Ochsner’s growth exploded under Warner Thomas’ tenure. What happens next?

As Warner Thomas opened a Diet Coke in a freezing conference room the day after his departure from Ochsner Health was announced, he was low-key and nostalgic as he reflected on his 24 years in New Orleans.

“It was a really tough decision…really tough,” he said, the typical executive confidence missing from his voice. “I love New Orleans.”

He will return however. Warner keeps his home in Uptown and plans to retire in the city he’s called home since becoming Ochsner’s chief operating officer at 33. For now, the 56-year-old is renting in Sacramento, where he will lead Sutter Health, California’s second-largest hospital system.

Following his departure, Thomas leaves a legacy of unprecedented growth in Louisiana. Ochsner Health’s footprint quickly swelled under his tenure, from 8 hospitals and 38 clinics in 2012, when he became CEO, to 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. As his successor, Pete November, transitions from chief financial officer to CEO on Nov. 1, it’s unclear if Ochsner will continue to acquire partnerships, subsidiaries and hospitals at a rapid pace. For now, November says he’s focused on the transition and the goals the hospital board already has in mind.

“The plan we put in place will stay in place,” he said. “Certainly we will look at external growth opportunities, but our focus must be on caring for our patients and the communities in which we find ourselves today.

Ochsner experienced “explosive” growth

Ochsner didn’t set out to be the biggest player in Louisiana or the southern Gulf, Thomas said, but a few key moves gave him a foothold in many communities. Along the way, the system developed a network of charter schools, built two factories to manufacture personal protective equipment, and eventually became the largest private employer in the state.

“There are only a few healthcare systems in the country that have experienced such explosive growth during this time,” said Jeff Goldsmith, industry consultant and founder of Health Futures.

For his part, Thomas bristles at the idea that his dynamism is fueled by ambition for ambition’s sake. A comment from an actor from another system — 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 deep purpose in what we do every day.

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

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

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

A defining meltdown and Hurricane Katrina

Thomas identified two defining moments that allowed the system to grow. First, the Ochsner Clinic and Hospital merged into a single nonprofit foundation, known as the Ochsner Clinic Foundation, in 2001.

Prior to the merger, the for-profit clinic was owned by hundreds of physicians across 26 sites. The nonprofit Alton Ochsner Medical Foundation included an educational and research arm, Ochsner Home Health, Jefferson Highway Campus, and Elmwood Fitness Centers. The move made the entity more powerful, cemented its nonprofit status, and centralized billing, resources, and buying power for the group.

“It was truly the defining event in Ochsner’s history to get him to where he is today,” Thomas said.

The second moment was born from the aftermath of Hurricane Katrina. As national chains backed away from waterlogged hospitals and the task of bringing wayward doctors and nurses back to the city, Ochsner rushed in.

“Katrina landed five or six other hospitals on her lap and then they went from there,” said Walter Lane, a health economist at the University of New Orleans. Lane has also served on the board of directors of Slidell Memorial Hospital, an Ochsner subsidiary since 2016, but did not speak on behalf of the hospital.

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In the eyes of one economist, the trend towards hospital consolidation was inevitable as rising costs made it difficult for smaller stores to remain independent. But because Katrina made New Orleans a less attractive market, the big chains were unsure of playing for Louisiana’s market share. Thomas had an opportunistic view of expansion as other systems retreated.

“What Warner has seen is the trend happening nationally,” Lane said. “Warner had this vision, I think, recognizing that if they didn’t do something, somebody 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 over whether some stranded patients had been euthanized.

“It was a huge gamble at the time,” said Thomas, who describes himself as a realist but possesses an optimism that allows him to understand most challenges.

“I think what we knew was that New Orleans was coming back, but we didn’t know the timeline,” he said. “We knew the city couldn’t be successful if it didn’t have excellent healthcare infrastructure.”

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

Thomas made the first call to Tenet in late September, just weeks after Katrina while still living in his office on Ochsner’s main campus. Pete November was the attorney on the other side of the Tenet deal.

The November Challenge

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

“I spent a lot of time with my mom in the hospitals in the afternoons, waiting for my grandma to pick me up or waiting for my mom to leave 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, recruited by Thomas after negotiating the sale of Tenet, and said his focus is now on the transition. Transitioning hospital systems can be notoriously difficult after longtime CEOs leave, industry experts 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 levels of leadership so that someone is able to step into their shoes and keep rock and roll.”

Thomas said he feels good leaving Ochsner now because the hospital and his estate plan are in place. Over the past 20 years, he has identified who could succeed him during an annual review. When Sutter’s offer was presented, the council already had this list of names.

Nationally, many hospitals are in worse financial shape than a year ago due to rising costs. November’s challenge will be to align recent partners and affiliates with the Ochsner way.

“When you’re growing this quickly, you really have a huge 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. More than 60% of births are paid for by Medicaid, Kahn pointed out. And while the population is sicker than the average U.S., the illnesses most often treated here — infections, multiorgan diseases and serious cancers — don’t always provide hospitals with enough funding, especially if patients are insured by Medicare or Medicaid.

“You have a lot of these patients in a place like Louisiana, with both an aging population and a poor population,” Kahn said.

Thomas said he was drawn to working in California because its reach is greater.

“I feel like Ochsner is in a much better position today than when I came here in 1998,” Thomas said. “And he’s in a much better position today than he was 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 didn’t say how much he would be paid in his new role, but Sutter’s 2019 CEO earned about $5.5 million in compensation, less than Thomas’s $6.8 million in 2020. But l ex-Sutter CEO Patrick Fry earned an estimated $13.4 million in 2015.

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