Section III Funds Flow / CARTS UNC P&A

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1 Section III Funds Flow / CARTS UNC P&A Funds Flow to School and Departments Funds Flow Clinical Programs Growth & Development Funds Flow CARTS: Medicine Anesthesia Family Practice Emergency Medicine Neurology OB/Gyn Otolaryngology Pathology and Laboratory Pediatrics Funds Flow CARTS: Physical Medicine & Rehabilitation Surgery Radiology Administrative and Strategic Teaching COTH GME Unweighted Residents and Fellows per Unit (F002) Funds Flow Non-MD Transfers to the Departments by Contract Funds Flow Non-MD Staffing Provided by UNC P&A

2 Summary of Recommendations Clinical Establish expectation for clinical time for each faculty. Establish specialty-specific, pro-rated work RVU benchmark for each clinical faculty member. Provide monthly feedback on work RVU production, including variance from the individual. benchmark. Administrative Confirmation of the recommendations on administrative roles will require the responsible VP on the hospital side and the Inpatient Medical Officer to review the individual contracts and agree to the amount of work that they wish to purchase and the budgeted amount they are willing to pay for the services. Contracts should be renewed annually to determine if the work was performed adequately and if it is still required. Contracts should include performance expectations and goals. All arrangements with physicians must include a signed contract or letter of agreement containing at least a clear job description or definition of duties, expected outcomes and time limits (one-year agreements preferred), accountability and reporting relationships, compliance review by legal counsel, fair market value analysis of the compensation and without cause termination provisions for both parties. Section III Page 2

3 Summary of Recommendations Medicine Move Urgent Care clinical revenue and expense to the ED. PCPs who perform O/P work in the Department of Medicine to have all ancillary testing performed by the hospital. Anesthesia Provide payment for coverage of Labor and Delivery on a per diem basis to compensate for poorly compensated services. Provide strategic support for CRNAs after transfer of the CRNAs to the Anesthesia department. Transfer partial savings from expense reduction of CRNAs to department. Family Practice Increase administrative support to $550K for usual medical direction and strategic services. Emergency Medicine Reduce administrative support to $150K for usual medical direction and service chief functions. Transfer Urgent Care to the ED. Neurology Adjust administrative payments. OB-Gyn NCI recommends a total of $155K for hospital-related administrative functions. GME Assistant Dean position should be funded from GME funds. Otolaryngology NCI recommends payment to Chair for ENT medical direction to be adjusted from $174K to $50K. Section III Page 3

4 Summary of Recommendations Pathology and Laboratory Payment for Medical Director and Chair to total $925K with an additional $438K for clinical work. Bill anatomic pathology professional services to non-governmental payers to generate additional funding and decrease need for hospital supplementation. Pediatrics NCI recommends payments for administrative and strategic services of $979K. Provide strategic support for primary care of $40K for 11.4 clinical FTE General Pediatricians. Physical Medicine & Rehabilitation NCI recommends payments of $143K for administrative support; reduce payment for I/P unit medical direction. Surgery Increase payments for administrative and strategic support to be $960K. Provide strategic investment for trauma coverage of $1,000 per day. Neurosurgery Neurosurgery to become a separate department to facilitate recruitment/retention of new faculty. Transplant Study financial performance of this division and compare with like programs to determine if additional support is warranted. Section III Page 4

5 Summary of Recommendations Radiology Provide payments for administrative support of $300K. Administrative and Strategic NCI recommends a reduction in transfer payments to the departments from $13.1M to $9.9M, a reduction of $3,163,358 overall. Teaching Monitor all resident costs, contracts and payments through the GME office. Appoint a GME committee that includes hospital and SOM/Departmental members to re-evaluate the mix of resident positions for strategic and mission-based justification. [Portions of the Teaching Recommendations are confidential and have been redacted.] Funds Flow Non-MD Staffing Provided by UNC P&A Hospital VPs will negotiate with P&A to purchase services that they require from UNC P&A. Classify strategic investments in a program separately and require a business case justification for those investments. Section III Page 5

6 Funds Flow CARTS NCI employs a mission-based management methodology with the acronym CARTS to analyze the multifaceted activity of an academic or teaching physician. The separation of activity and compensation into distinct buckets allows for benchmarking and evaluating each mission in isolation. Motivating factors can be different for different missions. Each of the areas below is analyzed through the CARTS methodology and compared to NCI benchmarks for similar organizations. C Clinical Practice Income Faculty Practice, Hospital clinics, other A Administrative Fees Hospital, School of Medicine (SOM), other R T S Research Grants Teaching Graduate Medical Education (Hospital) Undergraduate Medical Education (SOM) Strategic Support Clinical programs Research activities Core/mission critical program operating at a deficit Hospital, SOM, Philanthropy Section III Page 6

7 Funds Flow CARTS CARTS represents both sides of the payment equation, i.e., the payer and the payee. For a hospital, health system or SOM, it represents payment for the services it receives from physicians, both faculty and voluntary. Teaching Indigent care Professional services provided under global payment agreements. Medical administrative services Medical Directors, Unit Directors, etc. General department administrative support for SOM It may also represent strategic support for both research and mission-critical services by both hospital and SOM. For a department, a faculty practice plan or a practicing physician, it represents the various sources of revenue available for compensation and program/practice development. The source of funds is clearly defined. Performance expectations should be clear. Accountability is clearly outlined. Section III Page 7

8 Funds Flow CARTS C Clinical Practice Income (faculty practice, hospital clinics, other) The value and method of payment is not a subsidy or transfer but is payment for services provided in the clinical practice of medicine. The amount of clinical revenue used to fund non-clinical costs does not appear to have defined rules and is left to the discretion of the departments. A Administrative Fees All arrangements with physicians must include a signed contract or letter agreement containing at least the following provisions: Clear job description or definition of duties Expected outcomes and time limits (one-year agreements preferred) Accountability and reporting relationships Compliance review by legal counsel Fair market value analysis of the compensation Without cause termination provisions for both parties Medical administrative services are generally non-billable but essential to the safe, effective functioning of the health system. R Research Support Provides a pool of money to departments. Funding sources may include hospital support, philanthropy, Dean s tax and unrestricted endowment income. Hospital support comes only after essential hospital needs are met, i.e., from net operating profit. Section III Page 8

