Ochsner’s growth exploded under Warner Thomas’ tenure. What happens next? | Health care/Hospitals

As Warner Thomas opened a Diet Coke in a cold conference room the next day announced he would be leaving Ochsner Healthhe was subdued and brooding as he reflected on his 24 years in New Orleans.

“It was a really difficult decision… very difficult,” he said, without the typical executive assurance in his voice. “I love New Orleans.”

It will come back though. Warner keeps his house in Uptown and plans to eventually retire in the city he has called home since he became Ochsner’s chief operating officer at 33. For now, the 56-year-old is renting in Sacramento, where he will manage Sutter. Health, the second largest hospital system in California.

Upon his departure, Thomas leaves behind a legacy of unprecedented growth in Louisiana. Ochsner Health the footprint swelled quickly under his tenure, expanding from 8 hospitals and 38 clinics in 2012, when he became CEOto 48 hospitals and more than 300 clinics in ten years.

To some in Louisiana, Ochsner and Warner Thomas are synonymous, and the longtime executive is seen as part of the system’s DNA. With his successor, Pete November, moving from CFO to CEO on Nov. 1, it’s unclear whether Ochsner will continue to acquire companies, affiliates and hospitals at a rapid pace. For now, November says he is focused on the transition and the goals the hospital board already has in mind.

“The plan we have in place will stick,” he said. “Certainly we will look for external growth opportunities, but our focus must be on caring for our patients and the communities we are in today.”

Ochsner has grown ‘explosively’

Ochsner didn’t set out to be the biggest player in Louisiana or the southern Gulf, Thomas said, but some pivotal moves have allowed him to gain a foothold in many communities. Along the way, the system developed a charter school networkbuilt two manufacturing facilities of personal protective equipment and eventually became the largest private employer in the state.

“There are only a couple of health systems in the country that have grown so explosively in this time period,” said Jeff Goldsmith, an industry consultant and founder of HealthFutures.

For his part, Thomas bristles at the thought that his drive is fueled by ambition for ambition’s sake. A comment from another system stakeholder – that Thomas wakes up every day and wants to “take over the world” – is at odds with how he sees himself.

“They don’t know me,” he said, shaking his head. “People don’t think I’m sensitive, but I have a deep purpose in what we do every day.

“Are we fiscally responsible and do we make sure that we operate our organization from a business perspective? Absolutely,” he continued. “But the reason we do it … is for the patients and for our communities.”

Thomas acknowledges that it has taken relentless optimism to guide Ochsner from where he was when he joined as COO in 1998 to where he is today.

“I think we do things very well,” Thomas said. “And if we get them right, why wouldn’t we try to impact more lives and care for more people?”

A defining merger and Hurricane Katrina

Thomas identified two turning points that allowed the system to expand. First, the Ochsner Clinic and Hospital merged into a nonprofit foundation, known as the Ochsner Clinic Foundation, in 2001.

Before the merger, the for-profit clinic was owned by hundreds of doctors with 26 locations. The nonprofit Alton Ochsner Medical Foundation included a research and educational arm, Ochsner Home Health, the Jefferson Highway campus, and the Elmwood Fitness Centers. The move made the entity more powerful, cemented its nonprofit status, and centralized the group’s billing, resources, and purchasing power.

“That was really the defining event in Ochsner’s history that got him to where he is today,” Thomas said.

The second moment was born from the aftermath of Hurricane Katrina. As national networks pulled back from flooded hospitals and the task of bringing skittish doctors and nurses back to the city, Ochsner pounced.

“Katrina landed five or six other hospitals in her lap and then they took off from there,” said Walter Lane, a health care economist at the University of New Orleans. Lane is also a board member at Slidell Memorial Hospital, an Ochsner affiliate since 2016, but did not speak on behalf of the hospital.

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In the eyes of an economist, the hospital consolidation trend was inevitable because of rising costs that have made it difficult for small shops to remain independent. But because Katrina made New Orleans a less desirable market, the larger chains weren’t sure about making a play for Louisiana market share. Thomas had an opportunistic vision of expansion when other systems were in retreat.

“What Warner saw was that the trend was happening nationally,” Lane said. “I think Warner had this vision, recognizing that if they didn’t do something, someone else was going to do it.”

Ochsner Health’s first post-Katrina purchase was three Tenet Hospital properties for $56.8 million, including the now-infamous Memorial Hospital, where 45 patients died and controversy erupted about whether any stranded patients were euthanized.

“That was a big gamble at the time,” said Thomas, who described himself as a realist but possesses an optimism that allows him to solve most challenges.

“I think what we knew is that New Orleans was going to come back, but we didn’t know the timeframe,” he said. “We knew the city couldn’t be successful if it didn’t have a great health care infrastructure.”

Thomas told the board that in two years they would probably be wondering why they bought Tenet Hospitals, and in five years they would be glad they did.

Thomas made the first call to Tenet in late September, just a few weeks after Katrina, when he was still living in his office on the main Ochsner campus. Pete November was the lawyer on the other side of the deal with Tenet.

the november challenge

November spent much of her youth in Kentucky hospitals with her mother, a single mother who worked as a home care and oncology nurse.

“I spent a lot of time with my mom at the hospitals in the afternoon, waiting for my grandmother to pick me up or waiting for my mom to come off her shift,” November said. “My mom only cared about one thing, and that was taking care of people.”

November has been with Ochsner for 10 years, was recruited by Thomas after they negotiated the sale of Tenet, and said he is now focused on transitioning. The transition of hospital systems can be notoriously difficult after the departure of long-time chief executives, industry experts have said.

“A lot of times it’s really hard to follow,” Goldsmith said. “Often, the charismatic CEO doesn’t do the hard work of building the next two layers of leadership so that someone is able to step into their shoes and continue to rock and roll.”

Thomas said he feels good about leaving Ochsner now because the hospital and his succession plan are in a good place. For the last 20 years, he has identified who could succeed him in an annual evaluation. When Sutter’s offer came up, the board already had that list of names.

Nationwide, many hospitals are worse off financially than they were a year ago due to rising costs. November’s challenge will be to align new partners and affiliates with the Ochsner way of doing things.

“When you grow that fast, you really have a tremendous management problem on your hands,” said Chip Kahn, president and CEO of the Federation of American Hospitals. “It takes many years to bring everyone into your culture.”

Louisiana is a particularly precarious market due to its poverty. Medicaid pays for more than 60% of births, Kahn noted. And while the population is sicker than the U.S. average, the illnesses most commonly treated here — infections, multi-organ disease, and serious cancer — don’t always provide hospitals with enough funding, especially if patients are insured by health insurance. Medicare or Medicaid.

“There are a lot of those patients in a place like Louisiana, with an aging population and a poor population,” Kahn said.

Thomas said he was drawn to the California work because its scope is more significant.

“I feel like Ochsner is in a much better position today than when I got here in 1998,” Thomas said. “And he’s in a much better position today than when I took over as CEO in 2012. What excites me about Sutter is that I can have a broader impact and potentially help another organization reach its potential.”

Thomas did not say how much he would be paid in his new role, but Sutter’s CEO in 2019 earned about $5.5 million in compensation, less than Thomas’ $6.8 million in 2020. But Sutter’s previous CEO, Patrick Fry earned around $13.4 million in 2015.

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