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Meeting Information

HEALTH AFFAIRS COMMITTEE

Thursday, April 13, 2000

4:00 - 7:00 p.m.

Lower West Oval Room, The Rotunda

AGENDA

I. REPORTS BY THE VICE PRESIDENT AND PROVOST FOR THE HEALTH SYSTEM (Dr. Cantrell)

A. Medical Center Financial Report (as of February 29, 2000) (Mr. Sandridge to introduce Mr. Fitzgerald; Mr. Larry Fitzgerald to report)

B. Health System Performance Improvement Initiative (Mr. Sandridge to introduce Mr. Carter; Mr. William E. Carter to report)

C. Remarks by the Vice President and Provost for the Health System
II. EXECUTIVE SESSION

  • Discussion of proprietary, business-related information pertaining to, and consideration of matters relating to, a provider servers contract for clinical services to be performed by the University of Virginia Medical Center, where disclosure would adversely affect the competitive position of the Medical Center, consultation with legal counsel concerning federal regulations governing clinic billing practices, and discussion of appointment and assignment of specific administrative employees of the Medical Center, as provided for in Sections 2.1-344(A) (1), (7), (8) and (23) of the Code of Virginia.



I.A. University of Virginia Medical Center Financial Report as of February 29, 2000

ACTION REQUIRED: None

BACKGROUND: The Medical Center prepares a financial report and reviews it with the Executive Vice President and Chief Operating Officer before submitting the report to the Health Affairs Committee of the Board of Visitors. The Health Services Foundation (HSF) prepares and presents financial statements to the Vice President and Provost for the Health System.

DISCUSSION: Admissions for the Medical Center for Fiscal Year 2000 are below budget by 1.9% and below Fiscal Year 1999 by 2.9%. Since admissions are down, we completed a comparison of our market share for the Medical Center for calendar year 1995 to 1999, and have concluded that overall market share is flat to slightly increased. Some services such as Heart, Neurosciences, and Psychiatry have gained significant market share while others such as Obstetrics, Newborns, Children's Medical Center, and Surgery have declined. The length of stay for the Medical Center for Fiscal Year 2000 has dropped to 5.3 days - 12% below the length of stay for Fiscal Year 1998. This positive trend contributes to our efforts to lower costs.

Net operating revenue for Fiscal Year 2000 is 0.76% above net operating revenue for Fiscal Year 1999 and 1.2% above the Fiscal Year 2000 budget. The Balanced Budget Refinement Act of 1999 restored a portion of the Medicare funding reductions that had been made by the Balanced Budget Act of 1997. As a result of this Act, the Medical Center will realize $2 million of additional (non-budgeted) net revenue in Fiscal Year 2000. The February year-to-date financial statements reflect $1,110,000 additional net revenue from the Refinement Act. Each month through June 2000 the financial statement will reflect $222,000 of additional net revenue. The major item adjusted by the Refinement Act was indirect medical education payments.

Total operating expenses for Fiscal Year 2000 are $.35 million above budget but $4.8 million below Fiscal Year 1999. This is primarily the result of salaries/benefits, supplies and bad debt being below budget and below Fiscal Year 1999. The number of full-time equivalent employees (FTEs) is 159 below budget and 155 below prior year, in part because of the difficulty in hiring nurses.

After eight months of Fiscal Year 2000, the operating margin is 3.8%. We anticipate ending Fiscal Year 2000 with an operating margin of 4%. We also anticipate that expenses will increase in the next four months because of employee raises that were made in January 2000.

Accounting Policy

Each year the Medical Center prepares a Cost Report to determine the final payment by the Medicaid program. The Cost Report is prepared, filed, and audited after the year for which it applies. Historically, the Medical Center has recorded as net revenue the lump sum final settlement from the Medicaid Cost Report when it is received, generally two years after the year for which it applies. In June 1999, the Medical Center recorded $2.7 million as net revenue as the final settlement of the 1997 Medicaid Cost Report.

The practice historically followed by the Medical Center is in accordance with Generally Accepted Accounting Procedures (GAAP); however, it was a very conservative application of GAAP.

In June 2000, the Medical Center will receive approximately $5.6 million as a final settlement of the 1998 Medicaid Cost Report. We will record additional net revenue of $4.0 million from this anticipated settlement spread evenly over seven months starting December 1999. We will also restate the monthly financial statements for Fiscal Year 1999 as if this accounting practice had been followed in Fiscal Year 1999. This new accounting practice will not change the annual results for Fiscal Year 1999 or Fiscal Year 2000; however, it will change the historical pattern of recording a large increase to net revenue in the final month of the fiscal year.

I.B. Health System Performance Improvement Initiative

ACTION REQUIRED: None

BACKGROUND: In January, the Health System, with the assistance of the health care consulting division of the Computer Science Corporation (CSC), began the second phase of its Performance Improvement project. Phase one, which ran from July to November 1999, involved an assessment by CSC of the cost reduction and revenue enhancement opportunities that exist within the Health System. The analysis covered the institution's clinical operations and administrative support areas, as well as its revenue cycle and supply chain. CSC's findings were outlined to the Board of Visitors during executive session at the November 17,1999 Health Affairs committee meeting. The current phase will focus on translating the financial estimates in the CSC assessment into concrete, implementable projects.

DISCUSSION: Over the last three months, the Health System established the infrastructure necessary to evaluate the appropriateness of many of its programs and the efficiency of its operations. Discussion will focus on outlining the first wave of areas to be reviewed through this process and the work teams assigned to carry out these assessments. Reports from a newly installed (and CSC-developed) project management/tracking system also will be described.

I.C. Remarks by the Vice President and Provost for the Health System

ACTION REQUIRED: None

DISCUSSION: The Vice President and Provost for the Health System will utilize this portion of the Health Affairs Committee meeting to inform the Board of Visitors of recent events which do not require formal action, but of which they should be made aware.

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