UMHS reports positive financial results for FY 20005, plans for growth in '06

Updated 10:00 AM July 29, 2005

UMHS reports positive financial results for FY 20005, plans for growth in 2006

By Katie Gazella
Medical School Communications

The University of Michigan Hospitals and Health Centers (UMHHC) has finished another fiscal year in the black and has completed its fourth consecutive year of increasing its operating margin.

In a presentation July 21 to the Board of Regents, U-M Health System (UMHS) leaders reported that the UMHHC unit of UMHS had another strong year financially, with preliminary figures indicating an operating margin of 5.1 percent on revenues of more than $1.31 billion. That exceeds the previous year's margin of 4.1 percent, as well as the 4 percent budgeted for this year.

"Our patients increasingly want access to our services, and we are accommodating this greater demand while maintaining overall high quality and safety," says Dr. Robert Kelch, executive vice president for medical affairs. "Our outstanding staff and faculty continue to perform at an exceptionally high level to produce these results."

Kelch and other UMHS leaders also received regental approval of the FY 2006 budget, including more than $1.4 billion in revenues and an operating margin of 4 percent. One of the goals and targets outlined in the UMHS Strategic Direction is that the hospitals and health centers achieve an average operating margin of at least 3 percent per year during the next 10 years.

"The positive operating margins we have experienced allow us to reinvest in projects such as those that will add clinical space in coming years," Kelch says. "The clinical expansions respond to rising patient volumes and needs, while other projects will provide state-of-the-art research and education space."

In the next couple of years, UMHS leadership also will focus on creating capacity with existing beds while awaiting the opening of the new Cardiovascular Center and other expansions in 2007 and later.

"Our budget for 2006 is assertive but achievable," says Larry Warren, executive director and chief executive officer of UMHHC. "We are the hospital of choice for many people and have faculty and staff who understand the importance of working together to meet the expectations our patients and their families have of us. In that regard, we are uniquely positioned to meet our patient care objectives. Our clinical activity has grown because of the quality of care we offer, and we will continue to serve our patients with the highest quality of care even as we increase efficiency."

The strength of UMHHC finances is particularly noteworthy given the hurdles faced by health care providers in the difficult health care climate, says Doug Strong, UMHHC chief financial officer.

"The annual increases in the cost of health care are a major concern for governments and employers," Strong says. "Like all hospitals, we must meet the challenges of high health care costs and high levels of utilization while still maintaining and improving quality of care."

UMHS faces increasing pressure to keep rates low, potential reductions in Medicaid and Medicare reimbursements, the need to serve the uninsured, and inflation in the cost of supplies, employee benefits and pharmaceuticals.

UMHHC has reached its current financial position in part by hiring top people, particularly nurses and other health professionals, Warren says. UMHHC also has partnered with private and public insurers to demonstrate the value of its care and to streamline administrative tasks, he adds.

The three U-M hospitals—University Hospital, C.S. Mott Children's Hospital and Women's Hospital—had 43,345 patient discharges in FY 2005, up from 42,345 the previous year. Another 38,869 surgical cases, both inpatient and outpatient, took place in U-M operating rooms. Meanwhile, the many U-M outpatient clinics and health centers in three counties handled 1.62 million visits.

In addition to projects related to expansions and new buildings, UMHS also has undertaken efforts with the goal of improving safety and efficiency, and reducing waste. For instance, a computerized orders management system will be implemented soon, allowing employees to enter, process, fill and carry out all hospital-based orders for medications, procedures and other care.

UMHHC's financial stability also is reflected in its excellent bond ratings with both Moody's Investors Service Inc. and Standard & Poor's. This bond rating is among the highest for health care systems across the industry and reflects a strong and sustainable financial position.

UMHS reports positive financial results for FY 20005, plans for growth in 2006

More Stories