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The Health Systems Road to Recovery
Improving financial performance and preserving medical excellence. By Judith Rodin
Health care institutions across America
are encountering financial difficulties, and many academic medical centers,
in particular, are in financial distress. Cutbacks in government funding,
slow payments or claims denials by health insurance carriers, escalating
numbers of indigent patients, and other regional and national factors
have placed unprecedented pressures on teaching hospitals and academic
Detroit Medical Center lost $106 million in 1998, and another $93.2 million in the first seven months of 1999. DMC has eliminated 2,000 jobs and closed one hospital so far this year.
University of California at San Francisco/Stanford lost $86 million in FY98. In FY99 it eliminated 2,000 positions, or 15 percent of its workforce, before announcing that the health system partnership between UCSF and Stanford would be dissolved.
CareGroup Inc., which operates Beth Israel Deaconess Medical Center and New England Baptist Hospital in Boston, lost $100 million for the fiscal year that ended September 30.
Three major causes are contributing to this situation: 1) the Balanced
Budget Act of 1997, which severely reduced Medicare payments that historically
have been a vital source of revenue for academic medical centers; 2) reduced
reimbursements, increasing denials and extraordinarily long payment delays
by insurers; and 3) for UPHS, in particular, the increasingly heavy burden,
due to reductions in state assistance, of providing uncompensated care
for indigent patients. (UPHS provided $66 million in uncompensated care
and $40 million in under-compensated care in FY99.)
A workforce reduction of approximately 1,700 positions before the end of June 2000. The combination of this reduction and an earlier layoff in May 1999 will reduce the total number of health services positions at UPHS by approximately 20 percent and will save $40 million in FY00 alone.
Restructuring and consolidation of work processes in hospitals and physician practices to streamline flow and eliminate duplicative functions.
Development of a consolidated and standardized approach to purchasing equipment, supplies and services that will maximize UPHSs high-volume purchasing power.
In addition, UPHS is actively meeting with federal officials to seek Balanced
Budget Act relief, working with state officials to earmark a portion of
the multi-billion-dollar tobacco settlement to support research and indigent
care, and negotiating with HMOs to improve rates and payment schedules.