UWMC FY17 FINANCIAL PERFORMANCE. April 24, 2017

Transcription

1 UWMC FY17 FINANCIAL PERFORMANCE April 24, 2017

2 FY17 RESULTS THROUGH FEBRUARY UWMC has experienced significant financial losses YTD through February. Pressure from governmental as well as commercial payers Expenses are increasing at a rate that isn t sustainable. This is not exclusive to UWMC. Happening to all health care organizations. At a high level: To date through February 2017, UWMC has incurred a loss of approximately $34.0 million, which is negative when compared to budget by $35.5m. Two primary drivers of the negative performance are as follows: $14.9m of negative variance related to net patient services revenue $17.8m of negative variance related to labor expenses. 2

3 UWMCKEY PERFORMANCE INDICATORS FEBRUARY YTD FY 2017 KPI YEAR TO DATE Through February, admissions were right on budget. OR IP cases were strong as were ED visits. Births have lagged behind budget all year ACTUAL BUDGET % VAR PRIOR YR Admissions 12,473 12, % 11,993 Observation Stays 1,363 1, % 1,577 Patient Days 87,978 90, % 88,176 Length Of Stay % 7.35 Case Mix Index % 2.22 Occupancy 79% 82% -2.9% 83% OR Inpatient Cases 4,457 4, % 4,165 OR Outpatient Cases 6,170 6, % 6,239 Emergency Dept. Visits 18,204 17, % 17,369 Births 1,291 1, % 1,297 Primary Care Visits 38,759 38, % 38,664 Specialty Care Visits 181, , % 168,023

4 UWMCKEY PERFORMANCE INDICATORS FEBRUARY YTD FY 2017 FTEs on a YTD basis remain unfavorable to budget. On a YTD basis, the blended deduct rate is unfavorable to budget despite commercial payer mix being at budgeted levels. This is caused by rate degradation within commercial. KPI YEAR TO DATE ACTUAL BUDGET % VAR PRIOR YR Total Op Rev/CMI Adjusted Admission $15,675 $16, % $15,929 Total Op Exp/CMI Adjusted Admission $15,806 $15, % $15,901 FTEs 4,497 4, % 4,408 FTE/CMI Adjusted Admission % 0.76 Blended Deduction Rate 57.5% 56.1% 2.4% 55.8% Payer Mix - Medicare 34.3% 33.8% 1.5% 34.0% Payer Mix - Medicaid 17.8% 18.8% -5.3% 19.0% Payer Mix - Commercial 44.1% 44.0% 0.2% 43.5% Payer Mix - Exchange (HIX) 2.7% 2.4% 12.5% 2.4% Payer Mix - Self-Pay 1.1% 1.0% 10.0% 1.1%

5 UWMC REVENUE AND EXPENSE SUMMARY FEBRUARY YTD FY 2017 YEAR TO DATE (In 000's) Actual Budget Variance Prior Year Total Patient Service Revenue $1,741,179 $1,721,439 $19,740 $1,597,671 Total Deductions from Revenue 1,000, ,286 34, ,583 Net Patient Service Revenue $740,231 $755,153 ($14,922) $706,088 Net Revenue variance YTD despite strong volumes. Labor expenses driving majority of expense variance Other Operating Revenue 37,795 36,517 1,278 36,709 Total Operating Revenue $778,026 $791,670 ($13,644) $742,797 Labor Expense $330,610 $312,793 $17,817 $315,745 SoM Faculty Funding 53,636 51,881 1,755 46,245 Medical Supplies 167, ,476 (3,701) 165,328 IT Services 47,045 47,260 (215) 41,977 Other Purchased Services 125, ,890 7, ,009 Other Non Labor Expense 25,144 25,371 (227) 27,509 Depreciation 35,158 36,200 (1,042) 32,680 Total Operating Expense $784,567 $762,871 $21,696 $741,493 Operating Income (Loss) ($6,541) $28,799 ($35,340) $1,304 Non-Operating Income (Expense) (35,860) (34,479) (1,381) (30,302) Equity Earnings from Investment in SCCA 8,347 7,175 1,172 7,039 Total Non-Operating Income (Expense) ($27,513) ($27,304) ($209) ($23,263) Net Income (Loss) ($34,054) $1,495 ($35,549) ($21,959)

6 UWMCMONTHLY INCOME FEBRUARY 2017 (in 000 s) $10,000 $7,000 $4,000 $1,000 -$2,000 -$5,000 -$8,000 -$11,000 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY $2,569 -$6,370 -$1,618 $4,487 -$2,840 $147 -$8,108 -$5,089 -$235 -$5,646 -$1,728 -$2,735 FY $7,895 $1,890 -$10,284 -$3,690 -$4,621 $2,051 -$1,774 -$9,731 FY 2017 Budget -$3,288 $1,253 -$217 $4,352 -$2,644 $4,339 $605 -$2,905 $5,328 $1,416 $4,619 $5,473

