Scripps Health to Restructure Management

In an effort to adapt to changes and financial challenges created by healthcare reform, Scripps Health has implemented a horizontal management restructuring model that it says will cut costs, improve care, and preserve jobs.

The San Diego, CA-based, nonprofit health system is reorganizing every department within this horizontal co-management structure to standardize clinical and operational functions across its five hospitals and 20 outpatient centers.

"Very few health systems have a complete system-wide horizontal leadership structure to go along with the traditional vertical management structure," says Chris Van Gorder, Scripps Health president/CEO. "We believe we are one of the first to move in this direction."

Van Gorder says the management scheme will cut costs by eliminating unnecessary variations in how the facilities operate and deliver care. The changes began Oct. 1, in line with reductions in reimbursements from Medicare and commercial health insurers.

Some parts of healthcare reform are being felt now—years before they were expected, Van Gorder says. Government payers are cutting reimbursements, and private payers are following suit, prompting health systems to either adapt or face losing millions of dollars in operational income.

"As reimbursements fall, we must reduce our costs and improve the already high quality care we provide without resorting to across-the-board cuts and layoffs," Van Gorder says. "I want to make sure that we take care of our people, just as they take care of our patients. As part of this process, we are committed to preserving jobs for those who are displaced by this restructuring."

Scripps is identifying unnecessary and costly variations in practice, staffing, use of supplies and services, patient quality and satisfaction, physician satisfaction and others areas, and wants to replace the variations with best practices from within Scripps or other health systems.

A preliminary audit conducted by Scripps' project management office identified approximately $150 million in variations and potential annual cost reductions across the health system.

Potential long-term cost savings could come from areas as diverse as:

• Coffee vendors ($200,000);
• Clinical laboratory functions ($6 million to $12 million);
• Cardiac surgery programs (approximately $4.3 million).

In the past 20 months, Scripps has saved about $8 million by in-sourcing and standardizing pharmacy management functions.
Scripps has divided the horizontal co-management into four operational divisions:

1. Corporate Medical Division, led by CMO Brent Eastman, MD, includes nursing; quality; research and medical management and physician co-management.
2. Clinical Operations Division, led by Senior Vice President Barbara Price, includes clinical support; clinical ancillaries; and clinical service lines.
3. Support Services Division, led by Senior Vice President John Armstrong, includes surgery, pharmacy and supply chain management; facilities design and construction; and support services.
4. Administrative Services Division has already been operating horizontally, and includes finance; human resources; legal; audit and compliance; information services; physician services; community benefit; project management; government affairs; marketing communications; and philanthropy.

Scripps is working with its physician leaders to extend the co-management structure to its 2,500 affiliated physicians, with the aim of laying groundwork for the co-management models called for in healthcare reform. That includes creating clinical workflows designed around best practices.

To avoid layoffs, Scripps has a Career Resource Center to transition employees into new jobs in the health system. Job openings throughout Scripps are being held to create opportunities for staff in the CRC.