9 Funds Flow CARTS T Teaching Support Institutes a payment methodology that provides compensation to physicians for the time devoted to teaching and related administration according to a formula that includes recognition of RRC requirements. Payment methodology should consider the following factors: RRC-defined resident/faculty ratios by specialty Professorial salary variances based on clinical specialty GME-related roles of Department Chair, service chief and program director Administrative support costs S Strategic Support Identifies a consistent source of funds to provide annual funding for support of missioncritical core support for programs and recruitment that have multidisciplinary and school-wide implications. Seed funds for new program development Capital expenditures for new technology Recruitment packages for Chairs and super stars Business plans must be developed for these expenditures that project a return on investment within a reasonable time period. Section III Page 9

10 Funds Flow CARTS: Clinical : The UNC P&A compensation file lists 645 physicians. The UNC P&A billing system shows clinical production of 100 work RVUs or greater for FY04 for 662 physicians (physicians billing under 100 work RVUs annually were excluded). The billing file would include those faculty who departed during the fiscal year. These faculty, as defined above, generated 2,255,580 work RVU for the fiscal year (ASA units in the case of Anesthesia). An additional 149,216 work RVUs were generated by the faculty working in the community network (referred to as community-based practices from here forward). Total combined work RVUs between the two entities is 2,404,796 for FY04. Each physician s clinical work RVU production was benchmarked, by specialty, to the MGMA community 63rd percentile survey data in order to impute clinical FTEs. In total, the 662 physicians generated 355 imputed CFTE of production. The Time and Effort report provides an estimate of clinical time. Excluding those physicians who reported no clinical effort and considering all others, the Time and Effort report places clinical effort at 65%. This includes clinical services and graduate medical education efforts. The remaining 35% of faculty time would be devoted to research, undergraduate teaching, administration and other strategic and/or scholarly activities. If it is assumed that for the 645 physicians listed in the UNC P&A payroll file the clinical effort was 65%, then at full capacity there would be 419 CFTE of production. The current variance of 64 physician FTEs indicates physician production levels below benchmarks, or 10% excess capacity. To determine accurate capacity, clinical time needs to be confirmed in detail by each department. Section III Page 10

11 Funds Flow CARTS: Clinical The following table indicates clinical production by department. Department Name WRVU UNC P&A WRVU Communitybased Practices Imputed CFTE Anesthesia 402, Dermatology 24, Emergency Medicine 89, Family Medicine 50,319 65, Medicine 355,416 43, Neurology 60, Obstetrics Gynecology 154,306 12, Ophthalmology 50, Orthopaedics 71, Otolaryngology 57, Pathology 59, Pediatrics 199,602 21, Physical Medicine & Rehab 17,274 5, Psychiatry 66, Radiation Oncology 87, Radiology 211, Surgery 296, Total 2,255, , Section III Page 11

12 Funds Flow CARTS: Clinical Recommendation Establish expectation for clinical time for each faculty. Establish specialty-specific, pro-rated work RVU benchmark for each clinical faculty member. Provide monthly feedback on work RVU production including variance from the individual benchmark. Responsibility UNC P&A Leadership Clinical Department Chairs Timeframe Second and Third Quarters 2005 Performance Measures End of Second Quarter FY 2005: Monthly feedback to faculty to start End of Third Quarter FY 2005: Establish expectations of clinical time and production and incorporate into FY06 budgeting cycle Section III Page 12

13 Funds Flow to School and Departments The hospital purchases MD professional services from the departments. $16.8M is transferred to the departments for Medical Directors, Chair support and clinical program growth and development. Medical Directors and Chairs support: $13.1M. There is an additional $3.6M budgeted for FY05 portion of the Clinical Programs Growth & Development commitments made to new Chairs by the hospital. In addition, the hospital purchases an additional $8.3M of non-md services from the departments. Payments total $25.1M annually. Academic Dept. Med Dir& Chairs Clinical Prog Sup '05 Sub Tot Other Staff Total Anesthesiology 587, , ,000 Dermatology 44,707 44,707-44,707 Emergency Medicine 700, , ,000 Family Medicine 130, , ,491 Medicine 4,865,090 1,500,000 6,365,090-6,365,090 Neurology 318, , , ,330 OB/GYN 318, , ,975 Ophthalmology 47,205 34,185 81,390-81,390 Orthopaedics 83,970 1,000,000 1,083,970-1,083,970 Otolaryngology 174, , ,278 Pathology & Lab. Med 3,114,971 3,114,971-3,114,971 Pediatrics 919, ,000 1,219,799-1,219,799 Physical Med. & 163, , ,000 Psychiatry 151, , ,943 Radiation Onc. 88,575 88,575-88,575 Radiology 500, , ,000 Surgery 940, ,000 1,481,760-1,481,760 Sub-Total $ 13,149,094 $ 3,675,185 $ 16,824,279 $ 8,298,994 $ 25,123,273 Section III Page 13

14 Funds Flow Clinical Programs Growth & Development There were $23.6M* in commitments made to Department Chairs for clinical program development. Many commitments were part of recruitment packages and represent start-up funding that declines over several years. Four of the nine commitments are set to expire in FY06. Academic Department Total Commitment FY 2005 Budgeted Portion Funding for FY 2006 Dermatology $ 1,000,000 $ - No Family Medicine $ 750,000 $ - No Medicine $ 8,500,000 $ 1,500,000 Yes Neurology $ 1,500,000 $ 300,000 Yes OB-GYN $ 1,500,000 $ - No Opthalmology $ 600,000 $ 34,185 No Orthopaedics $ 1,200,000 $ - Orthopaedics $ 4,000,000 $ 1,000,000 Yes Pediatrics $ 1,500,000 $ 300,000 Yes Pediatric Critical Care $ 1,209,000 $ - Surgery $ 1,800,000 $ 541,000 Yes TOTAL $ 23,559,000 $ 3,675,185 * Source: SOM Finance Department Section III Page 14

15 Funds Flow CARTS: Administrative NCI reviewed the current payments at a high level and recommends the following payments to the administrative function. In Instances where there appears to be an obvious strategic or clinical function requiring additional support, recommendations to provide that support have been made. There is currently no clear definition as to which administrative services are considered essential for UNC HCS. Some services are required by regulation. Other services are desirable because of the particular professional expertise provided by the physician. Job descriptions or definitions of the administrative services that are required vary in specificity. There is no mechanism to evaluate and assign an appropriate financial value for administrative services determined to be necessary. Section III Page 15

