In an attempt to shed costs, Scripps Health is looking to reorganize in 2018, which will include an unspecified number of layoffs, The San Diego Union-Tribune reported.
Scripps Chief Executive Officer Chris Van Gorder wrote in a memo to staff that the health system will focus on lowering costs in part by moving more patients away from its five hospitals and focusing more on outpatient care.
Van Gorder said the move is needed to remain competitive in light of lower reimbursements and healthcare consumerism, including patients facing higher deductibles on their health insurance.
The San Diego-based health system is faced with a dilemma many health systems are facing — how do you keep doors open in a time of lower payer reimbursements and greater emphasis on outpatient care rather than inpatient hospital beds?
Many health systems have announced layoffs in recent months. Tenet Healthcare announced in its preliminary Q3 disclosures the company would cut 1,300 jobs. Lahey Health said in October it would lay off 75 employees to help bridge a budget gap. Providence Health & Services cut 210 jobs in August after experiencing a $255 million operating loss in 2016.
Many factors are working against a hospital’s bottom line. Payers are moving patients to less expensive settings, hospital operating costs are rising, patient admissions have softened, medical cost increases are outpacing wage growth and patients are experiencing higher deductibles.
Michael Abrams, co-founder and managing partner at Numerof & Associates, recently told Healthcare Dive that there are many factors working against a hospital’s bottom line. "If I was a hospital executive, it'd be a challenge to feel great about the year ahead,” he said.
Hospitals have tried multiple cost-saving levers to make ends meet such as reorganization and layoffs. Laying off staff may provide short-term savings, but might not be a long-term fix.
Chip Newton, healthcare leader of Deloitte's LaborWise, recently told Healthcare Dive that hospitals are also increasingly turning to workforce management as a way to control costs. Some ways include reviewing the incremental components of overtime, such as missed meal breaks. "Those seem minor but that level of granularity helps them maximize their labor force," Newton said.
Another way healthcare organizations are looking to cut costs is through mergers and acquisition. Though M&A is helping grow a health system’s footprint and reduce reduce, healthcare workers are being affected by consolidation.
The Center for Economic and Policy Research recently released “Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality,” which reported that healthcare savings through M&A has not gone back into staff training or improved healthcare workers’ wages. Instead, the money has improved healthcare organizations' finances. The report found hospital worker wages are stagnant, and outpatient center worker wages have dropped 6% over the past decade.