The internal picture at San Diego-based Scripps Health is strong. Quality rankings place the system among the best in the country, its workforce is growing and new facilities are under development. Chris Van Gorder has spent 26 years as its president and CEO making sure of that. The pressures that command his attention now are entirely external.
“We are in what I would call uncharted times,” Mr. Van Gorder said during a recent “Becker’s Healthcare Podcast” interview. “We’ve got HR 1 — with $1 trillion in cuts to hospitals over the next 10 years.”
That projection is already arriving in specific increments for Scripps. Early projections from the system estimate roughly $800,000 a month in lost income from reductions in Affordable Care Act subsidies, which could increase next year.
“We expect, starting probably into early 2027, $100 million a year in reductions coming from HR-1,” he said.
Layered on top of the federal pressure is a California-specific challenge Mr. Van Gorder believes makes an already difficult situation structurally unworkable. The California Office of Health Care Affordability has capped hospital cost growth at 3.5% for the current year, with a reduction to 3% ahead. Labor, supplies, pharmaceuticals and the rapid pace of clinical innovation are all rising faster than that threshold. This is already a penalty year under the framework, and the consequences of missing the target are severe.
“The penalties are extraordinarily high,” he said. “They could literally bankrupt or close hospitals.”
What troubles him about both the federal and state approaches is a shared idea that hospitals are the right place to solve what he sees as a systemic problem distributed across the entire care delivery chain.
“We’re at the end of the food chain when it comes to cost of healthcare,” Mr. Van Gorder said. “We’re the organizations that actually take care of patients. We are required to take care of patients in our emergency rooms. Everybody else’s cost — insurance cost, medtech cost, pharmaceutical cost, all the other supply cost, employee cost — all of those things we have to bear.”
He does not dispute that affordability is a genuine problem but the solution is directed in the wrong spot.
“We can’t just ignore the rest of the food chain and expect somehow the hospitals at the end are going to be the solution to this affordability issue, which is genuine. It’s real. It’s a problem,” he said.
Scripps has been making that case directly to state officials. Mr. Van Gorder and his team have testified in Sacramento, and officials from California’s Office of Health Care Affordability and the Department of Health Care Access and Information made a return visit to Scripps Mercy Hospital in San Diego. He and his CFO took different approaches to the conversation — his CFO as the good cop, himself as the bad cop — and he has since invited officials back for a longer look at how the system’s operations actually work.
“Come and spend a few days with us,” he said. “You can see how supply chain really does work in a hospital, how costs really do work in a hospital, how accounting in healthcare in a hospital works. There’s limits to what we can do at the end of the food chain.”
The conversation at the legislative level has been more receptive. The lawmakers who established the Office of Health Care Affordability acted with genuine intentions, but designed the mechanism without fully understanding what fixed cost caps on hospitals with no equivalent constraint on the rest of the healthcare supply chain would produce in practice.
The paradox he returns to is that the quality of care hospitals can now deliver has never been higher and never more costly. Genomics, advanced chemotherapies and rapidly arriving innovations are giving patients access to treatments that didn’t exist a generation ago. That trajectory cannot continue if the policy response addresses only one link in the chain.
“There’s going to be a bump in the road here when that quality gets impacted by affordability for those of us at the end of the food chain,” Mr. Van Gorder said. “We’re deeply concerned about affordability, but it has to be realistic affordability as well.”
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