Scripps Gets Horizontal
Thursday, October 21, 2010
I spoke to lots of people about health care reform when I was a reporter covering the health beat. And one thing a lot of people told me was the health reform plan, signed by Obama this year, was health insurance reform. It was not a reform that went to the heart of escalating health care costs.
SAN DIEGO I spoke to lots of people about health care reform when I was a reporter covering the health beat. And one thing a lot of people told me was the health reform plan, signed by Obama this year, was health insurance reform. It was not a reform that went to the heart of escalating health care costs.
But now Scripps Health, which runs 5 hospitals and 20 clinics in the San Diego area, is in the midst of a corporate restructuring they claim will make a big difference in cost. CEO Chris Van Gorder, in fact, believes their reorganization will eventually save $150 million a year.
Here’s the back story, according to Van Gorder.
Scripps Health was built from the union of several large hospitals. But the vertical corporate structure, in which each hospital had a chief operating officer who ran the place, remained intact. That meant every hospital within the system did things in a different way. They used different staffing levels and different materials. And that has required different levels of funding.
“We know, for example, that at one of our hospitals an open-heart case costs $3,000 more than it does to do the same kind of operation at another one of our hospitals,” said Van Gorder.
He said they’re trying to solve that problem by getting horizontal, in a corporate sense…. by getting rid of the silos and putting everything in one bin.
Van Gorder said the company has reassigned the top managers of its five hospitals to make them responsible for operations across the system. The goal is to standardize hospital operations and bring best practices to each site. This even applies to serving coffee.
“We’re spending $680,000 dollars a year for coffee and we’re using 15 different brands,” said Van Gorder. “If we standardize and buy at a larger scale we can get better buying power.”
Scripps claims it can save $200,000 dollars on coffee alone.
But if this is such a good idea, why didn’t Scripps do it five years ago? Van Gorder says strained relations between Scripps doctors and the company administration in the past have made it difficult to make dramatic changes.
But change has become unavoidable now that cuts to Medicare reimbursement will hit company revenues with an $8 million loss this year. Van Gorder adds that commercial insurance companies are also asking for decreases in reimbursement rates, since they’re concerned about having to compete with state insurance exchanges.
Come to think of it, state insurance exchanges were a product of this year’s health care overhaul. So maybe it is making hospitals deliver care at a cheaper price.