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Town hall meeting reviews financial status

Stuart Smith, vice president for operations and executive director of MUSC medical center, discussed topics in the 45-minute meeting: review of fiscal year (FY) 2007-08 organizational goals; employee survey results, quarterly strengths and opportunities; FY08-09 goals; financial challenges; cost control/revenue enhancement measures; projects to achieve standardization; call for ideas for cost savings; and summary.

Service—Serving the public with compassion, respect and excellence
Smith reviewed the medical center’s FY07-08 organizational goals as part of the MUSC Excellence initiative. Already three years into the program, MUSC Excellence was adopted to manage the hospital’s service issues and confirm that all people receive quality patient care. Smith gave his report based on MUSC Excellence’s five pillars of communication—service, people, quality, finance and growth.
Under the people pillar, Smith reported that the hospital had met its goals for reducing turnover, increasing employee and physician satisfaction. Goals were also achieved under the quality pillar (mortality index), which is an indicator of how well MUSC cares for patients. Expected growth in this area was 7 percent.
MUHA depends on its revenue to help balance the hospital’s budget. The medical center does not receive funds from state appropriations. Smith explained that MUHA’s FY07-08 budget was set based upon presumed projected growth by 7 percent, plus the last two years of activity (both around 7 percent). To prepare for this, MUSC opened a new hospital in February to handle expected capacity. Hospital leadership thought it was a reasonable presumption. In reality there was no patient growth, which contributed to the hospital’s current financial situation.
Under the finance pillar, the hospital did not achieve the operating margin goal of 3 percent and ended with -2 percent. Audited financial statements won’t be released until December and are  not expected to change based on preliminary reports. This reflects a $19-million loss.
For supplies and labor, goals were set at the 40th percentile under Action O-I (the benchmark used for academic medical centers). The current status is the 98th and 87th percentile. Smith is confidant MUHA will achieve this 40th percentile goal in the near future. On a positive note, Ambulatory Care continues to post gains reflecting their focus on caring for a busy outpatient population.
MUSC Excellence’s employee survey results were based on the mid-June surveys (and prior to the current financial situation) and demonstrate the best employee participation rate yet (83.6 percent).
Smith then described MUHA’s background behind the current financial situation starting with a proposal to conduct a study in the late 1990s, commissioned by MUSC’s Board of Trustees, to review the hospital’s status. The study found that MUSC was facing a shortage in medical-surgical bed capacity by 100-150 beds. The study recommended that the University Hospital consider adding more medical-surgical beds to accommodate expected growth and expansion in the area. Therefore, the hospital began planning for building phase 1 of MUSC’s replacement hospital (now Ashley River Tower-ART) to support the Tri-county’s growing retirement and aging baby boom populations to accommodate demands in inpatient medical-surgical services.
Leadership also decided to move construction to a new facility versus adding upgrades to a 50-year-old building. By Feb. 6 and ART’s opening, there was a rush to open the hospital to support anticipated admissions. The rush prompted the need to hire experienced (travel) nurses and other staff. By May, the hospital began to notice the first major evidence of the economy affecting hospital admissions. In reality, hospital admissions had flattened eight months earlier in fall 2007. To prepare for this, hospital leadership reviewed the need for replacement positions, imposed a quasi-freeze on staff hiring, sought justification, etc.
Another component affecting the hospital’s finances was a change in the state’s Medicaid reimbursement system, which changed from a traditional system to a managed-care model beginning Oct. 1. The result dramatically affected reimbursements in psychiatry and neonatal areas with cuts as much as 25 percent.
With a budget of 7 percent growth and zero actual growth, adjustments needed to be made to this volume. Meanwhile, the state legislature anticipates another 14 percent reduction in appropriations for the university.
Smith reviewed the financial statements of projected losses (July, August and September), which equals $8.7 million and means MUHA needs to make up $8.7 million, plus have a minimal targeted bottom line of as much as $5 million to 10 million, representing a few days of operations.
Marilyn Schaffner, Ph.D., R.N., MUHA Clinical Services administrator and chief nursing officer, reviewed several cost control and revenue enhancement measures to decrease costs. This includes reducing variance using a standardization staffing model focusing on nursing unit staffing, revenue enhancement and examination of premium pay.
It’s been determined that lack of standardization increases costs. Leadership agreed on metrics, developed an infrastructure for monitoring variation beginning with nursing unit staffing (based on California standards) developed a staffing template; daily review of staffing by administrators and daily review of timelines. Additionally, administrators looked at other projects and assignments to achieve standardization (i.e. standardization of unit titles/roles [nurse manager, operations coordinator and assistant nurse manager educator]; orientation redesign; availability of clinical associates; traveler reduction; charge nurse; ANSOS scheduling system; sitter policies, etc.).
Schaffner also reviewed the ShiftSmart program, which allows staff to register online for available shift work in their area of competency. Within 24-hours of making their request, participants receive a phone confirmation. Schaffner reviewed other projected savings initiatives (by June 30, 2009): labor cost reductions ($25 million); reaching supply benchmark [40th percentile] ($6.5 million); COM contributions-anesthesia/primary care support ($1.5 million); and a travel freeze ($500,000).
Projects identified to help increase funding (revenue enhancement) include control Medicaid HMO and uninsured; rent payments for MUHA space; and increase in MUHA’s bed capacity project. The project involved moving 8West (Hematology-Oncology) to 5West ART; 2Center MUH Medical/Surgical move to 8West (increased capacity to a 24-bed unit) balanced out the patient populations at ART and University Hospital. Other relocations include 7West (MUH Ortho/Trauma) to 10 West; 10East to 7West; and 9West and 9East will become the new Neurosciences unit.

Finance—Providing the highest value to patients while ensuring financial stability
Currently, MUHA Human Resources  and leadership have decided to forego January employee merit/performance increases to help preserve jobs. Market equity is planned for January for highly competitive jobs; no paid time off cash-in; plans to increase extended sick leave from 12 to up to 24 hours; and an increase in the SML bank from 24 up to 40 hours.
Management also unveiled a new survey tool, accessible via the MUHA intranet, asking MUHA employees to share cost-saving ideas. Categories identified include labor costs, supply costs, revenue enhancement ideas and other operational projects. So far, more than 400 responses were received. A group was assembled to examine and prioritize these ideas.
Administrators were glad to see that many submitted ideas were already being implemented. They include review clinic schedules for (labor) review; clinic schedules for average patient arrival times for first visit; adjust schedules to avoid overtime; (supplies) use of disposable yellow coats versus blue coats; (revenue) hold patients accountable for upfront payments; (other) monitor waste going into biohazard bags (stop trash going into biohazard bags); and turn lights off.
Schaffner admitted that these are tough times for everyone. Thankfully, MUHA continues to make progress and gains.
“On behalf of MUHA administrators, I want to thank employees for their dedication and support during this period,” she said. “MUHA has weathered financial difficulty before and the medical center will emerge as a stronger organization because of it.”


Nov. 7, 2008

The Catalyst Online is published weekly by the MUSC Office of Public Relations for the faculty, employees and students of the Medical University of South Carolina. The Catalyst Online editor, Kim Draughn, can be reached at 792-4107 or by email, Editorial copy can be submitted to The Catalyst Online and to The Catalyst in print by fax, 792-6723, or by email to To place an ad in The Catalyst hardcopy, call Island Publications at 849-1778, ext. 201.