7 UWMC CASH BALANCES BY CATEGORY JUNE 2015, JUNE 2016 AND FEBRUARY /30/2015 6/30/2016 2/28/2017 (In 000's) Audited Audited Unaudited Operating Cash Balance $ 10,201 $ 24,973 $ 25,980 Board Designated Funds 245, , ,885 Unrestricted Cash and Investments $ 255,688 $ 267,361 $ 180,865 Donor Restricted Assets 2,098 2,014 2,057 Restricted Cash and Investments $ 2,098 $ 2,014 $ 2,057 Total Cash $257,786 $269,375 $182,922 Unrestricted Days Cash on Hand Debt Covenant Requirement Moody's "A" Rated Note: CPE Hold Harmless settlement: $12.5M Days Unrestricted Cash without CPE Hold Harmless settlement: 55

8 FY18 BUDGET

9 TOUGH TIMES IN HEALTHCARE 9

10 THE NEED TO GENERATE POSITIVE MARGINS The long-term success and stability of any healthcare organization depends, in large measure, upon its ability to create sufficient capital (cash) resources to invest in the following: Staff New technology, buildings and replacement equipment Strategic initiatives that will lead to a sustainable competitive advantage. A positive operating margin is essential to cash generation and also the ability to access capital for strategic investments. No Margin, No Mission 10

11 FY18 KEY BUDGET ASSUMPTIONS Modest growth in volumes (except for strategic growth areas) Net revenue assumptions include the following: o Limited realization of price increases in commercial net revenue but none from other payers due to constraints on reimbursement o A reduction in outpatient facility fees from all payers, particularly for clinic services, certain surgical procedures, infusion services and other outpatient services o Reduction in the payment rate from commercial insurers as we see migration from more profitable commercial plans to less profitable plans. The impact of this for some plans is upwards of a 20% differential in the rates we are paid by the insurance companies. o Reductions from governmental payers across the board. Overall we are estimating a decrease in our reimbursement rate when compared to the current year. Status quo will continue to generate losses at the Medical Center. 11

12 FY18 KEY BUDGET ASSUMPTIONS (CONT D) In January, all areas within UW Medicine were asked by Dr. Paul Ramsey to model budget reductions in expenses of 2%, 4% and 6% from FY17 budgeted levels. Even at the 6% level, we will likely need to revisit and reduce further. Salary and non-salary expense inflation of 0% to 4% to account for state mandated and contractual increases, benefit load changes, etc. Pharmacy drug cost inflation of 8% IT operating expenses were reduced over the FY17 budgeted amount. Cash levels have dropped over the current year and margins must be generated so we can invest in our strategic priorities and replace capital equipment in the future. No new significant debt is anticipated; UWMC Phase II Expansion is continuing and was previously approved 12

13 SALARY IMPACT PUT IN NUMBERS OUR STAFF CAN RELATE TO FY17 FY18 Salary $75,000 $75,000 Benefits $28,425 $30,075 Total Compensation $103,425 $105,075 Benefit Load Rate 37.9% 40.1% Above illustrates the impact of the increasing costs of benefits to UWMC. Without any salary increase, the average total compensation for one RN2 is estimate to increase by $1,650 from FY17 to FY18. At a high level, the impact of these increasing benefits, without any salary increaseto all UWMC employees results in an additional $7.5m in expense for FY18. With a salary increase greater than 0%, this impact increases as the benefit load factor is applied to salary, including premium and overtime pay.

14 UWMC BUDGET HIGHLIGHTS FY18 FY17 Annualized Budget Target Net Income ($51.0) M $32.0 M Total Margin -4.4% 2.6% The variance between the current year annualized results and our budget target for next year is $83M Given the current financial results at UWMC, balancing the budget for FY18 will require significant assumptions beyond simply applying volume growth and inflation assumptions Programmatic initiatives eliminating and/or restructuring of certain programs Salary and FTE reductions through attrition, targeted reductions in force and revisions to labor mix in some areas Non-labor efficiencies Improved access for tertiary and quaternary referrals Achievement of the FY18 budget is dependent on system wide support of these initiatives 14

15 IN CONCLUSION We are currently in a time in our industry that is on a rapid course of change. We have experienced significant pressure on our margins and the arrival of a new competitor in the Pacific Northwest is going to continue to make our work challenging. Our ability to successfully maneuver through this rapid change is dependent on fresh new approaches on how we do our work specifically those related to cost reductions, standardization and efficiencies. We can do this, but we all need to work together.

16 QUESTIONS?