Scripps Health's operating performance is starting to stabilize as the San Diego-based system takes steps to get its costs under control. The four-hospital group is restructuring and plans to eliminate about 100 jobs.
Scripps CEO Chris Van Gorder notified employees in a memo earlier this year that the job cuts will come mostly from management and administration. The system spent nearly $2.4 million on restructuring costs in the quarter ended March 31, according to its quarterly earnings report.
Even still, Scripps' costs are rising faster than revenue. Salary and benefit costs increased 7.4% year over year with costs coming from merit increases and an expanded full-time employee headcount, the earnings report said.
Scripps also spent more money on drugs and prostheses as well as physician services.
Information technology costs added to the strain. Scripps' board of trustees last year gave the go-ahead to migrate the system's inpatient and outpatient electronic health records to Epic Systems Corp., and also selected Epic's revenue-cycle management system. The phased rollout will take place between April 2017 and January 2018.
The project has a 10-year budget of $308.6 million, and the system expects to incur $360.5 million in operating costs.
Scripps also spent $19.9 million on software and hardware needed to transition to the new ICD-10 billing codes, which went into effect last October. The new equipment raised its depreciation and amortization expense.
Yet Scripps did see a benefit from higher patient volume, particularly from outpatient and emergency room visits and more trauma cases. The earnings report did not break out admissions figures. Revenue increased 8.1% for the quarter, excluding the impact of California's provider fee program. The program had been on hold in 2014 while waiting for the CMS to approve its extension and back payments were made the following year, inflating those results.
Scripps reported an operating surplus of $28.1 million for the quarter on $671.2 million in operating revenue, excluding the provider fee program. In comparison, its operating surplus in the prior-year period was $26.9 million on $620.6 million in operating revenue, also excluding the impact of the provider fee.
Its operating margin remained steady at 4.2% compared with the year-ago period's 4.3%.
Scripps issued $150 million in taxable and tax-exempt financing earlier this year for general corporate purposes and to pay for prior capital expenditures.