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April 13, 1999

At our April 13 communications meeting, I highlighted reports from other medical centers regarding their dismal financial performances, which are a result of the demanding health care environment and the 1997 Balanced Budget Act. I also discussed MUSC Medical Center's budgetary situation and our plan to improve our financial outlook.

While our financial situation and outlook are difficult, we are in better shape than some other academic medical centers at this time. We need to learn from the experiences of others, and be creative and persistent in our cost-control and revenue-generating strategies.

A recent Association of Academic Health Centers report compared members' total margins for the fourth quarter 1997 and the fourth quarter 1998, and found a 45 percent drop in operating margins. The AAHC reported that the 1997 Balanced Budget Act, which reduces Medicare and Medicaid reimbursement, will accelerate losses in the future.

Modern Healthcare magazine recently reported that the prestigious Henry Ford Health System, based in Detroit, lost $43.8 million in 1998. The system blamed low Medicare and Medicaid payments, pharmaceutical and technology costs, debt owed by its managed care plans, and market forces that make it difficult to raise rates for the system's loss. Henry Ford plans to lay off 2 percent of its 19,000 workers.

Massachusetts General and Brigham & Women's Hospital reported that their censuses routinely have been at 90 to 95 percent, but their financial performance is down. They point out it's difficult to see where their hospitals can squeeze more out in terms of length of stay and charges. Their president explained Medicare margins are terrible, and the federal government takes into account only the inpatient end, which doesn't tell the whole story.

A recent article in The New York Times reported that academic medical centers have been hammered by the Medicare cuts, which were part of the 1997 Balanced Budget Act. At the same time, academic medical centers are being squeezed by reduction in payments caused by managed care. The New York Times reported that UCSF-Stanford Health Care expects operating losses of $50 million and may lay off as many as 2,000 of its 12,000 employees. The article also reported that the University of Pennsylvania lost $90 million, and Temple University lost nearly $25 million last year.

Closer to home, The State reported that the Palmetto Health Alliance (Richland and Baptist in Columbia) hospitals are so full they can't operate efficiently. According to the report, the nursing shortage has escalated costs for temporary workers. The Balanced Budget Act reduces payments for Medicare and Medicaid, which amount to 66 percent of Richland's patients and 45 percent of Baptist's patients. Their current loss for this fiscal year, which began Oct. 1, was $8.6 million at the end of February.

At MUSC, our census has remained at an all-time high. For fiscal year 1998, our inpatient operating margin was positive, but we had a significant loss with outpatient services. We have a plan in place to increase revenues, reduce write-offs and reduce expenses. To remain fiscally viable, the Medical Center will be forced to reduce and eventually eliminate transfers to the Academic Division. We hope to issue bonds to replenish cash used last year for capital improvements and equipment purchases. We don't plan to lay off employees, but the hiring slowdown will remain in effect, travel will be reduced and departments will be asked to determine other ways to cut costs.

I am optimistic that with widespread cooperation our plan to control costs and increase revenues will be successful. While we'll feel the pressure from the Balanced Budget Act and other demands of our competitive health care environment, I believe we'll be better able to respond to the challenge than some of our academic medical center peers.

W. Stuart Smith, Interim Vice President for Clinical Operations

CEO, MUSC Medical Center

Announcements

YES Campaign

Your participation in the 1999 Yearly Employee Support Campaign will help accomplish the following:

  • When you make a contribution through YES, your donation improves all of our lives through research in areas such as cancer, diabetes, glaucoma and Alzheimer's disease.
  • You can support education by designating your contribution to the library fund, scholarships and college annual funds.
  • Most importantly, your donation, regardless of its size, is important because it will increase the amount of outside funding MUSC receives to improve research, education and patient care programs.
  • Look for materials on this year's campaign in The Catalyst online at the following address: http://www.musc.edu/catalyst/yesform.htm. If you have any questions or need additional forms, please contact the Annual Fund office at 792-1973.

Blood Donors Needed

Please make time to donate blood at the bloodmobiles at MUSC. The blood supply at MUSC and other local hospitals depends on your donation. Walk-ins are welcome. If you'd like to schedule an appointment, please call 852-2922 and leave a message with the date and time preferred.

  • Every year, your heart pumps 2,625,000 pints of blood. Couldn't you spare just one?

Upcoming Horseshoe Bloodmobiles

  • Monday, April 26: 10 a.m.-3 p.m. (Donors who gave blood on or before 3/1 are eligible to give again.)

Platelet donors also are needed!

Please call to schedule an appointment. MUSC Apheresis Center Main Hospital, Room 267 792-3340

Y2K Message MUSC's Y2K Web site is: http://www.musc.edu/y2k.