16 Funds Flow CARTS: Administrative Recommendation Confirmation of the recommendations on administrative roles will require the responsible VP on the hospital side and the Inpatient Medical Officer to review the individual contracts and agree to the amount of work that they wish to purchase and the budgeted amount they are willing to pay for the services. Renew contracts annually to determine if the work was performed adequately and is still required. Contracts should include performance expectations and goals. E.g., Increased throughput, quality or patient satisfaction scores, budgetary goals, etc. All arrangements with physicians must include a signed contract or letter agreement containing at least the following provisions: Clear job description or definition of duties Expected outcomes and time limits (one-year agreements preferred) Accountability and reporting relationships Compliance review by legal counsel Fair market value analysis of the compensation Without cause termination provisions for both parties Responsibility Inpatient Medical Officer Timeframe First Quarter 2006 Section III Page 16

17 Funds Flow CARTS: Administrative NCI has used its experience to identify the usual levels of support for identified functions and compared the UNC transfers to those levels of support. The NCI usual funding for these services is $3M less than the $13.1M currently transferred. Some of this variance is due to a significant amount of support for strategic, teaching, and clinical work being funded within predominately administrative positions. The following discussion and tables represent NCI s best attempt to to identify recommended payments to to the departments on on a mission basis. Section III Page 17

18 Funds Flow CARTS: Administrative and Strategic Medicine NCI s usual amounts for the type of position are detailed in the tables that follow. Clinical activity reflects payment for clinical work that is being requested by the hospital. These funds are not intended to support Medical Director services. Strategic support identifies mission-based services that require hospital support. Recommendation Mutual agreement of the hospital and department on the services produced and the performance demanded are required in order to assign amount of strategic support to be paid by the hospital. Move Urgent Care clinical revenue and expense to the ED. ED should bill for the professional charges to eliminate the need for $564K of support. Included in the funds flow is a $2.2M strategic payment for Oncology. This is compensation for infusion funds that currently go to the hospital. Current transfers to Medicine total $4.8M. Identified functions total $4.4M, resulting in a funds transfer reduction of $530K. Section III Page 18

19 Funds Flow CARTS: Administrative and Strategic Medicine Recommendation FY2004 Rec Rec Rec Rec Funtion Amount Clin Admin Strat Total Delta Chairperson/Clinical Service Chief $ 89,898 $ - $ 75,000 $ - $ 75,000 $ (14,898) Chief of Staff - IMO 100, , , ,000 Various Physicians (Urgent Care) 564, (564,000) Acute & Peritoneal Dialysis 40, , ,973 - Adult Urgent Care Center 15,759 15, ,759 - Anticoagulation Clinic Subsidy 70, ,000 70,000 - Assoc. Chief of Staff 12, (12,500) Bone Marrow Transplant 105, , ,060 - Cardiac Graphics 47, , ,000 2,723 Cardiac Cath (& Assoc. Dir.) 73, , ,000 (23,542) Cardiac Rehabilitation 45, , ,000 (20,000) CCU/ICCU 50, , ,000 (429) Center for Chronic Disease Management 50, (50,000) Child & Family Violence Program 21, , ,000 3,574 Clinical Nutrition 23, , ,000 1,887 Diabetes Program 42, ,024 42,024 - EKG/Exercise EKG/Holter Monitoring 26, (26,265) Electrophysiology 21, , ,000 3,988 Employee Health & Epidemilogy & ID 173, ,551 25, ,551 - Geriatric Program & Unit $ 42,024 $ - $ 50,000 $ - 50,000 $ 7,976 Sub Total (This Page) $ 1,613,853 $ 164,310 $ 752,997 $ 105,060 $ 1,022,367 $ (591,486) Section III Page 19

20 Funds Flow CARTS: Administrative and Strategic Medicine Recommendation FY2004 Rec Rec Rec Rec Funtion Amount Clin Admin Strat Total Delta GI Meadowmont $ 12,500 $ - $ - $ - $ - $ (12,500) GI Procedures (Endoscopy) 30, (30,000) Heart Center 63, (63,036) Heart Failure/Heart Transplant 47, , ,000 (17,277) Hepatology & Liver Transplant 163, , ,000 (113,894) Hospitalist Program Develop. 63, (63,036) Kidney Transplant 84, , ,000 (54,048) Lung Transplant 63, , ,000 (33,036) Manometry 12, (12,500) Medical ICU 21, , ,000 28,988 Medical Informatics 135, , ,000 - Medical Oncology & Clinic & Infusion Center 2,289, ,000 2,239,150 2,289,150 - Medical PCU 17, , ,000 7,024 Oncology Protocols 15, (15,759) Pulmonary Function 29, , ,417 - Respiratory ICU 21, , ,000 3,988 Respiratory Therapy (Assoc. Dir.) 10, (10,506) Sleep Studies, (Assoc. Dir.) 15, , ,000 9,241 Tumor Registry 15, , ,759 - Waste Management & Epidemiology 140, , ,560 - General Med Support (11 $40K) , , ,800 Total $ 4,865,090 $ 164,310 $ 1,388,733 $ 2,783,010 $ 4,336,053 $ (529,037) Section III Page 20

21 Funds Flow CARTS: Administrative and Strategic Medicine Recommendation Primary care physicians who perform O/P work in the Department of Medicine have all ancillary testing performed by the hospital. NCI estimates the opportunity costs to the department at $40K per productive FTE physician. Medicine supports 8.22 General Internists and 2.75 Geriatricians = 11 FTEs. Provide compensation to the department for the opportunity cost of $439K at $40K per clinical FTE at the benchmark level of MGMA 63rd percentile. Responsibility Inpatient Medical Officer, Chair of Medicine Timeframe First Quarter 2006 Section III Page 21

22 Funds Flow CARTS: Administrative and Strategic Anesthesia Current transfers to the Department of Anesthesia total $587K. Identified functions total $509K resulting in a funds transfer reduction of $77K. NCI is conducting a detailed assessment of the department. Section IV, Faculty Practice Plan and Ambulatory Operations, provides operational and strategic recommendations to improve the department s financial and operational performance. Anesthesia provides several services that typically require strategic support. OB services Epidurals are poorly compensated. Section III Page 22

