The University Record, May 22, 1995

Hospitals will implement Clinical Delivery System July 1

Reflecting its commitment to provide an integrated approach to health care, the U-M Hospitals presented its 1995-96 fiscal year budget to the U-M Board of Regents, featuring the implementation of its new Clinical Delivery System (CDS).

Under CDS, which takes effect July 1, all clinical revenues (including hospital and physician) and expenses generated from managed care and fee-for-service patient care will be combined into a single pool. That gross patient service revenue, minus provisions, will then be shared by Hospitals and the Medical School. The Medical School will in turn distribute funds through its physician group practice to each of the clinical departments in order to cover physician salaries and professional development.

"This re-engineering effort will create an organization that is more patient-oriented and cost-effective so that we may compete effectively in the managed care environment today and the future," said John D. Forsyth, executive director of the Hospitals.

In the fiscal year 1996 budget, the Hospitals will raise room rates for the first time in four years. Even with rate and fee increases averaging 4.2 percent, the U-M maintains among the lowest general care room rates in southeastern Michigan.

The higher rates will go into effect July 1 in part to cover the Medical Center's $882 million operating expense budget for the 1995-96 fiscal year, which the Board of Regents approved at their May meeting.

Under the new CDS arrangement, the U-M projects a fiscal year 1996 operating margin of $19.6 million and $55 million in excess revenue over expenses. Any operating margin generated by the CDS will be split evenly between the CDS and the Medical School, its clinical departments and physicians as an incentive to improve the CDS's financial performance.

The 1995-96 budget also anticipates that outpatient clinic visits will increase compared with last fiscal year; conversely, admissions, length of stay and the Hospitals' occupancy are expected to be stable or slightly decrease from last year.

Also included in the new budget is an emphasis on enhancing academic support of the Medical School. For example, the CDS program projects the allocation of $7.3 million in operating margin share for Medical School use in 1996, in addition to the $4.8 million allocated in the 1995 fiscal year.

The financial stability of the U-M Hospitals is reflected in its AA bond rating with both Moody's Investors Service Inc. and Standard & Poor's. Only one medical institution in the country has a higher rating.

The U-M Hospitals' commitment to providing high-quality patient care and academic excellence is reflected by a number of honors and awards received during the past year.

The Hospitals was named one of two recipients of the first-ever Quality Leadership Award. The award, presented by Gov. John Engler, recognizes excellence in leadership, strategic quality planning, human resources development and management, and customer focus.

The U-M Hospitals also recently was named among the top 100 hospitals in the United States and one of the top 10 medical centers in the nation, according to a study released by Mercer Management Consulting and Baltimore-based HCIA Inc., a leading health care information company. U-M was one of 25 hospitals and one of only five major medical centers to earn this honor for two consecutive years.

Additionally, the Medical Center is included in the new edition of The Best Hospitals in America, a guide for people seeking the best possible health care facility. And the Medical School has been ranked among the nation's top 10 research-oriented medical schools, according to U.S. News and World Report's recent annual survey of graduate schools.