June 19, 2014
The U-M Health System's leaders Thursday reported positive fiscal year-end results, with an anticipated 0.7 percent ($17 million) targeted margin on operating revenues of $2.52 billion for the U-M Hospitals and Health Centers.
This performance helps position the university's health care enterprise for continued investment in targeted strategies and support of the Health System missions in patient care, education and research.
T. Anthony Denton, chief operating officer of UMHHC, presented the projected year-end results for fiscal year 2014 along with the FY '15 plan to the Board of Regents. He credited the strong financial performance to increases inpatient care activity and successful strategies to adapt to rapid changes in the health care industry.
In the annual financial summary, leaders projected that the FY '14 results will meet the target set last year. Patient care activity grew 4.3 percent over the previous year, and all three U-M hospitals had very high occupancy rates throughout the year, approximately 88 percent.
Also today, the regents approved a new budget that sets the bar even higher for the fiscal year that begins July 1. The FY '15 plan aims for a 3 percent margin on revenues of $2.66 billion, based on further increases in patient activity and effective management to reduce the rate of expense growth.
Achieving this target for clinical operations would position UMHS for long-term success, because clinical margins fuel the next generation of investments in buildings, technologies, research and talent. Gifts to UMHS, through its $1 billion portion of the Victors for Michigan campaign, will also be vital.
"Thanks to the hard work of more than 22,000, including physician faculty, leaders and staff, we continue to grow and strengthen our ability to provide value to those we serve, including patients from every county of Michigan and beyond," says Denton.
As of June 20, Denton becomes acting CEO of the Hospitals and Health Centers, when current CEO Doug Strong becomes interim executive vice president and chief financial officer for the University.
Denton notes that in addition to keeping up with rising patient care demand, UMHS teams of physicians, nurses and others have worked hard for more than a year to plan for two major launches: continuing the phased implementation of a new electronic health record and billing system known as MiChart, and opening the Northville Health Center in July.
Patients already have started scheduling appointments at the new 100,000-square-foot primary and specialty care center, which will improve access to U-M care for patients in metro Detroit.
"A wide range of other projects and initiatives have also helped keep UMHS finances on target during fiscal year 2014, including stepped-up efforts to manage expense growth, improve productivity and provide ideal patient experiences," Denton says. "Patient satisfaction continues to improve across the Hospitals and Health Centers, reaching record levels on rating of care."
It will take time for UMHS to assess the full financial impact of the Affordable Care Act on its clinical operations and financial health. In FY '14, UMHHC provided more than $152 million in uncompensated care. Increased insurance coverage is likely to reduce that figure in coming years.
At the same time, says UMHS Chief Financial Officer Paul Castillo, the pressure to provide high-quality care and contain cost growth continues to be a focus.
"Our participation in the POM ACO Accountable Care Organization, which works to meet those aims for patients covered by traditional Medicare, supports this effort," he says. "We can be very proud of achieving our financial target during a year of such change. But we'll continue our focus on operational efficiencies and all aspects of our revenue cycle."
Additional investments in capital projects to expand clinical capacity, including the opening of the Northville Health Center and a new Emergency Critical Care Center, will continue to take shape in FY '15.
Strategic clinical collaborations with other health care institutions in Michigan will also enable UMHS to continue to provide access to those requiring the expert and complex care provided by U-M physicians and other clinicians.
Just before the start of FY '14, UMHS signed an affiliation agreement with MidMichigan Health, and teams from both systems are working to develop enhanced programs and services. Last December, UMHS and Allegiance Health announced a proposed affiliation. That proposal is still in the due diligence phase.