Scripps Health's Q1 operating income drops $38.9M: 4 things to know

San Diego-based Scripps Health saw its operating income plunge in the first quarter of fiscal year 2018. The system is responding through a reorganization plan unveiled late last year.

Here are four things to know about Scripps' first quarter results, according to unaudited financial documents.  

1. Scripps saw operating income plunge 94.1 percent to $2.4 million in the first quarter of 2018, compared to $41.3 million reported in the first quarter of the year prior. A Scripps spokesperson told Becker's Hospital Review, "2018 is Scripps' most costly year in our three-year Epic installation, so this one-time (over three years) cost has a significant impact on our operating margin. We are also seeing a continued shift in our payer mix moving toward more patients covered by government payers."

2. Scripps saw its first quarter operating expenses increase 9.5 percent to $738.3 million in 2018, up from $674.4 million in the first quarter of 2017. In addition to its Epic EHR implementation, the system said the incline reflected increased provider fees and wages and benefits, among other costs.

3. In late December 2017, Scripps revealed a $30 million cost-cutting plan that will include layoffs of administrative and leadership staff. In a memo to employees and affiliated physicians, Scripps President and CEO Chris Van Gorder said the cuts are necessary to remain competitive as payers increasingly focus on low prices in contract negotiations and patients with high-deductible health plans shop around for care.

4. The health system reported operating revenue of $740.3 million for the first quarter ended Dec. 31, 2017. That's up 3.7 percent from $714.1 million reported in the same period in the previous fiscal year. After factoring in nonoperating gains, Scripps posted net income of $77.4 million in the first quarter of 2018, up 2.7 percent year over year from $75.4 million.

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