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The experts are telling me and others that you’re going to see a huge jump in that as technology continues to improve … that’s going to pull a whole lot of utilization away from hospitals and hospitals that haven’t prepared for that shift are going to be in deep trouble in the not-to-distant future.

“We’re now, for example, doing total joint replacement in ambulatory surgery centers. “We’re seeing a huge shift in the ambulatory side,” Van Gorder said. The company operates stand-alone imaging centers that offer cheaper scans than are available in the outpatient centers attached to the region’s major hospitals. Scripps has already started on this path with the purchase of Imaging Healthcare Specialists in 2015.

That means pulling back on the previous tendency to include plenty of space inside hospital complexes to patients whose medical needs don’t require them to be admitted for a overnight stay.

That plan, Van Gorder said, will continue but will be undertaken with knowledge that insurance companies want to avoid paying the higher prices charged by hospitals whenever possible. In addition to borrowing and revenue from philanthropy, Scripps plans to tap its savings to fund its building plan. These upgrades and replacements, the executive added, are made more urgent than they would otherwise be due to a state law that requires all hospitals to meet certain seismic requirements by 2030 or cease operation.

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And, having a hefty balance sheet, he added, is necessary to get favorable interest rates from lenders as Scripps moves to execute a recently announced $2.6 billion building plan that will replace Scripps Mercy Hospital in Hillcrest, add a new patient tower at Scripps Memorial Hospital, La Jolla and upgrade facilities in Encinitas, Chula Vista and Torrey Pines. Van Gorder said that it’s not responsible management to fix a recurring problem with savings. Still, with more than two billion in the bank, couldn’t Scripps afford to burn some savings and stave off layoffs? “As strong as we are on the bottom, bottom line, the trends at the top end are changing, and we have to adjust to them,” Van Gorder said. Van Gorder said the basic fact is that operation of the organization must continue to bring in more revenue than it spends and declining operating margins must be addressed even if revenue from the stock market is currently masking those declines. How can an organization be making money, have a significant financial cushion and yet still be planning for layoffs in the coming year? A roaring stock market helped significantly increase the value of its holdings, pushing total profitability up to $350 million for the year, a number that is 25 percent greater than last year. Financial statements show that Scripps’ bottom line was significantly bolstered this year by investment income.

However, Scripps has recently seen its operating margin, the percentage of revenue left over after all the bills are paid, shrink significantly from about 9 percent in 2012 to 2.3 percent in 2017. Scripps, the audited financial statements for the 2017 budget year show, has banked about $2.6 billion in unrestricted cash and other investments. Things haven’t gotten quite so bad yet at Scripps.Ī look at Scripps’ bond industry financial filings make it clear that this is not a company teetering on the edge of insolvency.

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