CHICAGO -- Indiana University Health, the state’s largest health care system, announced Sept. 11 that it will lay off 800 employees by the end of the year to save money.

The cuts, which represent about 2% of its work force, are part of a larger effort by IU Health to cut more than $1 billion in costs over the next four years amid declining reimbursements and patient volume.

“This was a very tough decision,” Jim Terwilliger, president of two of IU Health’s hospitals, said in a statement. “You don’t do things like this without a lot of consideration. We are trying to position the system to be successful in a radically changing industry.”

He said the pace of change in the health care sector is faster now than at any time in recent history.

A letter to employees from the system’s CEO Dan Evans said the $1 billion cost-cutting campaign is designed in part to offset future reimbursement cuts.

“We adopted this goal because we fully expect that the future reimbursement environment, from all payers, will look much like Medicare does today,” the letter said. Recent cuts have not been sufficient, Evans added. “This, along with declining reimbursement rates and inpatient volumes, has us significantly behind our budgeted operating performance.”

In March, IU Health announced that it was postponing a $500 million new patient tower project. Officials said at the time the decision was due to uncertainty surrounding the new federal health care law and the economy. The building project had been planned for the Methodist Hospital in Indianapolis.

IU Health, formerly known as Clarian Health Partners Inc., is a 16-hospital system headquartered in Indianapolis. The system employs around 36,000 people, according to local reports.

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