The University of Michigan Health System told the Board of Regents Thursday it expects to close its 2014 fiscal year on June 30 on a high note.
After a slim one-tenth of a percent positive operating margin in 2013, the UMHS expects to close its 2014 fiscal year with $17.3 million more in revenue than expenditures on an operating budget of $2.52 billion.
The 2014 fiscal year results will meet the targeted numbers projected from last year, and the $17.3 million represents a 0.7 percent targeted margin of operating revenues.
Tony Denton, the chief operating officer of UMHS, and Executive Director of University Hospitals, credited the strong financial performance to increases in patient care activity and successful strategies that have helped UMHS adapt to rapid changes in the health care industry.
One of those successful strategies was the implementation of its electronic health record system. Electronic health records helped streamline data input and provided staff with more reliable clinical data and allowed the to efficiently use valuable critical care resources.
Patient care activity grew 4.3 percent over the previous year, and all three U-M hospitals had occupancy rates of approximately 88 percent. Additionally, the number of people discharged outpaced projections, increasing 4.8 percent year over year.
“Thanks to the hard work of more than 22,000, including physician faculty, leaders and staff, we continue to grow and strengthen our ability to provide value to those we serve, including patients from every county of Michigan and beyond,” Denton said.
“A wide range of other projects and initiatives have also helped keep UMHS finances on target during fiscal year 2014, including stepped-up efforts to manage expense growth, improve productivity and provide ideal patient experiences.”
Officials said that the UMHS still has to assess the full financial impact of the Affordable Care Act on its clinical operations and financial health. ACA was implemented late in the 2014 fiscal year.
During the fiscal year 2014, UMHS provided more than $152 million in uncompensated care. Increased insurance coverage is likely to reduce that figure in coming years.
At the same time, Health System chief financial officer Paul Castillo said, the pressure to provide high quality care and contain cost growth continues to be a focus.
“Our participation in the POM ACO Accountable Care Organization, which works to meet those aims for patients covered by traditional Medicare, supports this effort,” he said.
“We can be very proud of achieving our financial target during a year of such change. But we’ll continue our focus on operational efficiencies and all aspects of our revenue cycle.”
Additional investments in capital projects to expand clinical capacity, including the opening of the Northville Health Center and a new Emergency Critical Care Center, will continue to take shape in FY15.
The Regents also unanimously approved a new budget for the 2015 fiscal year that aims for a 3 percent margin – or about $79 million in revenue over expenditures – on total revenues of $2.66 billion.
This projection is based on expected increases in patient activity among other things. The bulk of the increased patient activity is expected to come from the new Northville Health Center – which will open in July – and its two additional on-site operating rooms.
Castillo said the 3 percent margin of $79 million would depend heavily on a projected 4 percent growth in adjusted case activity and new patient capacities.
The health system is also expected to shave costs through “ongoing initiatives to improve quality, productivity and supply optimization” and an expected 1.4 percent increase in cost for each patient visits.
The 2015 budget includes a 4.9 percent increase in payroll expenditures, a 5.4 percent increase in supply costs and a 2.5 percent reduction in non-salary spending.
A revenue increase is expected from the December 2013 proposed affiliation between UMHS and Allegiance Health. That proposal is still in the due diligence phase, but should be finalized during the 2015 fiscal year.
