Financial Problems to Lead to Job Cuts
Scripps Health layoffs in 2018 are coming as the non-profit healthcare organization looks to reduce its costs following an annual budget miss of about $20.0 million. While Scripps operates within the non-profit healthcare system—and the organization has billions of dollars in savings—the healthcare operator is looking to reduce its costs in order to sort out its budgetary problems, as well as to remain competitive.
Healthcare industry challenges have plagued many hospitals and other medical facilities across the country in 2017, with healthcare layoffs in 2018 likely across the industry, should the trend keep.
A recent memo by CEO Chris Van Gorder to Scripps Health’s 15,000 employees and 3,000 affiliated doctors maintained that cuts are necessary to remain competitive. Health insurance companies look for hospitals with the lowest costs, while patients similarly shop around for cheaper services as their deductibles increase.
The Scripps Health layoffs in 2018, therefore, represent the organization trying to adapt to what officials say is a changing healthcare industry.
The upcoming personnel cuts are intended to cut $30.0 million from the current budget year ending September 30, 2018, with $40.0 million being saved in subsequent years.
“There will be layoffs,” said Van Gorder. “I don’t like it, but it has to be done for me to protect the organization and our ability to take care of our community into the future.”
The cuts, which will primarily be made to administrative jobs, follow a Scripps Health reorganization that took place earlier in December when the company consolidated leadership positions.
Meanwhile, the legal battle that happened in Congress over the Affordable Care Act (ACA) earlier in 2017 spooked insurance companies, with some pricing in the uncertainty of what healthcare will look like in the near future, leading to higher insurance premiums.
While the direct repeal of the ACA failed, the newly-passed Republican tax plan does contain a repeal of the individual mandate, which had imposed penalties for not buying into the ACA exchanges. Without the penalties, many are concerned that the healthcare plan will fail as it loses the funds necessary to keep it afloat.
Despite all the healthcare industry challenges in 2017, and even after Scripps Health missed its annual budget by $20.0 million (the first time it has done so in 15 years), the organization still banked about $2.6 billion in unrestricted cash and other investments, according to its audited financial statements for the 2017 budget year.
What has fallen, however, is its operating margin; that number fell from approximately nine percent in 2012 to 2.3% in 2017. Total profitability still reached $350.0 million for the year (25% higher than for 2016), largely bolstered by a strong stock market. Despite the overflowing coffers, Scripps health layoffs in 2018 are still on their way.
Scripps Health’s Cost-Cutting Measures in Early December
Layoffs are not the only move that the health network has made to save money in 2017.
Scripps Health’s cost-cutting measures were announced earlier in December when leadership positions were consolidated. The network is eliminating four hospital CEO positions and will be delegating responsibilities to two regional CEOs, who will oversee its five hospitals.
The Scripps Health operating budget was also in search of the aforementioned $30.0-million reduction in costs.
Healthcare Industry Challenges Led to Layoffs in 2017
As mentioned at the outset, healthcare industry challenges are negatively affecting organizations across the country. Healthcare layoffs in 2017 hit many medical networks in several states. Here is a list of some of the larger cuts made to hospitals across the United States:
- Maimonides Medical Center layoffs looked to cut as many as 200 employees.
- Detroit Medical Center layoffs hit 150 people.
- Molina Healthcare layoffs saw 58 people lose their jobs.
- Virtua Health System layoffs cut 50 people.
- Winona Health layoffs slashed 42 jobs.
- Oklahoma State Department of Health layoffs reached nearly 200.
“Scripps Health reorganization to include layoffs,” The San Diego Union-Tribune, December 22, 2017.
“Scripps Health to adopt regional CEO model in effort to trim $30M in corporate costs: 4 things to know,” Becker’s Hospital Review, December 4, 2017.
“New Jersey health system lays off 50 employees, consolidates services,” Becker’s Hospital Review, December 12, 2017.
“Winona Health to cut 42 positions,” Becker’s Hospital Review, December 21, 2017.