Orlando Health to Cut Record Number of Jobs to Save Money

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Orlando Health to cut record number of jobs to save money

By Marni Jameson, Orlando Sentinel

9:00 a.m. EST, November 19, 2012

For the first time in its nearly 100-year history, Orlando Health is reducing its workforce by up to 400 positions starting immediately, hospital officials announced this morning.

The elimination of 300 to 400 jobs will occur in two phases, and represents a 2- to 3-percent decrease in the system's 16,000 employees, said Orlando Health spokeswoman Kena Lewis. The reductions affect all departments and all eight of its hospitals, including Orlando Regional Medical Center and Arnold Palmer Hospital for Children.

The first wave of employees affected by the "labor expense reduction" portion of the initiative received their notices Friday, said Lewis. The next wave of downsizing will happen after the first of the year.

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The non-profit health network also will reduce positions through attrition of the workforce and by not filling any new positions, Lewis said.

Other aspects of the cost restructuring include eliminating "admirable but not sustainable" programs, streamlining some health-care delivery systems and supplies, and delaying capital spending.

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However, the hospital system will move forward with its $300 million expansion and renovation of Orlando Regional Medical Center, which is underway, and its $50 million acquisition of Physician Associates, a large, primary-care medical practice, which is set to be complete Dec. 31.

Facing challenges

Orlando Health officials called the move necessary.

"Health-care reform mandates and changes in reimbursement structures for Medicare and Medicaid are forcing health-care organizations throughout the U.S. to confront new challenges," said Sherrie Sitarik, president and CEO of Orlando Health. "We must find better ways to deliver enhanced value to patients and lower the overall cost of care."

For example, the hospital is cutting supply expenses by consolidating pharmaceutical purchases through one wholesaler and by renegotiating contracts for cardiac pacemakers and implantable defibrillators. Those two measures combined will result in an annual savings of $825,000, Lewis said.

As hospitals make moves that improve care, and reduce readmission rates from infections, their revenues drop, said Sitarik.

"We have made great strides in improving our quality outcomes," said Sitarik. "But these gains have also triggered lowered revenues due in part to a reduction in readmissions."

Added Lewis, "We're in a transition phase right now. We're moving from volume [based reimbursement] to value [based]. Eventually that will even out, but for a while it will present a fiscal challenge."

Orlando Health not alone

Such cost-cutting measures are happening across the country. On Wednesday Wake Forest Baptist Medical Center in North Carolina announced it would cut 950 jobs by June.

Last month, Louisiana State University announced it would cut more than $150 million from its hospital system, and 1,495 positions across its seven hospitals.

"It's a challenging time for hospitals," said John Bigalke, senior partner of global health care for Deloitte, one of the nation's largest professional services firms.

Hospitals are looking at an $800 billion to $900 billion reduction in Medicare payments over the next 10 years, along with reductions in Medicaid payments, he said.

"As patients shift into insurance exchanges, payments will go down further. Meanwhile, they have to spend a lot of money on technology. They're under lots of pressure," Bigalke said.

Just this year, Orlando Health experienced reductions of more than $59 million in Medicaid reimbursements — a reduction of more than 20 percent over the prior year, said Lewis. This trend is expected to continue as additional reforms take effect, she said.

"A lot of hospitals have already done this," Bigalke said referring to the cutbacks. "A lot are looking to do it, and more will have to look at it in the future."

Laura Goodhue, executive director of the health-advocacy organization Florida Chain, doesn't see it that way. "I'm not sure why they're having layoffs now. And I'm not sure what they're referring to in regards to reduced payments," she said.

"As a result of the Affordable Care Act, more Floridians are going have health coverage, not fewer, so there will be more paying Floridians in the system," Goodhue said.

mjameson@tribune.com