About 125 people who work for two south suburban hospitals and affiliated outpatient clinics were laid off Monday, as Franciscan Alliance refocuses its business model.

The cuts, which affect almost every department, account for about 6 percent of the work force at Franciscan St. James hospitals in Chicago Heights and Olympia Fields, as well as several outpatient centers, said Franciscan St. James President and CEO Seth Warren.

The cuts went into effect immediately, he said.

He attributed the move to the changing health care environment.

"What we've seen is a decrease in reimbursement from the federal government and local insurers, as well as a continued decline in inpatient admissions," he said. "That's a national trend and true in the Chicagoland market as well."

A news release from the hospital referenced changes required by the Affordable Care Act, also known Obamacare, as playing a role in the decision.

"Elements of the new law cap reimbursement rates for specific diagnoses and mandate hospitals to deliver quality care more efficiently while reducing hospital admissions," it states. "Under the new law, institutions such as Franciscan St. James are, in fact, encouraged to keep patients out of the hospital, and are penalized for certain hospital re-admissions."

Warren said the company is coordinating with sister hospitals in Indiana to inform recently cut employees of job openings there.

Mishawaka-based Franciscan Alliance also operates 11 hospitals in Indiana, including Franciscan St. Margaret Health hospitals in Dyer and Hammond and Franciscan St. Anthony Health hospitals in Crown Point and Michigan City.

The company announced in June that it was looking for an organization to acquire or enter into a joint venture on its two Illinois hospitals. More than $300 million was invested in St. James Health hospitals in Chicago Heights and Olympia Fields since 1994, but still incurred significant operating losses, the company stated.