Lessons Learned: How Scripps Health keeps making $100 million
I haven't heard of too many hospital systems reaching a $100 million last year. In fact, 2008 was the third year in a row that San Diego-based Scripps Health surpassed the $100 million marker in operating income. That's after investing more than $287 million in community benefit programs.
During a time of unprecedented chaos in the economy and the capital markets, Scripps Health continues to see returns following an overhaul that began in 2001.
When Richard Rothberger, corporate executive vice president and CFO, arrived in August that year, the nonprofit system, with five hospitals (and now 19 outpatient centers), was $15 million in the red and without a credit rating. Rothberger, who was recently named CFO of the year in the large not-for-profit category by San Diego Business Journal, shared with me some of the changes he has made, plans for a $2 billion expansion, and how he's addressing big challenges such as Medicaid and Medicare cuts.
HealthLeaders: What was one key thing you did on day one to put a turnaround plan in motion?
Rothberger: We assessed the entire organization and began to create a list of priorities. At the time, Scripps had hundreds of initiatives and everybody was pretty fractionalized. So I sat down with my boss, our CEO Chris Van Gorder, and said I could see doing a maximum of 10 things and the rest we would come back to later.
HealthLeaders: How did you restructure the finance department?
Rothberger: I reassigned key folks who were very good at what they did, but would be better suited for other key roles. For example, the corporate VP of financial operations was appointed VP of supply chain and we began insourcing our contracting and supply chain folks, and reassessing all of our contracts. I also shifted around the site-based VPs of financial operations and put the stronger ones into more complex roles. I had about 20 direct reports when I got here and over eight years I have moved it down to nine. I also hired new auditors, a new financial advisor, a new investment banker and a new investment consultant because I felt like the individuals and groups that we had prior might have been biased and not as focused on the change that needed to occur.
HealthLeaders: How have you been able to sustain profitability year after year, especially in the past two years where it has been so tough for many hospitals?
Rothberger: We have set up the leadership structure so that the chief executives work for Chris (Van Gorder) and the VPs of finance operations work for me. The chief executives spend 70 percent of their time with the finance operation folks. We have achieved quite a bit from that. Also, I started monthly operating reviews for each business unit, which has made a big difference because rain or shine, we stay focused. We have also established a single signature for all of our managed care contracts for both the clinic and the hospitals, where previously they had been done separately. We cancelled our commercially capitated contracts, and we converted to fee-for-service to both improve the contract yield and reduce our risk of exposure. We also merged one of our smaller hospitals with a larger and stronger hospital, putting them both under one license. We were able to get more federal and state monies and reduce costs by putting in one administrator over both hospitals.