UMHS reports continued success in FY03, looks forward to balanced growth

Updated 4:00 PM July 28, 2003

UMHS reports continued success in FY03, looks forward to balanced growth

By Kara Gavin
UMHS Public Relations

At a time when many health care institutions are facing financial difficulty, the U-M Health System (UMHS) is reporting that its Hospitals and Health Centers (UMHHC) ended fiscal year 2003 with a preliminary positive margin of $22.5 million, on an operating budget of $1.07 billion.

UMHS officials presented the fiscal 2003 year-end budget projections, and the proposed $1.13 billion fiscal year 2004 budget, to the Board of Regents July 17. The regents also approved the latest in a series of projects that will help UMHS continue to grow and strengthen its financial base, and to better serve patients.

The sixth-straight positive margin for UMHHC, which meets the target of 2 percent of operating revenues, comes despite continuing reimbursement pressures from public and private insurers, and rising costs for everything from drugs to medical devices.

The credit for the good financial news goes to the entire UMHS community, says Dr. Lazar Greenfield, interim executive vice president for medical affairs. UMHS faculty, staff, trainees and students, he says, continue to work as a team to find new ways to contain costs while increasing patient flow and pursuing the UMHS missions of excellence in patient care, research, education and community service.

"In the current climate, major academic medical centers such as ours can only succeed through teamwork, innovation and strategic thinking, and we're doing well on all three," Greenfield says.

Looking ahead, says UMHHC chief executive officer Larry Warren, the keys to continued financial health will be the same kind of attention to cost-effectiveness and strategic growth that have brought UMHS to this point.

"We are always finding new ways to improve quality, to give appropriate and cost-effective care, to put patients and families first, and to grow our clinical capacity," Warren says. "By raising our targeted margin to 3 percent for fiscal year 2004, we will improve our ability to fund the expansion that will ensure our continued success."

Greenfield and Warren also note that the continued attention to the bottom line is vital in the current economic climate, when state and federal health care spending cuts, downward pricing pressures from employers and private insurers, salary competitiveness demands, and commodity price increases are converging.

The unified structure of UMHS helps make cost-containment efforts feasible, they note. Medical School physicians see and treat patients at U-M hospitals and health centers, and are involved in the design of clinical care processes. UMHS also includes M-CARE, a managed care organization with more than 200,000 members whose medical care accounts for about 10 percent of UMHS clinical charges.

More than a third of UMHS patients are covered by public insurance, with just more than 24 percent of care delivered to Medicare enrollees, and about 10 percent to Medicaid participants. Blue Cross Blue Shield members make up 26 percent of the mix, while other insurance plans and payment sources make up the remaining 29 percent.

The number of patients coming to UMHS for treatment has grown steadily in recent years, with a 12 percent increase in hospital inpatients since fiscal 1999, leading to a total of 40,454 discharges in fiscal 2003. There also has been a 24 percent increase in clinic visits in that same time, with patients making 1.52 million outpatient visits to U-M facilities in fiscal 2003. Operating room cases in Ann Arbor have increased 11 percent since 1999, and more than 30,900 people had surgery at U-M's hospitals and outpatient surgery centers in fiscal 2003.

Those numbers should climb in the new fiscal year as UMHS prepares to open five new pediatric and neonatal intensive care beds at the C.S. Mott Children's Hospital, re-open 24 beds in the main University Hospital that were deactivated several years ago, and lengthen operating room hours and open new operating and procedure rooms.

UMHS has received regental approval for several major projects, including a Cardiovascular Center and additional medical imaging facilities. Funding for capital projects comes from UMHS reserves, debt and gifts, not from state general funds.

UMHS reports continued success in FY03, looks forward to balanced growth

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