Hospital's fiscal health may be illusory

By Dan Heuchert

If the U.Va. Medical Center were a patient, its chart might say, "Outwardly healthy, but exhibits a number of risk factors. Monitor closely."

That was the impression given July 14, when the University Board of Visitors' Health Affairs Committee met in Richmond.

Larry Fitzgerald, the U.Va. Health System's chief financial officer, told the committee that reaching a 4.2 percent operating margin for the fiscal year that ended June 30 looks probable. He estimates that puts U.Va. in the top 10 percent of academic medical centers nationwide.

"It's outstanding, quite frankly," he said. However, that success may be somewhat illusory. Overall patient volume was mostly flat compared to a year ago, and three one-time revenue gains that had not been anticipated in preparing the budget accounted for nearly $13 million -- or roughly the same amount as the margin of revenues over expenses, he reported.

The payments involved Congressional restoration of some 1997 Medicare funding cuts, as well as changes in how Medicaid payments were made, Fitzgerald reported.

As a future revenue source, the board is pursuing legislation to allow the Medical Center to keep the interest earned on operating fund balances, which is currently turned over to the state treasury. The Medical College of Virginia already has similar authority. U.S. Rep. Thomas Bliley, a board member, promised that he would write to the governor's office in support of the proposal.

Of great concern to hospital officials and committee members is a shortage of nurses and other health professionals, including pharmacists, lab technicians and physical therapists. Overall turnover approaches 23 percent annually, compared to a national average of about 15 percent. Currently, 100 of 1,300 registered nurse positions at the Medical Center are vacant, plus 46 positions in allied health and 62 patient care assistants.

Staffing shortages have led to the closure of 24 beds, six in intensive care units and 18 in acute care units, according to figures supplied to the board.

"Despite our challenges, we do not feel we are compromising patient care," said ICU nurse Donna Markey, president of U.Va.'s professional nursing staff.

U.Va.'s nursing salaries appear to be reasonable, said Ronald Bouchard, chief administrative officer. A bigger factor seems to be the volume and intensity of the workload, he and Markey agreed.

Markey noted that as more nurses depart and fewer are hired to take their places, the demand on the remaining nurses increases. Many are working mandatory overtime, which can be a major drag on a workforce with an average age that is climbing into the mid-40s -- higher in some specialties.

Nationally, nursing school enrollment is declining, and more nurses are looking to practice their professions outside of hospital settings, in part to maintain a better balance between their personal and professional lives, Markey noted.

Under questioning from board members, Markey agreed that the "organizational culture" at U.Va. -- especially collegiality between nurses and doctors and among nurses and their supervisors -- was a factor in the shortages.

The Medical Center has stepped up recruitment efforts, with more multi-media advertising, direct mail and job fairs at colleges and high schools -- and in areas where nurses have been laid off, Bouchard said. The University is offering sign-on bonuses, and has begun to search for recruits internationally, he said.

In the short-term, the Medical Center is seeking to retain its workforce through salary adjustments, more flexible scheduling, the hiring of an employee ombudsperson, and conducting exit interviews. Long-term, it needs to look at redesigning processes and improving the quality of work life, Bouchard said.

"I don't know necessarily that there's a magic bullet,² he said.

Med School has big plans

Medical School dean Dr. Robert M. Carey presented the school's strategic plan, with a particular eye toward increasing research efforts.

The plan outlines 10 areas of particular focus, chief among them cancer, cardiovascular disease and neuroscience, and Carey said that he would seek $300 million in new investment over the next five years to support those efforts. The funds, he said, would come from roughly doubling the school's annual fund-raising to $60 million annually.

"It's a stretch goal for us, but I think it's reasonable. ... There is tremendous untapped capacity," he said later.

Each private dollar invested could yield as much as $10 in research grants, Carey said. Eventually, research findings can spin off revenue-producing enterprises as well, he noted.

Central to the strategic plan is the construction of another research building, currently dubbed "MR-6." (MR-5 is under construction.) The building has an estimated price tag of $50 million, half of which Carey hopes can be raised privately, with the balance to come from the state.

Some board members questioned Richmond's willingness to directly fund capital projects.

"It depends on the state's revenue position going in" to the General Assembly session, said President John T. Casteen III. Legislators generally pay for such projects out of surplus funds, he said.

Debt financing may not be out of the question, he added. "There's always the possibility that this is the year for a general obligation bond bill."