23 Funds Flow CARTS: Administrative and Strategic Anesthesia Recommendation Provide payment for coverage of Labor and Delivery on a per diem basis (e.g., $821 per day) will compensate the department for services provided that are poorly compensated (performance of epidurals). Provide strategic support for CRNAs after the transfer of the CRNAs to the Department of Anesthesia. Responsibility Inpatient Medical Officer, Chair of Anesthesia Timeframe Function Chair $ - $ - $ 50,000 $ - $ 50,000 $ 50,000 Pain Program $ 32,000 $ - $ - $ - $ - $ (32,000) Respiratory Therapy $ 38,000 $ - $ - $ - $ - $ (38,000) Pre-Care $ 35,000 $ 35,000 $ - $ - $ 35,000 $ - PACUs $ 83,000 $ - $ 50,000 $ - $ 50,000 $ (33,000) Operating Rooms $ 282,000 $ - $ - $ - $ - $ (282,000) Assoc. Chief of Staff $ 117,000 $ - $ - $ - $ - $ (117,000) Medical Director, OR $ - $ - $ 75,000 $ - $ 75,000 $ 75,000 Medical Director, Amb Surg $ - $ - $ - $ - $ - $ - OB Coverage ($821/Day) $ - $ - $ - $ 299,665 $ 299,665 $ 299,665 TOTAL $ 587,000 $ 35,000 $ 175,000 $ 299,665 $ 509,665 $ (77,335) First Quarter 2006 FY 2004 Amount Rec Clinic Rec Admin Rec Strat Rec Total Delta Section III Page 23

24 Funds Flow CARTS: Administrative and Strategic Family Practice Current transfers to the Department of Family Practice are $130.5K per year. These funds are for medical direction as well as strategic clinical support. Recommendation Increase administrative support to $550K for the usual medical direction and strategic services for this department. Strategic support for primary care is set at $40K for 11.4 clinical FTEs. Function FY 2004 Amount Rec Clinic Rec Admin Rec Res Rec Strat Rec Total Delta Chairperson/Service Chief $ - $ - $ 50,000 $ - $ - $ 50,000 $ 2,509 Clinical Decision Unit $ 47,491 $ - $ 22,500 $ - $ - $ 22,500 $ - Residency Training $ 22,500 $ - $ - $ - $ - $ - $ (39,000) Needlestick Hotline $ 39,000 $ 21,500 $ - $ - $ - $ 21,500 $ - Strategic Support (11.4 $40K) $ 21,500 $ - $ - $ - $ 456,800 $ 456,800 $ 456,800 TOTAL $ 130,491 $ 21,500 $ 72,500 $ - $ 456,800 $ 550,800 $ 420,309 Responsibility Inpatient Medical Officer, Chair of Family Practice Timeframe First Quarter 2006 Section III Page 24

25 Funds Flow CARTS: Administrative and Strategic Emergency Medicine Current transfers to the Department of Emergency Medicine are $700K per year. These funds are for medical direction as well as strategic clinical support. Recommendation Reduce administrative support to $150K for the usual medical direction and service chief functions of the department. Transfer urgent care to the ED. Combine with Fast Track. Billing for clinical professional services could make up some loss of administrative stipends. Function FY 2004 Amount Rec Clinic Rec Admin Medical Director & Physician Coverage $ 700,000 $ - $ - $ - $ - $ - $ (700,000) Chair $ - $ - $ 50,000 $ - $ - $ 50,000 $ 50,000 Medical Director, ED $ - $ - $ 25,000 $ - $ - $ 25,000 $ 25,000 Director, Hospital Disaster Management $ - $ - $ 25,000 $ - $ - $ 25,000 $ 25,000 Director, Peds ED $ - $ - $ 25,000 $ - $ - $ 25,000 $ 25,000 Director, Clinical Decision Unit $ - $ - $ 25,000 $ - $ - $ 25,000 $ 25,000 Chair, Administrative Assistant $ - $ - $ - $ - $ - $ - $ - TOTAL $ 700,000 $ - $ 150,000 $ - $ - $ 150,000 $ (550,000) Responsibility Inpatient Medical Officer, Chair of Emergency Medicine Timeframe First Quarter 2006 Rec Res Rec Strat Rec Total Delta Section III Page 25

26 Funds Flow CARTS: Administrative and Strategic Neurology Current allocations for the Department of Neurology total $318K. NCI estimates a total of $300K is appropriate for administrative functions associated with departmental functions. Recommendation Adjust administrative payments as seen below. Chair $ 56,595 $ - $ 50,000 $ - $ - $ 50,000 $ (6,595) CNP Lab $ 80,340 $ - $ 50,000 $ - $ - $ 50,000 $ (30,340) Deep Brain Stimulation $ 25,000 $ - $ 50,000 $ - $ - $ 50,000 $ 25,000 Epilepsy Program $ 26,780 $ - $ 50,000 $ - $ - $ 50,000 $ 23,220 Headache Pain Program/Clinic $ 17,139 $ - $ - $ - $ - $ - $ (17,139) Sleep Program $ 32,136 $ - $ 50,000 $ - $ - $ 50,000 $ 17,864 Stroke Program $ 80,340 $ - $ 50,000 $ - $ - $ 50,000 $ (30,340) TOTAL $ 318,330 $ - $ 300,000 $ - $ - $ 300,000 $ (18,330) Responsibility Inpatient Medical Officer, Chair of Neurology Timeframe Function First Quarter 2006 FY 2004 Amount Rec Clinic Rec Admin Rec Res Rec Strat Rec Total Delta Section III Page 26

