University of Michigan
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July 15, 2019

Michigan Medicine shares expected positive financial results for FY ’19

June 20, 2019

Michigan Medicine shares expected positive financial results for FY ’19

U-M’s academic medical center projects 3.8 percent operating margin

Michigan Medicine is projecting an anticipated 3.8 percent operating margin — $178 million on forecasted operating revenues of $4.7 billion — for the end of the 2019 fiscal year.

The financial results for the University of Michigan’s academic medical center include performance from the U-M Health System’s three hospitals, 125 clinics and the U-M Medical Group, as well as U-M Health, which represents Michigan Medicine’s affiliation with Metro Health in Grand Rapids.

David Spahlinger, executive vice dean for clinical affairs and president of the U-M Health System, presented the projection of positive year-end results for FY ’19 along with the FY ’20 plan to the Board of Regents on June 20. The fiscal year ends June 30.

“The year’s results reflect our activity growth and our steadfast focus on investments in safety, quality, access and efficiency,” Spahlinger said.

“The results also demonstrate the commitment of our dedicated faculty and staff to providing excellent health care, improving our patients’ experiences and executing our long-term vision of being a health care provider of choice in the state of Michigan.”

Spahlinger said Michigan Medicine worked hard to manage costs and improve efficiencies in FY ’19, along with continued efforts in activating new capacity and relationships with affiliate partners.

“This was smart cost management. We added and managed additional patient volume efficiently and safely, while monitoring the cost of care,” Spahlinger said. “By examining our processes, we improved not only efficiency but also patient safety, through reduction of hospital acquired infections.”

Several initiatives in FY ’19 helped to position the whole organization for success across all of its missions: patient care, education and research.

  • In July 2018, Michigan Medicine and St. Joseph Mercy Health System opened a joint venture in Chelsea, Michigan, at the new St. Joseph Mercy Chelsea Hospital.
  • In September 2018, Michigan Medicine opened the nearly 300,000-square-foot Brighton Center for Specialty Care, providing more than 50 adult and pediatric specialty services in Livingston County.
  • In March 2019, Michigan Medicine signed an affiliation agreement with Sparrow Health System to expand access to specialty care for patients in the mid-Michigan region.
  • It operated the first full year of business at the new West Ann Arbor Health Center Parkland Plaza in Scio Township, which houses 27 adult and pediatric primary and specialty care services.
  • Michigan Medicine invested in its employees through the recent expansion of the university’s parental leave programs, along with a planned increase in retirement benefits.

Regents also approved a budget that sets Michigan Medicine financial performance targets for the fiscal year that begins July 1. The FY ’20 plan aims for a 3.4 percent operating margin on revenues of $5 billion.

“No significant capacity enhancements are expected in fiscal 2020, so this plan is ambitious as we continue to deal with legislative, regulatory and industry pressures,” Spahlinger said. “But we are optimistic. We will continue to take proactive steps to reduce the cost of care as we improve the patient experience.”

Also approved was a potential line of credit between the U-M Health System and Metro Health, a member of U-M Health. Borrowing on this line of credit would be subject to approval from the executive vice president for medical affairs or his designee, for an amount not to exceed $125 million over a five-year period. The internal line of credit may be used for facility improvements at Metro Health.

“This will give us the flexibility to allow for proper investments at Metro that will move us closer towards our long-term strategy of providing access to specialty care closer to home for west Michigan residents,” Spahlinger said.

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