BATON ROUGE, La.—As Louisiana faces its lowest federal matching rate for Medicaid in decades, LSU System officials announced a plan that will allow all LSU public hospitals to stay open, but at the cost of nearly 1,500 jobs throughout the system. Congress this year cut the state's disaster-recovery Federal Medical Assistance Percentage, or FMAP, rate to a projected 65.5% from 71.9%, which results in about $859.2 million in decreased funding. The change will require a total reduction of about $329 million for the system when accounting for the federal matching-rate funds.

The system's original plan to address the issue called for a 35% across-the-board reduction throughout its system. A new plan announced this month limits that cut to about 19% and is expected to allow LSU to keep its hospitals open and maintain other services, such as medical homes and graduate medical education. But the strategy also calls for considerable job losses and budget reductions at LSU system hospitals. The system's Interim Public Hospital in New Orleans would take the hardest hit—reducing more than $49 million from its budget between now and next June and cutting 423 jobs. “LSU Health has long been on an unsustainable path that threatens the strength of our medical training programs,” Dr. Frank Opelka, the system's executive vice president of healthcare and medical education redesign, said in a news release. “This transformation helps us focus on our core competencies by maximizing public-private partnerships in local communities that will help cover critical services and strengthen our medical education programs.”