Scripps Health is planning to lay off part of its workforce. This is the result of senior management looking to reorganize the company in order to make it more financially sound.
Scripps Health is a private, non-profit healthcare system that has four hospitals and more than 28 outpatient facilities and clinics, operating out of San Diego, California. It also has home health care and educational programs.
In total, there are more than 15,000 employees and an additional 3,000 affiliated physicians under the Scripps Health business network.
Why Cut Jobs and Reorganize Now?
When Scripps Health completed its annual budget and missed its forecast by $20.0 million, it was an alarming wake-up call for the senior management team. This was the first time such a miss occurred in the annual budget in 15 years. This has resulted in the management looking into all areas of the business with change in mind.
The healthcare sector is in the same boat as the technology and retail sectors, which can see instant changes. Decisions often need to be made immediately and on a daily basis to ensure that a company is still relevant. And Scripps Health is going through this rapid process at the moment.
There was no announcement of the number of jobs that would be impacted within the company. The intentions of the job cuts are for Scripps Health to reduce its operating cost as a business. Jobs cuts are the easiest method of following through with reducing the overall business expenses.
By reducing the headcount of the overall business, it means that there is a greater probability of meeting the annual budget numbers. This would also mean that the business would still remain competitive and relevant in the future. In spite of the plan to cut jobs, the services provided are expected to be at the same level.
How Will Management Reorganize the Business?
With fewer employees employed by Scripps Health, the management team will have greater opportunities to change the operations side of the business.
The company’s president and chief executive officer, Chris Van Gorder, gave employees and the public some information of how the business will look in the future.
For one thing the business will focus more on outpatient care rather than patients staying in the hospital. This is due to the fact that there will be a higher turnover of patients seen by nurses and doctors, which should result in lower business cost and higher revenue.
A major reason why all this has to take place is that patients are seeing higher deductible costs on their healthcare insurance.
In addition, this business model is seeing wage increases for employees, medical cost increases, and fewer patients looking for healthcare services.
The future could see further changes due to shifts in operations over time. There’s even the possibility of more job cuts or business reorganization. Another possible strategy could be to shrink the size of the business and sell off assets.
Scripps Health Not the Only One in Trouble
Recently, competitors of Scripps Health also reduced their workforce. For example, Tenet Healthcare Corp (NYSE:THC) announced that 1,300 employees would receive layoff pink slips; another 75 employees are being laid off at Lahey Health System; and Providence Health & Services cut 210 jobs.
So it can be said that the $20.0 million that was missed in regards to Scripps Health’s annual budget shouldn’t have come as a surprise, as the entire sector is seeing shrinking revenue and job cuts. Job cuts are normally a short-term fix, but the reorganization of the business reads as more of a longer-term potential fix. However, there will be a learning curve due to the change in business strategy.
“Scripps Health plans reorganization, layoffs in 2018,” Healthcare Dive, January 2, 2018.
“Scripps Health reorganization to include layoffs,” The San Diego Union-Tribune, December 22,2017.