Nemours Children’s Health System announces $100-million cut in costs

Naseem S. Miller, Orlando Sentinel

Nemours Children’s Health System, the parent organization for Nemours Children’s Hospital in Orlando, is planning to cut $100 million in costs and reduce its workforce by 3 to 4%, due to “another wave of decreasing patient volumes in the fourth quarter of 2020,” the health system said on Thursday.

“The hard truths of this pandemic remain that pediatric volumes have not returned to pre-pandemic levels and we don’t know when the volumes will return,” said Nemours officials In a statement shared with the Orlando Sentinel. “But we know when they do, they will look different from today.”

The health system has experienced a nearly 10% drop in volume, according to officials.

Nemours, which has two free-standing hospitals — in Wilmington, Del., and Lake Nona in Orlando — didn’t provide specific plans for each location.

“We will be looking at everything to preserve the most jobs possible,” said a health system spokeswoman in an email on Thursday. “A few examples are spending less on travel and consulting and purchased services; standardizing processes to be more efficient; deferring some capital investments; and even slowing important recruitments.”

Nemours is also eliminating merit raises for 2021.

The health system added that it did not downsize or furlough employees last year and created a re-deployment program to keep its employees during the pandemic.

“But now, Nemours must work to right-size operations to these new expected patients volumes,” it said in the statement.

In 2019, Nemours finances received an AA+ from Fitch Ratings, indicating a very strong financial profile.

But the stay-at-home orders issued last year early in the pandemic led to as much as 60% drop on patient volumes in children’s hospitals, said Kevin Holloran, a senior director at Fitch Ratings. He said many children’s hospitals have bounced back since. He couldn’t speak on Nemours’ financial health, since Fitch hasn’t rated it since 2019.

“We just have to put it this way: COVID taught us a lot how about fragile the health system can be,” said Holloran. “The U.S. health care system was not prepared for a pandemic and it takes one little microbe to bring the society to its knees and dramatically impact our sector.”

With 130 beds, Nemours Children’s Hospital in Lake Nona Medical City, which opened in 2012, had about 13% of the pediatric market in Central Florida in 2019, compared with 46% at Orlando Health and 18% at AdventHealth.

nmiller@orlandosentinel.com.