San Diego-based Scripps Health's clinic and coastal medical groups will stop participating in Medicare Advantage plans, effective Jan. 1, a move that will affect about 32,000 seniors enrolled in plans from UnitedHealthcare, Anthem Blue Cross, Blue Shield of California and Centene's Health Net, among others, according to the Encinitas Advocate.
The health system is staring down the barrel of a $75 million loss on the MA contracts this year but will remain in network for about 13,000 MA enrollees who receive care through Scripps' individual physician associations, CEO Chris Van Gorder told Becker's.
The decision is not a negotiation tactic; the health system simply cannot sustain "another year losing $75 million on full-risk Medicare Advantage," Mr. Van Gorder told the Advocate. Several other hospitals and health systems are also ditching MA contracts as operating margins dwindle amid financial headwinds.
Systemwide, for the nine months ending June 30, Scripps reported a $46 million operating loss, with expenses rising to $3 billion and revenues at $2.9 billion. While Scripps has a cushion of $3.4 billion in unrestricted cash and investments for the period, the system is facing its first annual operating loss in more than two decades, with labor and supply costs having a significant effect on its overall expenses and operating margins, according to the report.
"The last time we lost money from operations was probably 23, 24 years ago," Mr. Van Gorder told the Advocate.
Operating at negative margins and slowly eroding savings could make it challenging for Scripps to borrow in the future, especially as the system projects its bond rating to fall amid financial losses, so having a buffer of cash on the books will be key for the health system to borrow additional funds to repair and replace Scripps Mercy campuses in Hillcrest and Chula Vista, Calif., and make other capital investments, Mr. Van Gorder said.
"I cannot rebuild Chula Vista, I cannot rebuild San Diego if we continue losing money," Mr. Van Gorder told the publication. "If we continue losing money, I won't even be able to access the money necessary to do it, so then we end up closing hospitals down, and then there is no care for any of the people in [those] communities."