27 Funds Flow CARTS: Administrative and Strategic OB-Gyn Current payments for the Department of OB/Gyn total $319K. Recommendation NCI recommends a total of $155K for hospital-related administrative functions of the department. Fund GME Assistant Dean position from GME funds. Assistant Dean, GME $ 90,640 $ - $ - $ - $ - $ - $ (90,640) Chairperson/Clinical Service Chief $ 103,335 $ - $ 50,000 $ - $ - $ 50,000 $ (53,335) IVF $ 20,000 $ - $ 20,000 $ - $ - $ 20,000 $ - Antepartum/Postpartum; Inpatient Service $ 24,000 $ - $ 24,000 $ - $ - $ 24,000 $ - Gynecology; Inpatient Service $ 20,000 $ - $ - $ - $ - $ - $ (20,000) Labor and Delivery / Obstetrics $ 37,000 $ - $ 37,000 $ - $ 37,000 $ - Ultrasound / Prenatal Diagnostics $ 24,000 $ - $ 24,000 $ - $ - $ 24,000 $ - TOTAL $ 318,975 $ - $ 155,000 $ - $ - $ 155,000 $ (163,975) Responsibility Inpatient Medical Officer, Chair of OB-Gyn Timeframe Function First Quarter 2006 FY 2004 Amount Rec Clinic Rec Admin Rec Res Rec Strat Rec Total Delta Section III Page 27

28 Funds Flow CARTS: Administrative and Strategic Otolaryngology Current payments to the Department of Otolaryngology total $50K. Recommendation NCI recommends payment to the Chair for ENT medical direction to be adjusted from $174K to $50K. Chairperson/Clinical Service Chief $ 79,278 $ - $ 50,000 $ - $ - $ - $ (29,278) Audiology and Other Diagnostics $ 20,000 $ - $ - $ - $ - $ 50,000 $ (20,000) Center for Hearing & Ear Disorders $ 20,000 $ - $ - $ - $ - $ - $ (20,000) Speech Pathology $ 55,000 $ - $ - $ - $ - $ - $ (55,000) TOTAL $ 174,278 $ - $ 50,000 $ - $ - $ 50,000 $ (124,278) Responsibility Inpatient Medical Officer, Chair of Otolaryngology Timeframe Function First Quarter 2006 FY 2004 Amount Rec Clinic Rec Admin Rec Res Rec Strat Rec Total Delta Section III Page 28

29 Funds Flow CARTS: Administrative and Strategic Pathology and Laboratory Current allocations for Departments of Pathology and Laboratory total $3.1M. These allocations include payments for the physician component of work billed to thirdparties and paid to the hospital. Medical payments for lab direction and clinical compensation in AMCs the size of UNC usually total between $1M and $1.5M. FY2004 Rec Rec Rec Rec Rec Function Amount Clin Admin Res Strat Total Delta Chair $ 50,000 $ - $ 50,000 $ 50,000 Hospital Labs, clinical services 937, (937,500) Cytogenetics Lab, clinical services 64, (64,000) Anatomic Pathology, medical direction* 427, , ,000 (302,783) Autopsy, medical direction & service 312, , ,500 - Cytogenetics Lab, medical direction 87, (87,500) Hospital Labs, medical direction 1,285, (1,285,688) Blood Bank , , ,000 Chemistry , , ,000 Hematology , , ,000 Immunology , , ,000 HLA , , ,000 Cytology , , ,000 Microbiology , , ,000 Total $ 3,114,971 $ 437,500 $ 925,000 $ - $ - $ 1,362,500 $ (1,752,471) * Bill Part A Professional charges for non-governmental payors Section III Page 29

30 Funds Flow CARTS: Administrative and Strategic Pathology and Laboratory Recommendation Payment for Medical Director and Chair should total $925K with an additional $438K for clinical work. Anatomic pathology professional services should be billed to non-governmental payers in order to generate additional funding and decrease the need for hospital supplementation. Responsibility Inpatient Medical Officer, Chair of Pathology & Laboratory Medicine Timeframe First Quarter 2006 Section III Page 30

31 Funds Flow CARTS: Administrative and Strategic Pediatrics Current payments to the Department of Pediatrics total $920K. Recommendation NCI recommends payments for administrative and strategic services of $979K. Provide strategic support for primary care of $40K for the 11.4 clinical FTE General Pediatricians. Responsibility Inpatient Medical Officer, Chair of Pediatrics Timeframe First Quarter 2006 FY2004 Rec Rec Rec Rec Rec Function Amount Clin Admin Res Strat Total Delta Chairperson/Clinical Service Chief $ 61,275 $ - $ 75,000 $ - $ - $ 75,000 $ 13,725 Acute Inpatient Units 33,207-33, ,207 - Ped ED medical direction & supp attending physician coverage 365,000-25, ,000 (340,000) Cardiac Graphics (Assoc. Dir.) 21,424-21, ,424 - Cath./Invasive Cardiology 38,563-38, ,563 - Child & Family Violence Program 14, (14,992) Children's Specialty Clinics 31,021-31, ,021 - ECMO 50,000-50, ,000 - Electrophysiology 10,000-10, ,000 - Ethics Consult Svc. 5,000-5, ,000 - GI Proced./Bronc. (Assoc. Dir.) 27,851-27, ,851 - NNICU 82,482-82, ,482 - Pediatric Oncology 21,424-21, ,424 - Pediatric Transport 37,492-37, ,492 - PICU 104,000-50, ,000 (54,000) PFT Lab (Assoc. Dir.) 16,068-16, ,068 - Primary Care Strategic Support (11.4 $40 K) , , ,800 Total $ 919,799 $ - $ 524,532 $ - $ 454,800 $ 979,332 $ 59,533 Section III Page 31

32 Funds Flow CARTS: Administrative and Strategic Physical Medicine and Rehabilitation (PM & R) Current payments to the Departments of Physical Medicine and Rehabilitation (PM&R) total $163K. Recommendation NCI recommends payments of $143K for administrative support; reduce payment for I/P unit medical direction. FY2004 Rec Rec Rec Rec Rec Function Amount Clin Admin Res Strat Total Delta Chair $ - $ - $ 50,000 $ - $ - $ 50,000 $ 50,000 Inpatient Unit 120,000-50, ,000 (70,000) Pediatric Program 18,000-18, ,000 - PT/OT 25,000-25, ,000 - $ 163,000 $ - $ 143,000 $ - $ - $ 143,000 $ (20,000) Responsibility Inpatient Medical Officer, Chair of PM&R Timeframe First Quarter 2006 Section III Page 32

