By W. Stuart Smith
MUSC Medical Center
At the recent communications meeting I updated the management team on the medical center's financial status and our action plan to date.
Our fiscal year (FY) 2012 financial goal called for a $25.5 million operating margin. Our budget was based upon 2 percent growth in patient volume. Including observation patients, our inpatient activity for FY 12 was essentially flat, we observed no growth in outpatient activity, and our operating room cases were slightly down for the year.
While we projected deterioration of Medicaid reimbursement for FY 12 as a result of changes by the state, we did not anticipate the revenue loss due to a slight decrease in the number of operating room cases.
There was some slow down with clinic patient activity due to Epic implementation. Fortunately our continued focus on "5/5 plans" (designed to reduce costs and improve quality) helped us avoid a loss for the year. The net result of this is our unaudited FY 12 financial statement indicates an $8.5 million operating margin, falling significantly short of our $25.5 million goal.
Plans are under way to adjust pay rates for medical center (Medical University Hospital Authority) employees by 1/2 percent (.5 percent) in the near future to help offset an increase in the employee contribution for the benefits plan. Assuming we meet with success later in the year with our financial status, then we will revisit a pay-for-performance proposal.
A cost reduction work group has been investigating methods to reduce labor costs. Among other things, all directors have been given the task of reducing labor costs to the 25th percentile for their respective University Healthsystem Consortium (UHC) (Action O-I) peer group benchmark by October. A variety of other cost reduction ideas are currently being explored.
Also, a revenue enhancement work group has been investigating opportunities to increase revenue. In conjunction with this work, a number of new physicians will be coming on board in the months ahead and this is expected to improve patient volume, including surgery. The opening of 10 East and a new ICU will also help with our growth. On a more long-term basis, plans are being made to renovate the seventh floor in Ashley River Tower to add 40 new beds.
Like other hospitals and health systems, we have experienced financial challenges in recent months. To meet demands facing the health care industry, we will need to improve operational efficiency while continuing to focus on quality. Everyone's support will be needed.