San Diego-based Scripps Health is estimating that HR 1 could reduce its net revenue by as much as $100 million annually once all of the law’s provisions are fully implemented.
Two elements of the law driving that estimate are reduced Medi-Cal enrollment and new limits on provider fee programs, the system said in its Aug. 19 financial report.
Third-party studies cited by Scripps found that 20% to 37% of Medi-Cal enrollees in its service area could lose coverage under the law, with the statewide impact on California pegged at $9.5 billion a year. Separately, changes to provider fee programs already cut about $20 million from Scripps’ reimbursement under the state’s Calendar Year 2025 provider fee program, a reduction the system expects to persist in future program years.
Scripps also flagged pressure from California’s Office of Health Care Affordability, which has adopted net revenue growth targets and is developing enforcement penalties for health systems tied to 2026 performance, though the system does not expect penalties to be assessed until 2030 or later. Using a 2023 test run of the framework, the office found 92% of California hospitals would have faced penalties; Scripps, which posted a $36.6 million operating loss that year, would have owed an additional $159.9 million on top of it. Scripps said it does not believe the office’s current data and enforcement framework accurately reflect underlying conditions.
“Advocacy efforts will continue in the hope that OHCA and health systems can work together to promote affordability in California under a revised and more accurate framework,” Scripps said in the report.
The system pointed to two more pressure points: the expiration of the ACA’s enhanced insurance subsidies on Dec. 31, 2025, and proposed federal legislation affecting the 340B drug discount program.
Scripps reported an operating income of $101.5 million (6.6% operating margin) for the three months ended June 30, up from operating income of $24.4 million (2.1% margin) during the same period last year. Total operating revenue climbed 30.3% year over year to $1.5 billion, helped by a $209.8 million jump in provider fee revenue tied to CMS’s approval of the state’s Calendar Year 2025 provider fee program and a $141.3 million increase in patient service revenue.
Excluding the one-time provider fee recognition, Scripps said it would have recorded operating income of $60.4 million (4.5% margin) in the quarter.
For the nine months ended June 30, Scripps reported $185.5 million in operating income (4.5% margin), up from $109.8 million (3.1% margin) during the same period last year.
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