of its expected layoffs. Connie Seeley, executive vice president and interim chief people officer, said "OHSU anticipates additional permanent layoffs within the next 90 days," in the state's WARN Notice.
"As these permanent layoffs are identified, OHSU will provide a supplemental notice," Seeley added.
The news comes as the hospital is pursuing a merger that will see OHSU absorb the Legacy Health system, renaming the combined company OHSU Health. The two companies announced plans for the merger last year, and signed a binding agreement last week. The combined company will be the largest employer in the Portland area with about 30,000 employees.
A summary of the merger terms posted to OHSU's website states that all current OHSU and Legacy employees will become employees of the combined system, and it says OHSU will commit to making no workforce reductions for at least the first six months after the deal closes, although the document doesn't rule out the possibility of later layoffs.
The deal is still going through the regulatory process and isn't expected to close for several months. The current layoffs at OHSU will apparently happen before that point, with the letter describing the layoffs as happening in the next 90 days. The hospital first warned staff in May of cost cuts and possible layoffs, according to Willamette Week.
Still, the current round of layoffs is likely to place greater scrutiny on OHSU's financial position heading into the merger. In an Q&A on its website, OHSU noted that it is "facing financial challenges" and acknowledged that there have been questions about how it could afford the Legacy acquisition. Addressing the concern in the Q&A, OHSU said it has "built up its capital capacity over the past 15 years in order to be able to borrow the funds" for the deal.
The layoff announcement letter also tackled the question, stating that the planned 30-year bonds that will finance the Legacy merger "cannot be used to close gaps in our fiscal year 2025 OHSU budget or to pay our members."
The letter is signed by OHSU President Danny Jacobs and eight other members of the executive leadership team. OHSU told KGW it had no comment beyond the letter itself. The full text of the letter is below:
As we continue to navigate a period of significant transformation at OHSU, we want to provide an update on our ongoing Strategic Alignment work, including necessary reductions in workforce.
Our expenses, including supplies and labor costs, continue to outpace increases in revenue. Despite our efforts to increase our revenue, our financial position requires difficult choices about internal structures, workforce and programs to ensure that we achieve our state-mandated missions and thrive over the long term.
One of the guiding principles of the Strategic Alignment work is a commitment to transparency and providing significant updates as soon as possible. As such, we want you to be aware that discussions between managers and members about workforce reductions will begin following the annual review and contract renewal process, with additional reductions happening over the next few months.
Annual renewal communications will include language about the WARN (Worker Adjustment and Retraining Notification) Act, which requires employers like OHSU to provide written notice of at least 60 calendar days in advance of covered layoffs of 500 or more full-time positions within a 90-day period. These non-renewals are part of the usual annual review process, which does not independently trigger the required WARN notices, but because of its strategic realignment process, OHSU anticipates additional layoffs within the next 90 days. More information about anticipated reductions will be provided in the coming weeks.
While we work to address short-term financial challenges, we must also plan for an impactful and successful future. We understand that last week’s announcement regarding the Legacy Health definitive agreement, while exciting and potentially transformational, raises questions about how we can afford the required investment in light of our financial situation.
The capital investment in Legacy Health represents a strategic expansion designed to enhance our capacity to serve the health and wellness needs of people across the Pacific Northwest, and will be financed by borrowing with 30-year bonds. These capital dollars cannot be used to close gaps in our fiscal year 2025 OHSU budget or to pay our members. The OHSU Strategic Alignment and budgetary work would be necessary with or without the Legacy Health integration. We invite you to an all-member Town Hall next week where we will further discuss the combination with Legacy.
Although we believe expanding OHSU’s overall footprint will help alleviate capacity issues and help us financially, budget projections for fiscal year 2025 (beginning July 1, 2024) and fiscal year 2026 (beginning July 1, 2025) require us to make challenging decisions now.
Uncertainty and change are difficult. We will continue to proceed with compassion, fully understanding the gravity of these decisions and the personal impact they have.