Health System's cost reduction plan in motion

By Rebecca Arrington

The Board of Visitors' Health Affairs Committee met Jan. 11 and heard reports on the Health System's cost-reduction progress and the Medical Center's finances.

Leonard W. Sandridge, executive vice president and chief operating officer, assured board members that the groundwork was being laid to reduce costs and improve revenue long-term, but told them not to expect great strides immediately.

Four in-house Health System committees began work this month, following recommendations made by Computer Sciences Corporation, the management consulting firm hired by the Health System last year to assist in the cost-reduction project. The committees will focus on expenses associated with administration and operating room supplies and operations. Ways for the Health System to enhance operating revenue will also receive attention, Sandridge said.

Computer Sciences Corporation, which has been retained through March, projects that the Health System's performance improvement efforts will yield a "financial opportunity" in savings and net cash collection between $13.9 million and $34.3 million.

The Health System management's own efforts to cut costs and improve revenue were successful during the second quarter of the current fiscal year, Sandridge reported.

Larry Fitzgerald, associate vice president for Health System finance, told the board that the Medical Center's operating margin is 4 percent. He also reported that patient admissions for the Medical Center are 1.4 percent below budget. As a result, the center conducted a market-share comparison study, by service, of U.Va. and other hospitals in Virginia from 1995 to 1999, and concluded that overall market share is flat to slightly increased, he said. Some U.Va. services, such as coronary care and neurosciences, have gained significant market share, while others -- obstetrics, neonatal specialties, the Children's Medical Center and surgical services -- have declined.

Fitzgerald also told the board that the length of stay for Medical Center patients has dropped to 5.2 days, 13.3 percent below the average length of stay last year. "This positive trend contributes to our efforts to lower costs," he said.

Total operating expenses to date in fiscal year 2000 are $185.9 million -- $1.5 million below budget and $6.5 million below fiscal year 1999.

The board also heard that the Integrated Healthcare Information Management System project is proceeding as planned. All hardware and software components are operating and technical support staff has been trained. Currently, the software is being tailored to fit the University's environment, which will take several months, after which the new system will be tested before "going live" in April 2001.