Scripps Health is eliminating chief executive positions and cutting corporate services by $30 million in order to remain "relevant and viable in a new health care era," according to the San Diego-based system's CEO.
The CEO positions at each of the system's four hospitals will be cut. Scripps instead will have one CEO overseeing the Scripps Encinitas, Green and La Jolla campuses, another chief executive for the Scripps Mercy San Diego and Chula Vista campuses and one CEO over ancillary services.
These leaders will supervise chief operations executives at the facilities.
In another move, Scripps will create a joint leadership model between hospital executives and physician leaders "to further align physician and hospital objectives."
The memo also said Scripps will redesign its care delivery to be as patient-centered and cost-efficient as possible.
"The goal is to get out of our silos and work together in entirely new ways to deliver care at a lower cost, with better quality and an exceptional patient experience," Scripps Health CEO Chris Van Gorder wrote.
The memo said that for the first time in 15 years, Scripps had not reached its operating budget. The system blamed declining reimbursement and increased operating costs—something that plagues the entire industry. Two-thirds of Scripps patients are covered by Medicare or Medicaid, according to the memo.
The memo said the company's operating income, minus expenses, had dropped over the last five years. Scripps did not specify what would be cut in the plan to drop corporate services by $30 million.
"None of this is pretty, but we need to see it as an opportunity to create a different future. We can no longer rely on past models. If the world around us is rapidly changing, we have to stop looking back and start looking forward," Van Gorder wrote.
No specific time frame to accomplish that was set. But many of the changes would be implemented within 30 to 60 days, according to the memo.
This is the second restructuring in nearly two years. In May 2016, Van Gorder announced 100 jobs would be cut. In the most recent memo, Van Gorder, who has led the system since 2000, warned that without change, the system would have less money to fund new equipment, construction and salary increases.
Earlier this month, Scripps announced a $2.6 billion expansion that includes replacing Scripps Mercy Hospital. Over the past seven years, Scripps has achieved $700 million in performance improvements through cost savings and growth initiatives.
Van Gorder presented Eastman Kodak Co. and Blockbuster as companies that fell victim to inertia. Scripps was founded in 1924.
"We can sit back and fool ourselves into thinking change is not really needed and risk the consequences," Van Gorder said. "I choose to move ahead, and I hope you're with me. Let's make our founders proud."