33 Funds Flow CARTS: Administrative and Strategic Surgery Current payments for the Department of Surgery total $941K. Recommendation Payments for administrative and strategic support to be $960K, an increase of $19K. NCI recommends a strategic investment for trauma coverage of $1,000 per day and has included $365K in strategic support as a result. FY2004 Rec Rec Rec Rec Rec Function Amount Clin Admin Res Strat Total Delta Chairperson/Clinical Service Chief $ 105,760 $ - $ 50,000 $ - $ - $ 50,000 $ (55,760) Surgical ICU 45,000-45, ,000 - CT Surgery ICU 45,000-45, ,000 - Trauma Program ($1000/Day) 150,000-50, , , ,000 Neurosurgical ICU 45,000-45, ,000 - Pediatric Surgery/Surgeon-In-Chief Children's Hospital 60,000-50, ,000 (10,000) Abdominal Transplant Programs 100,000-45, ,000 (55,000) Burn Center 95,000-45, ,000 (50,000) Clinial Nutrition (Assoc. Dir.) 35,000-25, ,000 (10,000) Heart & Lung Transplant Programs 35,000-35, ,000 - Melanoma Program 25, (25,000) Surgical Oncology & Multidisciplinary Breast Program 35,000-25, ,000 (10,000) UNCH Critical Care 30,000-30, ,000 - UNCH Transplantation Programs 30,000-30, ,000 - Urophysiology 35,000-25, ,000 (10,000) Vascular Lab 35,000-25, ,000 (10,000) Wound Clinic & Program Support 35,000-25, ,000 (10,000) Total $ 940,760 $ - $ 595,000 $ - $ 365,000 $ 960,000 $ 19,240 Section III Page 33

34 Funds Flow CARTS: Administrative and Strategic Surgery Recommendation Neurosurgery NCI recommends that Neurosurgery become a separate department to facilitate recruitment and retention of new faculty. This will facilitate the recruitment and retention of a new Chair. Neurosurgery often requires some strategic support for trauma coverage. Transplant Surgery NCI recommends further study of the financial performance of this division and comparison with like programs in order to determine if additional support is warranted. Transplant Surgery has lost one of its surgeons and states a need for additional strategic support. Responsibility Inpatient Medical Officer, Chair, Department of Surgery Timeframe First Quarter 2006 Section III Page 34

35 Funds Flow CARTS: Administrative and Strategic Radiology Current allocations to the Department of Radiology total $500K. Recommendation NCI recommends payments for administrative support total $300K based on experience with other clients. FY2004 Rec Rec Rec Rec Rec Function Amount Clin Admin Res Strat Total Delta Radiology Medical Direction $ 500,000 $ - $ - $ - $ - $ - $ (500,000) Radiology Chair , ,000 50,000 MRI Medical Director , ,000 50,000 Interventional Medical Director , ,000 50,000 Nuclear Medical Director , ,000 50,000 General Radiology Med Dir , ,000 50,000 Mamography Med Dir , ,000 50,000 Total $ 500,000 $ - $ 300,000 $ - $ - $ 300,000 $ (200,000) Responsibility Inpatient Medical Officer, Chair, Department of Radiology Timeframe First Quarter 2006 Section III Page 35

36 Funds Flow CARTS: Administrative and Strategic Recommendation NCI recommends a reduction in transfer payments to the departments from $13.1M to $9.9M, a reduction of $3,163,358 overall. Recommended payments for administrative services should be at $4.9M. This reduction is based on NCI s experience with similar institutions. Recommended payments for strategic support should be $4.3M. There may be business cases for other support payments that NCI has not examined. Responsibility Inpatient Medical Officer, Chair of Respective Department Timeframe First Quarter 2006 Department Amount Rec Clinical Rec Admin Rec Strategic Rec Total Reduction Anesthesiology Total $ 587,000 $ 35,000 $ 175,000 $ 299,665 $ 509,665 $ (77,335) Dermatology Total 44, (44,707) Emergency Med Total 700, , ,000 (550,000) Family Medicine Total 130,491 21,500 72, , , ,309 Medicine Total 4,865, ,310 1,388,733 2,783,010 4,336,053 (529,037) Neurology Total 318, , ,136 (136,194) OB/GYN Total 318, , ,000 (163,975) Ophthalmology Total 47,205-50,000-50,000 2,795 Orthopaedics Total 83,970-50,000-50,000 (33,970) Otolaryngology Total 174,278-50,000-50,000 (124,278) Pathology & Lab Total 3,114, , ,000-1,362,500 (1,752,471) Pediatrics Total 919, , , ,332 59,533 P M & R Total 163, , ,000 (20,000) Psychiatry Total 151,943 77,250 50, ,250 (24,693) Radiation Oncology Total 88,575-80,000-80,000 (8,575) Radiology Total 500, , ,000 (200,000) Surgery Total 940, , , ,000 19,240 Grand Total $ 13,149,094 $ 735,560 $ 4,890,901 $ 4,359,275 $ 9,985,736 $ (3,163,358) Section III Page 36

37 Funds Flow CARTS: Teaching There are approximately 60 programs with 667 Residents and Fellows. The direct costs of all 667 Residents are estimated to be $33.5M. Type of Resident Number Cap Residents 376 Hospital Supported Residents 60 University Paid Residents 118 Other Residents, Including AHEC 113 TOTAL 667 Section III Page 37

38 Funds Flow CARTS: Teaching Resident Expenses There are 436 Residents paid by UNC Hospital. The Medicare reimbursement cap is 375 Residents (for the IME cap). In addition, the hospital pays for 60 Residents, which support its mission. The direct costs of hospitalfunded Residents is estimated to be $19.1M. There are also 113 University Residents paid by the hospital, but reimbursed by the departments. There are 118 Residents and Fellows paid by the departments, 60 of which are out-placed to other institutions. Hosp Est. Dir Cost of University SOM Department Funded Hosp Funded /Other Total Anesthesiology Total 51 $ 2,241, Dental Total 12 $ 527, Dermatology Total 8 $ 351, Emergency Medicine Total 12 $ 527, Family Medicine Total 24 $ 1,054, McLendon Labs Total 0 $ Medicine Total 82 $ 3,603, Neurology Total 12 $ 527, Ob/Gyn Total 24 $ 1,054, Otolaryngology 12 $ 527, Ophthalmology Total 6 $ 263, Orthopaedics Total 19 $ 835, Pathology Total 13 $ 571, Pediatrics Total 34 $ 1,494, PM&R Total 11 $ 483, Preventive Medicine Total 3 $ 131, Psychiatry Total 36 $ 1,582, Radiation Oncology Total 4 $ 175, Radiology Total 20 $ 878, Surgery Total 53 $ 2,329, Grand Total 436 $ 19,161, Section III Page 38

