The books will soon close on the university’s 2012 fiscal year, with financial results for the U-M Hospitals & Health Centers (UMHHC) projected to exceed original plans.

As the new fiscal year begins, the outlook calls for continued growth in the number of patients U-M serves — made possible by recent capacity investments.

In the last 12 months, UMHHC opened a new children’s and women’s hospital, expanded its adult emergency department and began to introduce a major new computer system for patient care and billing — three important strategic investments for the future. Due to the anticipated incremental expenses, the original plan for FY12 called for an operating loss of 1.1 percent.

UMHHC now expects nearly break-even results on revenues of about $2.2 billion, with an operating loss of approximately 0.5 percent. If the costs of the major projects were left out, UMHHC would be ending the year with a positive operating margin of just under 3 percent.

On June 21, in addition to presenting expected results for the 2012 fiscal year, U-M Health System leaders also presented the Board of Regents with the proposed budget for the 2013 fiscal year. For FY 2013, UMHHC forecasts a positive operating margin of 0.5 percent on estimated revenues of nearly $2.4 billion — a sign of confidence that recent investments will enable UMHHC to accommodate patient demand, and provide better service through a range of new facility and technological investments.

Continued growth and patient demand leads to increased revenue and operating cash flow generation, which in turn fuels the entire Health System’s three-part mission of patient care, education and research. UMHHC and the Medical School’s Faculty Group Practice, which includes all of the physicians who see patients at UMHHC facilities, together run the U-M clinical enterprise.

Patient activity continued to grow in the last year: Inpatient and observation cases were up 4.5 percent in fiscal 2012, and clinic visits were up 3.6 percent. Strong growth in the number of patients seeking care is expected to continue in FY2013.

UMHHC will be well positioned to match the patient demand for services as the new C.S. Mott Children’s Hospital and Von Voigtlander Women’s Hospital facility achieves fuller utilization in its first year of operation, and other care expands into clinical space made available by services moving into the new building.

“To see this kind of patient growth, and to beat our own expectations despite the Michigan economy, major investments and great change, is a testament to our entire team,” says Doug Strong, the chief executive officer of UMHHC. “Every one of our staff and faculty have pulled together to ensure that we serve patients well, and find every opportunity to improve operations in ways large and small.”

Dr. Ora Hirsch Pescovitz, UMHS CEO and executive vice president for medical affairs, says, “The strategic investments that we have made this past year, or have developed plans to making in the new fiscal year and beyond, will further strengthen our ability to serve patients and the community, perform groundbreaking biomedical research, and educate the next generation of health and science professionals. We are confident we can rise to the challenges that coming years will bring.” She notes the excellent bond ratings that UMHHC has earned as a result of its performance.

In fiscal 2013, UMHS will open new areas for care, and invest in systems and equipment to support care and care teams. Planning will accelerate for the Northville Health Center, and the adult inpatient expansion project and Neuroscience Hospital, both approved earlier this year and targeted for opening in calendar year 2014.

Efforts will also continue to use “lean thinking”, a concept borrowed from the auto industry, to optimize clinical and support functions for better efficiency, quality and patient experience. UMHS also continues to find ways to save money through energy efficiency improvements — 15 projects completed in 2011 are expected to save $528,000 in energy costs this year alone.

UMHS also continues to form alliances with hospitals and physician groups across the state, to ensure that high-quality care is provided in the most appropriate setting. Such alliances include the recently signed master affiliation agreement with Trinity Health-Michigan, the Pioneer Accountable Care Organization with the IHA physician group, the Pennant Health Alliance with hospitals in west Michigan, and the Physician Organization of Michigan with physician groups.

UMHS Chief Financial Officer, Paul Castillo, CPA, notes that every one of the strategic growth initiatives UMHS is undertaking relies on the engagement of the more than 22,000 UMHS faculty, staff and trainees.

“From the expansion of our adult emergency department and Survival Flight air medical services, to the expansion of care in the Taubman Center and University Hospital, to the re-use of the former Mott and Women’s facility, we succeed because of the ideas and energy of our people,” he says.

As UMHS patient care continues to grow, employment levels will also increase – as evidenced by the nearly 500 jobs created by the opening of the new children’s and women’s facility.

At the same time, every one of those individuals plays a role in ensuring that daily operations are as efficient and patient-centered as possible, says Tony Denton, the chief operating officer of UMHHC and executive director of university hospitals.

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