The University of MichiganNews Services
The University Record Online
Updated 10:00 AM August 9, 2004



news briefs


UM employment

police beat
regents round-up
research reporter


Advertise with Record

contact us
meet the staff
contact us
Healthy finances, challenging future for Hospitals & Health Centers

Related stories
Budget, tuition increase contingent on state support>
Dearborn, Flint budgets strained>
Athletics projects budget surplus>

For the ninth year in a row, the U-M Hospitals and Health Centers (UMHHC) have finished the fiscal year with a positive operating margin that will fuel continued growth and allow U-M to serve even more patients with high-quality medical care.

In a presentation July 15 to the Board of Regents, U-M Health System (UMHS) leaders reported that the UMHHC unit of UMHS has surpassed its 2004 goal of an operating margin of 3 percent of total revenues. Preliminary figures indicate that UMHHC ended the fiscal year on June 30 with a margin of 4.1 percent on $1.193 billion in revenues.

As they plan to devote those funds to new facilities and programs that will enhance patient care, research and education, UMHS leaders are setting an aggressive goal for FY2005, despite a harsh health care environment. They told regents that the plan is to achieve a 4 percent operating margin on revenues of $1.28 billion by attracting more patients, containing costs, and focusing on quality and patient safety.

"Thanks to tremendous effort by all of our faculty and staff, we are in a healthy position despite a challenging health care environment, and we have the opportunity to grow further and invest in our future," said Dr. Robert Kelch, executive vice president for medical affairs. "Our clinical activity continues to increase, showing that patients and payers are attracted to our high-quality care, and we are delivering that care in a more cost-effective way."

Kelch added that the trends must continue in order for UMHS to meet current and future challenges in this health care climate, and to carry out its 10-year strategic plan of major construction projects and other goals. Positive operating margins help fund many new initiatives.

Larry Warren, director and CEO of UMHHC, explained that many factors combined to make the positive financial results possible.

"We have reached this position by increasing our investment in hiring and retaining top-notch people, especially nurses and other health professionals, and by focusing on our core mission of serving patients with the best and safest medical care," he said. "We've also partnered with those who pay for our care, both private and public insurers, to demonstrate the value of our care and streamline administrative tasks."

UMHHC chief financial officer Doug Strong added, "Governments and employers are very concerned about significant annual increases in the cost of health care, including high levels of utilization. A major challenge for us, and all hospitals, is meeting these challenges while maintaining and improving quality of care."

In all, the three U-M hospitals—University Hospital, Women's Hospital and C.S. Mott Children's Hospital—had more than 42,000 patient discharges in FY2004, and consistently had high occupancy. More than 38,100 surgical cases, both inpatient and outpatient, took place in U-M operating rooms during the year. Meanwhile, the many U-M outpatient clinics and health centers in three counties handled more than 1.57 million patient visits.

All of these numbers represent increases over FY2003, and goals for FY2005 anticipate even further growth in patient activity.

That growth will be made possible in part by the opening of additional patient beds, operating rooms and medical imaging facilities in recent and upcoming months. Recent efforts to improve scheduling, referral processes and outpatient clinic access through a major "front-end redesign" process also have made it easier for patients to get an appointment with a U-M physician.

Also making a major difference will be the arrival of more clinical faculty in the Medical School, including additional surgeons in many disciplines and the hiring of more hospitalists, who specialize in the care of hospitalized patients.

UMHHC also expects to hire 50 more nurses in coming months, continuing a highly successful recruitment and retention campaign that already has increased the nursing staff and kept vacancy and turnover rates well below the national average. Other health professionals also are being recruited.

Kelch noted that recent UMHS clinical expansion projects, and the resulting demand for more clinical staff to serve more patients, stem directly from previous years' positive operating margins.

The latest expansion, approved by the regents at the July meeting, will increase the capacity of the heart catheterization facilities where children with heart defects are diagnosed and treated as part of the renowned Michigan Congenital Heart Center.

In the longer term, major capital projects recently approved by the Board of Regents will further enhance patient care, research and education.

Kelch noted the importance of philanthropic gifts, in addition to UMHS financial resources, to fund major projects. He also emphasized that UMHS faces challenges ahead, including increasing pressure to keep rates low, potential reductions in Medicaid and Medicare reimbursement, the need to serve the uninsured, and inflation in the cost of supplies, employee benefits and pharmaceuticals.

But, he noted, the cooperative efforts among faculty, staff and administration that have brought UMHS to its current state of good financial health will continue and help UMHS find innovative ways to cope with continued challenges.

More Stories