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March 2000
Regents Hear Financial Forecast for Medical Center The UCSF Medical Center is projecting a loss of almost $50 million for the 10-month period ending June 30, when the University of California fiscal year ends. In a presentation to the UC Regents yesterday, John Stone, interim chief operating officer of the Medical Center, said the medical center has made gains in reducing its expenses, but not enough to eliminate the loss. This year's loss is due in large part to three factors -- costs related to dissolving the merger, one-time costs to restructure the Mount Zion site and a decline in the average length of stay of hospital patients, which results in lower revenue. As part of a three-year business plan, Stone said the medical center hopes to reduce its loss to $25 million next year, and to break even the following year, fiscal year 2002. To meet those goals, the medical center must continue aggressive management of expenses and achieve revenue growth. Stone said the exact cost to dissolve the merger is not yet known, but that he expects UCSF's share to exceed $10 million. In addition, there was a one-time cost of about $5 million to restructure the Mount Zion site. In the long term, however, the medical center is expected to save about $10 million to $15 million a year by consolidating the Mount Zion inpatient activities at Parnassus. The third major factor contributing to the loss this year is the reduction in the average length of stay of hospital patients, which is causing a decline in net patient revenue. Currently, the average length of stay is about 5.8 days, compared to 6.7 last year. This decline could result in a $26.5 million reduction in net patient revenue. The hospital benefits from a shorter length of stay when it is paid on a per-case basis, but about 60 percent of its patient reimbursements are based on per-day rates, Stone explained. Most of the cost of caring for a hospital patient occurs during the first two or three days, when care is more intensive. In the past, the hospital offset those heavy costs during the patient's last day in the hospital, when the patient typically requires less staff time, equipment and medication. Stone noted, however, that insurers or payers are pressuring health care providers to reduce the length of stay and that last day is being eliminated. "We've come a long way in reducing expenses, but revenue is down," Stone said. Stone pointed out that inpatient activity for February and early March has been higher than anticipated. If this trend continues, patient revenue may be greater than projected. But high volume won't necessarily resolve the financial problem. Stone cautioned that costs increase as volume increases because of the additional staff and supplies needed. The issue is that the medical center is not being adequately reimbursed for care, he said. To address this problem, the medical center is aggressively negotiating with payers for higher reimbursements and at the same time continuing to cut costs through new, more efficient systems in areas such as purchasing.
"In summary, we are very busy at UCSF. Our hospital is at a 90 percent occupancy rate and the staff is doing a tremendous job caring for those patients," Stone said. Source: Medical Center Update, News for Employees of UCSF Medical Center |
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