There has been a sea change when it comes to health care. In 2014 and 2015, we saw the Obama Administration significantly enlarge Medicaid and sold it to the American public as if these people were part of the uninsured that the Affordable Care Act was designed to remedy.
Now, with the changing of the tides and the Trump Administration, the chickens are coming home to roost. Both the federal and state governments are reassessing the effectiveness and costs associated with Medicaid -- mostly in the form of reducing reimbursements.
After windfall hospital profits in 2014 and 2015, mostly attributable to the massive enrollment of the uninsured into Medicaid programs and which resulted in an influx in the number of people seeking serious medical care for the first time, the profit picture has drastically changed.
Consider these two recently reported stories on San Diego-based Scripps Health Care which illustrates the issue from the CEO’s perspective: moving from a “no-layoff philosophy” to layoffs are a necessary consequence of the current environment.
(2016) San Diego-based Scripps Health recently revealed it will lay off 69 employees.
The layoffs, which will take place May 20 through Oct. 4, affect employees in the human resources and marketing departments.
Scripps Health President and CEO Van Gorder, who has reinforced a no-layoff philosophy over the duration of his tenure, recently spoke with Becker's Hospital Review about the layoffs.
Question: What were the circumstances surrounding the layoffs?
Chris Van Gorder: Revenues have flattened out due to healthcare reform and payer mix changes and we are seeing an increase in government-sponsored patients. Volume is up, costs are up and revenues are flat. Since we need to hit our financial targets to generate enough capital to comply with California's SB1953, which requires upgrading or replacement of our hospitals by 2030, we need to control our costs. But it's also the right thing to do for our patients. Lower costs mean more affordable access for our patients. <3/22/2016>
(2017) San Diego-based Scripps Health's cost-cutting plan will include layoffs in 2018, according to The San Diego Tribune.
In a recent memo to employees and affiliated physicians, Scripps President and CEO Chris Van Gorder said the cuts are necessary to remain competitive, as payers increasingly focus on low prices in contract negotiations and patients with high-deductible health plans shop around for care.
In a statement to Becker's Hospital Review, Mr. Van Gorder indicated layoffs would happen at an administrative and leadership level. The number of employees or roles to be affected was not specified. "We are still hiring patient caregivers," he said.
Mr. Van Gorder noted that major changes in healthcare delivery are forcing health systems to adjust. "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 Affordable Care Act, the uninsured will once again be growing nationally," he said. "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."
With the aim of lowering costs by $30 million, Scripps is making several changes, including restructuring its leadership model and implementing corporate services reductions. The reorganization comes after Scripps missed its annual budget by $20 million last year for the first time in 15 years, according to The San Diego Tribune. <12/28/2017>