Am I Next? Layoffs and Restructuring at Scripps Health

Once again we find a major health care provider, this time famed $2.9 BILLION Scripps Health, engaging in layoffs as part of a reorganization that will address revenue shortfalls and the an uncertain competitive environment. Although Scripps CEO Chris Van Gorder did not cite the number of layoffs that will occur in 2018, he did say that layoffs would happen at an administrative and leadership levels. The health care enterprise employees 15,000 people, 3,000 physicians, and an unknown number of contract personnel.

CEO Van Gorder cites insurance companies reduced contracting rates and the increasing price competition for patients with high deductibles. Also cited was a $20 million budget shortfall, said to be the first indication of trouble ahead and the first such shortfall in the past 15 years.  Troubling, but not catastrophic for a private not-for-profit health care organization that sees a substantial financial revenue stream from its investment portfolio.

“Healthcare is changing rapidly with huge growth in ambulatory care and reduced utilization of inpatient hospitals --- and given the elimination of the individual mandate under the ACA, the uninsured will once again be growing nationally. It’s important that healthcare organizations proactively change to address these changes and Scripps is doing so with a major restructuring of our organization to (1) reduce costs for our patients; (2) increase the quality of our services even though they are already strong, and; (3) improve our patient experience in both our hospitals and our many ambulatory sites of care. Our organization remains strong financially as we prepare to spend more than $2.6 Billion to improve our facilities and comply with the State Seismic Safety Act – SB 1953 – but changes will be required to maintain that strength and, at the same time, find a way to lower our costs for our patients now and in the future. The changes we are making now will involve our leadership and administrative services. We are still hiring patient care givers.” <Source>

Scripps Health unveiled their new multi-billion dollar master plan in November, 2017 which represents the largest building program in the health care system’s 125-year history and triggers significant construction projects at its hospital campuses across San Diego County (California). According to Van Gorder, the master plan projects will be financed by operating revenues, borrowing and philanthropy. “We are thankful for that. We don’t receive government funding for these projects. It’s the generosity of grateful patients and others that has made us what we are today, and it will be that generosity that will shape us into who we become in the future.” Most of the construction will take place to address seismic replacements and retrofitting to meet state earthquake standards. In January, 2017, Scripps notified the State of California of its intent to borrow $168.5 million under the auspices of the California Health Facility Financing Authority with loan maturities up to 40 years. This program provides a borrower with access to low interest rate capital markets through the issuance of tax-exempt and taxable revenue bonds.