Scripps Health Announces Bold Restructuring Plan in Response to Health Care Reform

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New Management Structure Designed to Cut Costs, Improve Quality, Save Jobs

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Very few health systems have a complete system-wide horizontal leadership structure to go along with the traditional vertical management structure. We believe we are one of the first to move in this direction

In a move to successfully meet the significant and unexpectedly swift financial challenges posed by health care reform, Scripps Health has implemented an innovative management restructuring model aimed at cutting costs, improving patient care and preserving jobs.

The nonprofit health system is reorganizing every department within a horizontal co-management structure, which aims to standardize clinical and operational functions across the entire Scripps system of five hospital campuses and 20 outpatient centers.

“Very few health systems have a complete system-wide horizontal leadership structure to go along with the traditional vertical management structure. We believe we are one of the first to move in this direction,” said Chris Van Gorder, president and CEO of Scripps Health.

Under the new model, costs will be cut by the elimination of unnecessary variation in how the facilities are run and how care is delivered. The changes began Oct. 1, 2010 in light of reductions in reimbursement from Medicare and private insurers.

Some aspects of health care reform are already being felt now – years before they were initially expected. Government payers are already cutting their reimbursement rates for hospital care and private payers are starting to follow suit, prompting health systems to quickly adapt or face the likelihood of losing millions of dollars in operational income.

“As reimbursements fall, we must reduce our costs and improve the already high quality care we provide without resorting to across-the-board cuts and layoffs,” said Van Gorder. “I want to make sure that we take care of our people, just as they take care of our patients. As part of this process, we are committed to preserving jobs for those who are displaced by this restructuring.”

Leaders in Scripps’ new horizontal structure have begun identifying unnecessary variations in practice, staffing, use of supplies and services, patient quality and satisfaction, physician satisfaction and others areas. Scripps aims to eliminate these variations and replace them with best practices from within Scripps or other health systems.

A recent preliminary audit conducted by Scripps’ project management office identified approximately $150 million in variation (and possible annual cost reduction) across the Scripps system. Potential long-term cost savings for Scripps may come from areas as diverse as: coffee vendors ($200,000 in possible savings); clinical laboratory functions ($6 million to $12 million in possible savings); cardiac surgery programs (approximately $4.3 million in possible savings).

Another recent example of Scripps’ potential for cost savings: In the past 20 months, Scripps has saved approximately $8 million by in-sourcing and standardizing its pharmacy management function.

In the new horizontal management model Scripps is divided into four operational divisions:

  •     Corporate Medical Division, led by Scripps Chief Medical Officer Dr. Brent Eastman, includes the areas of nursing; quality; research and medical management and physician co-management.
  •     Clinical Operations Division, led by Scripps Corporate Senior Vice President Barbara Price, includes the areas of clinical support; clinical ancillaries; and clinical service lines.
  •     Support Services Division, led by Scripps Corporate Senior Vice President John Armstrong, includes the areas of surgery, pharmacy and supply chain management; facilities design and construction; and support services.
  •     Administrative Services Division has already been operating on a horizontal basis. This division includes the areas of finance; human resources; legal; audit and compliance; information services; physician services; community benefit; project management; government affairs; marketing and communications; and philanthropy.

Scripps is working with its physician leadership to extend the horizontal co-management structure to its 2,500 affiliated physicians. By doing so, Scripps is laying the groundwork for the co-management models called for in health care reform, including the creation of clinical workflows designed around best practices.

To avoid layoffs, Scripps has a Career Resource Center (CRC) to assist employees transitioning to new positions within the organization. Current openings throughout Scripps are being held to create opportunities for staff in the CRC. Since 2002, 746 employees have benefited from the CRC. Last year, 98 employees participated and 81 were placed in jobs at Scripps. Scripps’ commitment to preserving jobs is in contrast to the quick pace of hospital layoffs nationally. The Bureau of Labor Statistics recently reported that during the first eight months of 2010 there have been 102 mass layoffs in health care resulting in more than 8,200 unemployment claims.

ABOUT SCRIPPS HEALTH

Founded in 1924 by philanthropist Ellen Browning Scripps, Scripps Health is a $2.2 billion nonprofit community health system based in San Diego, Calif. Scripps treats a half-million patients annually through the dedication of 2,500 affiliated physicians and 13,000 employees among its five acute-care hospital campuses, home health care services, and an ambulatory care network of physician offices and 20 outpatient centers and clinics. Recognized as a leader in the prevention, diagnosis, and treatment of disease, Scripps is also at the forefront of clinical research, genomic medicine, wireless health care and graduate medical education. Scripps has been recognized as one of the Top 10 health systems in the nation by Thomson Reuters for quality care. More information can be found at http://www.scripps.org.

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