Committee Members:

Charles M. Caravati, Jr., Chair
Terence P. Ross
William G. Crutchfield, Jr.
Albert H. Small
William H. Goodwin, Jr.
Joseph E. Wolfe
T. Keister Greer
John P. Ackerly, III, Ex Officio

AGENDA

A. Medical Center Financial Report (as of February 28, 1999)
(Dr. Cantrell to introduce Mr. Carter; Mr. William E. Carter to report)

B. Vice President's Remarks

II. EXECUTIVE SESSION

Discussion of proprietary, business related information of the Medical Center in connection with its proposed and existing joint ventures, and the investing of public funds where competition or bargaining is involved, when if made public initially the financial interests of the University would be adversely affected, as provided for in Section 2.1-344 (A)(6) and (24) of the Code of Virginia.

I. A. University of Virginia Medical Center Financial Report as of February 28, 1999

BACKGROUND: The Medical Center prepares a quarterly financial report and reviews it with the Executive Vice President and Chief Financial Officer before submitting the report to the Health Affairs Committee of the Board of Visitors. Due to the scheduling of the March Board of Visitors meeting, the Medical Center financial report includes year-to-date information through February. The Health Services Foundation (HSF) prepares and presents financial statements to the HSF Board and to the Vice President and Provost for Health Sciences.

DISCUSSION: At the end of the first 8 months, gross inpatient revenue was 3.6 percent less than budget and gross outpatient revenue was 7.1 percent less than budget. The Medical Center has experienced a decrease in indigent care charges ($8.8 million less than budget year-to-date) that offsets an increase in bad debt ($1.6 million greater than budget year-to-date). In addition, the Medical Center is experiencing better than expected contractual adjustments resulting in an $8.1 million favorable comparison to budget. These activities, in combination with miscellaneous revenue being $0.3 million lower than budget, result in total operating revenue being $1.8 million lower or six-tenths of a percent lower than budget.

Expenses are $11.5 million higher than budget through February primarily because of the cost in the category of Medical Supplies and Pharmaceuticals, which represent $7.6 million of the variance from budget. Purchased Services & Other expenses represent another $2.9 million of the variance. Salaries & Fringe Benefits have increased to be $0.8 million over budget and Bad Debt is $1.6 million greater than budget. Favorable Medical Center Contracts and Depreciation & Amortization partially offset these unfavorable variances. The resulting operating margin is 1.1% of net operating revenue and $13.3 million less than budgeted.

In general, the financial position at the end of the first 8 months is less than optimal. Lower than budgeted gross inpatient and outpatient revenues have been experienced despite higher than budgeted admissions. Although this is offset by favorable indigent and contractual adjustments, the higher admissions contribute to expenses being higher than budget. The resulting operating margin positions the Medical Center poorly for the remainder of the year as it faces increased costs and decreased reimbursements.

The commitment to achieving an acceptable operating margin as a percentage of net operating revenue holds firm, albeit very challenging given the financial results for the first 8 months. In response to this situation, the Vice President and Provost for Health Sciences and the entire staff of the Medical Center continue to work toward ensuring aggressive medical management, cost containment, and process improvement with an emphasis on both quality patient care and lower cost.

REQUIRED ACTION: None.

I.B. Vice President's Remarks

The Vice President and Provost for Health Sciences 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.