Scripps posts $36.6M annual loss as labor costs grow 11%

San Diego-based Scripps Health reported a $36.6 million operating loss (-0.9% margin) for the fiscal year ended Sept. 30, down from an operating gain of $49.3 million (1.2% margin) in the prior fiscal year, according to financial documents published Dec. 8.

Revenue increased 4.1% year over year to $4.3 billion while expenses rose 6.3% to $4.3 billion. Under expenses, wages and benefits increased 11% to $1.8 billion and supplies increased 10% to $763.3 million over the 2022 fiscal year. 

After including the performance of its investment portfolio and other nonoperating items, the four-hospital system ended the 2023 fiscal year with a net gain of $335.2 million, a significant improvement on the $502.9 million loss it reported in the previous year. 

In a recent interview, Scripps CFO Brett Tande told Becker's that the health system's biggest financial challenge is the continued mismatch in inflationary pressures on the expense side and the rigidity of healthcare reimbursement on the revenue side. 

"Typical Medicare hospital increases are roughly 3% per year, and this year, the Medicare physician fee schedule is actually declining about 3%. Commercial insurers continue to push against any increases in reimbursement," Mr. Tande said. "On our expense side, with labor and supplies eating up 70% to 80% of total expenses, it is not surprising to learn that our expenses are rising at 5 percent to 7% per year. That mismatch is not sustainable, and our management efforts are intended to close up that gap."

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