39 Funds Flow CARTS: Teaching Resident Expenses The hospital is capped at 375 Residents for GME funding through Medicare. In 2003, it is estimated that the hospital will receive $25.6M after cost reports are settled. The direct cost (salary, benefits, food, etc.) of Residents without the cost of teaching is $19.2M. This is in excess of the $9.1M that the hospital receives for direct support from GME. The Indirect Medical Education funds (IME) are intended to reimburse the hospital for its indirect costs from the Residents. E.g., Prolonged OR time per case for surgery, increased testing, etc. The Balanced Budget Act decreased IME for 2003 by 14% (est) IME 19,126,356 19,126,356 19,126,356 16,448,666 GME A 7,845,794 7,845,794 7,845,794 7,845,794 GME B 1,304,695 1,304,695 1,304,695 1,304,695 GME T 9,150,489 9,150,489 9,150,489 9,150,489 Total 28,276,845 28,276,845 28,276,845 25,599,155 The last settled cost report was FY 2002 Section III Page 39

40 Funds Flow CARTS: Teaching Resident Expenses UNC Hospital paid $19.1M for the direct costs of hospital Residents (436 Residents) in FY04. These Residents are in excess of the hospital cap. The hospital incurred an additional $5M in direct costs for University Residents for the additional 113 University Residents. These Residents are considered the responsibility of the departments. The departments reimbursed the hospital for those expenses. Cost Center Name YTD Actual Jun 04 YTD Actual Jun 03 Hosp Residents Total $ 19,128,052 $ 18,282,665 Traing Prog - Otolaryngology Total 147, ,893 Univ Residents-Anes Total Univ Residents-Derm Total 180, ,401 Univ Residents-Emerg Med Total 497, ,108 Univ Residents-Fam Med Total Univ Residents-Med Total 536, ,674 Univ Residents-Med/Peds Total 235, ,087 Univ Residents-Neuro Total 0 48,364 Univ Residents-Ob/Gyn Total 283, ,001 Univ Residents-Ophthal Total 109, ,527 Univ Residents-Orthopedic Total 143, ,544 Univ Residents-Path Total 94, Univ Residents-Peds Total Univ Residents-Psych Total 1,238, Univ Residents-Rad Total 240, ,486 Univ Residents-Surg Total 471, Univ Resid-Phys Med & Reh Total University Resident Total $ 4,966,183 $ 4,935,591 Grand Total $ 24,095,091 $ 23,218,884 Section III Page 40

41 Funds Flow CARTS: Teaching Resident Expenses Out-placed Residents There are 60 out-placed Residents contracted through the departments. These Residents are paid by the departments through contracts and reimbursed through the departments from the hospitals serviced by contract. These include: Wake Carolina Medical Dorthea Dix Moses Cone Area Health and Education Consortium (AHEC) is also contracted through the departments. Ashville Moore County Contracts for these Residents pay the departments $3,124,734 for approximately 60 Residents (about $52K per resident). Remaining costs are borne by the departments. Section III Page 41

42 Funds Flow CARTS: Teaching GME Office The GME Office has overall responsibility for Resident training programs. Reviews both hospital and non-hospital paid Residents. Does not have a single financial statement for all the Residents from all sources. The GME Office is supported by the hospital at a cost of $1.1M. Account Name YTD Actual Jun 04 YTD Actual Jun 03 Staff $ 504,167 $ 446,912 Non-Staff 687, ,636 Total $ 1,191,461 $ 1,056,548 Section III Page 42

43 Funds Flow CARTS: Teaching Teaching Expense NCI uses ratios of Residents to faculty FTEs required for teaching. See Teaching tables that follow. Source: NCI experience with multiple AMCs Specialty Care 6-1 Primary Care 40-1 Program Directors 40-1 Administrative Directors Estimated funds to support program directors, secretarial help, some RRC required positions (e.g., Family Practice Behaviorialist) and cost of GME office are added to the cost of faculty. NCI usually finds that this support equates to between $30K and $35K per Resident. Some smaller programs are more expensive per Resident because of fixed expenses that cannot be spread over a larger base. For UNC, NCI estimates teaching requirements of $31,300 per Resident, or $12.6M for the 436 hospital-funded Residents. Section III Page 43

44 Funds Flow CARTS: Teaching Teaching Expense In most AMCs, these costs become a hospital expense, and the hospital sends these funds to the departments. At UNC, the hospital pays some limited and unspecified teaching through administrative payments, identified in the contract for services, that are greater than is required for the administrative purposes. The bulk of the support for teaching comes from departmental funds. The hospital has elected to contribute $5K per Fellow to the departments for the support of Fellows. Section III Page 44

45 Funds Flow CARTS: Teaching Teaching Expense The table below shows the NCI estimated teaching costs incurred by most AMC hospitals. These funds are usually paid by the hospital to the departments to support the teaching effort. Department Hospital Funded Total Adj IME CAP Ratio (Hosp Pd Res) FTE Fac Fac Sal Prog Dir (40:1 all Res) Prog Dir $ & Serv Chief (Med, Surg, Peds) Admin (40:1 Hosp Res) $ AA suport GME Support (436 R) Anesthesiology $ 1,071, $ 225, $ 57,375 $ 1,353,375 Dental $ 180,000 - $ $ 13,500 $ 193,500 Dermatology $ 141, $ 54, $ 9,000 $ 205,353 Emergency Med $ 220, $ 125, $ 13,500 $ 359,468 Family Med $ 594, $ 106, $ 27,000 $ 727,639 Medicine $ 1,880, $ 508, $ 92,250 $ 2,481,754 Med-Peds $ - - $ - - $ - $ - Neurology $ 166, $ 58, $ 13,500 $ 238,217 Ob/Gyn $ 456, $ 145, $ 27,000 $ 629,234 Ophthalmology $ 107, $ 43, $ 6,750 $ 157,245 Orthopaedics $ 523, $ 161, $ 21,375 $ 706,271 Pathology $ 197, $ 114, $ 14,625 $ 326,621 Pediatrics $ 699, $ 404, $ 38,250 $ 1,142,151 PM&R $ 158, $ 47, $ 12,375 $ 218,863 Preventive Med $ 68, $ 33, $ 3,375 $ 106,106 Psychiatry $ 751, $ 146, $ 40,500 $ 938,457 Radiation Oncology $ 104, $ 27, $ 4,500 $ 137,087 Radiology $ 472, $ 227, $ 22,500 $ 722,049 Surgery $ 1,396, $ 477, $ 73,125 $ 1,947,066 Grand Total $ 9,191, $ 2,908, $ 490,500 $ 12,590,457 GME Office $ 1,056,548 Total $ 13,647,005 Section III Page 45

