Q&A: Scripps CEO on Strategic Appeal of a Regional Medical Center

Chris Van Gorder, Scripps Health CEO, explains why his organization would want to shoulder the challenges of buying an acute care hospital in a small farming community. The potential deal is appealing he says, because from a "population health basis, we need to grow."

San Diego-based Scripps Health and El Centro (CA) Regional Medical Center announced this week that they are in acquisition talks.

It's pretty clear why ECRMC would want to join Scripps. Tucked into the southeastern corner of the state, the 161-bed city-owned acute care hospital is located in Imperial Valley in the middle of the desert, 100 miles east of San Diego. It serves a farming community of about 43,000 souls just north of the Mexican border with a challenging patient mix that includes a substantial number of undocumented workers and uninsured U.S. citizens, and an unemployment rate close to 25%, one of the worst in the nation.

ECRMC earned an "F" in its Fall 2013 hospital safety score from the Leapfrog Group, and scored at or near the bottom of the pack on a number of measures including surgical site infections, ICU physician staffing, and falls and trauma injuries.

David Green, CEO at ECRMC, said the medical center had explored affiliations with more than 30 organizations before deciding to negotiate exclusively with Scripps. "Their mission and values align with the mission and values of El Centro Regional Medical Center, and we feel that together the city, the hospital, and most importantly, patients will greatly benefit from this affiliation," Green said in prepared remarks.

All of this makes perfect sense from ECRMC's perspective. What's not so clear is why blue chip Scripps Health would want to shoulder the challenges and liabilities presented by ECRMC. Scripps Health CEO and President Chris Van Gorder addressed those questions in an interview this week.

HLM: Why did you do this? What's in it for Scripps?

CVG: Actually El Centro reached out to over 30 organizations. I have no idea who else they approached but I know they reached out to others in San Diego… we are the largest metropolitan area near Imperial County and the hospitals out there.

These days it is going to be extremely difficult, if not impossible, for a freestanding hospital to survive and develop the necessary infrastructures around accountable care and economies of scale and everything that is going to be required in the future. They recognized that they were going to need to reach out and they did.

For us, we have been preparing for growth for the last decade and we also recognize that to gain economies of scale and meet patient needs from an accountable care perspective and a population health basis we need to grow.

HLM: The hospital is on the border with Mexico and the community has high numbers of uninsured. Why would you take this on?

CVG: I would reverse that and say that it is obvious that they need a quality healthcare organization to help them. We have that capability. Scripps Health right now has the closest hospital to the border in San Diego so we are very familiar with handing cross-border issues and dealing with what can be a challenging payer mix.

Anybody who is an American citizen is going to be required to have insurance of one kind or another under the Affordable Care Act, so we fully anticipate that a lot of the people there will have one form or insurance or another. They will still have the undocumented issue. But from our perspective we are a community health provider with an excellent tertiary care capability and our job is to meet the healthcare needs of our communities. This is an expansion of what we define as our community.

HLM: Will population health be a priority, and how might you go about improving population health?

CVG: Population health is going to be an issue for everybody across the country. We are in this era now where we need to look at value. Today's healthcare system I often describe as a sick business. If you're not sick we are out of business. We are moving into an era where we focus on keeping people well and that requires population health management. That means intervening earlier in our patients lives to try to do everything we can to keep them well.

See Also: Intelligence Report: Population Health Management–Steps to Risk Sharing and Data Analytics

We anticipate that we will reach out with wireless technologies, video conferencing, and other [telehealth] capabilities to lower costs of care, reach more patients in that community and bring more services to that community. I have never believed that it is the best for a patient to have to leave their community to receive care. Certainly they are not going to have every tertiary and quaternary service.

A number of patients will still come to San Diego. But under Scripps leadership, we think we can bring new services to that community and meet that community's much closer to their homes. It's the right thing to do… assuming we can put this transaction together.

HLM: Do you anticipate cutting some services or downsizing ECRMC?

CVG: Over time, every inpatient hospital is going to shrink. But there will clearly be an expansion of ambulatory services. El Centro understands that already and they have already invested in a number of ambulatory sites. I would anticipate growth in that area. We still have to do some work under the California Seismic Safety Law out there and eventually, probably, we will build a brand new hospital. When that happens, we will work with the community to determine what their needs are for inpatient and ambulatory care.

HLM: Are you committed to keeping some sort of inpatient acute-care hospital in El Centro?

CVG: Absolutely. That hospital is 120 miles away from Scripps and that community absolutely has to have an inpatient capability. I would have no interest in shutting down the inpatient capacity out there.

HLM: Are you going into these negotiations looking for an outright acquisition?

CVG: El Centro is looking for an outright acquisition. That is what we will be approaching it as. It's a city-owned hospital. The city recognizes that running healthcare facilities of the future requires an enormous amount of expertise that elected city council members might not have necessarily. Certainly it needs a very large organization these days to meet the broad range of community needs. They are looking for an acquisition so we would look for the very same thing, not just a loose affiliation.

HLM: Does the fact that ECRMC is city-owned complicate things?

CVG: I don't think it matters. City-owned hospitals were not unusual a few decades ago, but it is my understanding that El Centro is the last city-owned hospital in California, or there may be two of them, and El Centro is the largest in the state. They recognize that it is no longer the kind of business that a municipality ought to be running.

HLM: What can ECRMC leadership and physicians expect with this deal?

CVG: They are looking for more services to be delivered in their community. They are very excited about the way Scripps works with its physicians [and] with our physician leadership cabinet and care board. We really engage our physicians. I know the doctors are excited about that.

We also have a very robust graduate medical education program at Scripps. We have a couple of internal medicine residency programs and a family practice residency program and we have the opportunity to rotate some of our physicians-in-training out to Imperial County. It will give them a very different look at medicine in a very different community and potentially some of those physicians might stay in that community at well.

HLM: Are physicians in El Centro interested in joining Scripps Health Foundation?

CVG: At this point I have not heard any physicians out there express an interest in joining our foundation. I think they actually enjoy their independence. And to put it in perspective, while we have around 2,600 physicians at Scripps, about 700 of them are in the integrated model and the rest are independent.