46 Funds Flow CARTS: Teaching This table shows the NCI estimated teaching expense of hospital-funded Residents. Department Hospital Funded GME Support (436 R) GME Support /Res Fellow Support ($5K/Fel) Anesthesiology 51 $ 1,353,375 $ 26,537 $ 10,000 Dental 12 $ 193,500 $ 16,125 $ 85,000 Dermatology 8 $ 205,353 $ 25,669 $ - Emergency Med 12 $ 359,468 $ 29,956 $ 5,000 Family Med 24 $ 727,639 $ 30,318 $ - Medicine 82 $ 2,481,754 $ 30,265 $ 260,000 Med-Peds $ - $ - Neurology 12 $ 238,217 $ 19,851 $ - Ob/Gyn 24 $ 629,234 $ 26,218 $ - Ophthalmology 6 $ 157,245 $ 26,208 $ - Orthopaedics 19 $ 706,271 $ 37,172 $ - Pathology 13 $ 326,621 $ 25,125 $ 10,000 Pediatrics 34 $ 1,142,151 $ 33,593 $ 120,000 PM&R 11 $ 218,863 $ 19,897 $ - Preventive Med 3 $ 106,106 $ 35,369 $ 25,000 Psychiatry 36 $ 938,457 $ 26,068 $ 5,000 Radiation Oncology 4 $ 137,087 $ 34,272 $ - Radiology 20 $ 722,049 $ 36,102 $ 40,000 Surgery 65 $ 1,947,066 $ 29,955 $ 30,000 Grand Total 436 $ 12,590,457 $ 28,877 $ 590,000 GME Office $ 1,056,548 Total $ 13,647,005 $ 31,300 Section III Page 46

47 Funds Flow CARTS: Teaching The distribution of state funds is shown in the following table. Department State Funds Anesthesiology Total 825,013 Dental Total Dermatology Total 589,784 Emergency Medicine Total 205,108 Family Medicine Total 2,791,335 McLendon Labs Total Medicine Total 7,062,631 Neurology Total 1,130,696 Ob/Gyn Total 1,624,663 Otolaryngology 382,940 Ophthalmology Total 892,833 Orthopaedics Total 390,083 Pathology Total 3,110,445 Pediatrics Total 3,375,579 PM&R Total 453,617 Preventive Medicine Total Psychiatry Total 3,764,458 Radiation Oncology Total 502,132 Radiology Total 1,120,030 Surgery Total 2,259,515 Grand Total 30,480,862 Section III Page 47

48 Funds Flow CARTS: Teaching SOM/Department Support Residents There are 231 Residents (118 University Residents out-placed Residents) in the SOM/Departments (departmentally-supported Residents). There are approximately 60 Residents on external rotations paid for by contract, leaving 171 Residents supported by the SOM/Departments. The direct net cost of these 171 Residents to the SOM/Departments is $7M. These 171 Residents are in addition to the 436 Residents paid by the hospital. SOM/Other 118 University Residents 113 Departmentallly supported residents 231 Direct Costs of departmentally supported residents $ 10,152,109 Departmental residents supported by external sources (60) Departmentally supported w/o external support 171 Extramural Support $ 3,124,734 Net Direct Costs of departmently supported residents $ 7,027,375 Section III Page 48

49 Funds Flow CARTS: Teaching SOM/Department Support NCI recommended teaching costs for the hospital Residents (436) would be $13.6M. NCI recommended teaching costs for the departmentally-supported Residents without extramural funding (171) would be $5.3M. NCI estimated clinical undergraduate teaching support for 640 medical students based on tuition, etc., to be $7.8M (see table below). NCI recommended teaching support for both the graduate and undergraduate education would total $26.8M. Recommended Teaching Support for Graduate and Undergraduate Education NCI Estimated Teaching Hospital (436) $ 13,647,005 NCI Estimated Non-Hospital (171) $ 5,352,381 NCI Estimated Undergraduate Clinical (640) $ 7,840,000 Total Teaching Estimates $ 26,839,386 Estimated Clinical Undergraduate Teaching Support for 640 Medical Students Students 640 Tuition (estimated National) $ 35,000 Total Tuition $ 22,400,000 70% of Tuition $ 15,680,000 Clinical Department Support (50%) $ 7,840,000 Section III Page 49

50 Funds Flow CARTS: Teaching The SOM/Departments have elected to employ 171 Residents over those paid by the hospital or supported by external sources. The direct costs of these Residents is $7,027,375. NCI estimated costs to teach those Residents is $5,352,381. Total direct costs and teaching costs of these 171 Residents totals $12,379,756. The hospital has elected to pay for 436 Residents. This number of Residents exceeds the IME cap of 375 by 61 Residents. The hospital receives no funding for its direct costs of $2.7M for these Residents. Some of these Residents are essential to the residencies. E.g., Research years, unfunded external rotations. The Council of Teaching Hospitals (COTH) report shows comparative data for the number of Residents per work load unit. UNCH is comparable to peer institutions. Section III Page 50

51 COTH GME Unweighted Residents and Fellows per Unit (FY02) UNC reported 450 Residents and Fellows to COTH. Actual total is approximately 600. COTH is self-reported institutional data Value 1.50 GME per Bed GME per 100 Disc GME per 1000 Days UNC (450 R&F) UNC (600 R&F) Barnes Brigham & Chicago Duke HUP Womens Johns Hopkins Med Col VA UCSF Virginia Average GME per Bed GME per 100 Disc GME per 1000 Days Section III Page 51