University of Iowa hospitals report progress in overcoming deficit

Campus capitalizes on Mercy Iowa City cuts

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After ending the last budget year with an operating income nearly 50 percent under budget and starting the new budget year with a $7.2 million deficit, the University of Iowa Hospitals and Clinics is reporting two positive months and optimism of a bounceback.

An August in the black has reduced the UIHC deficit to $4.8 million — although UIHC operating income year-to-date remains $9 million under budget and nearly $13 million lower than the same point last year. September’s operating income also was positive, giving administrators confidence they’ll overcome the slow start, UIHC CEO Ken Kates told the Board of Regents on Thursday.

Iowa’s only academic medical center is facing the same “enormous” headwinds as others nationally — including challenges with payers exiting the insurance market, Medicaid Managed Care denials, and large spikes in drug and medical supply costs.

“The increases in reimbursement are not keeping pace with the cost increases,” Kates said.

UIHC is addressing the issues by cutting facility and staffing costs where possible. Total operating expenses are under budget by $1.2 million, thanks largely to a reduction in salaries and wages. Efforts to ensure lean staffing does not include folks who work with patients, like nurses, according to Doug True, interim UIHC associate vice president and chief financial officer.

Staffing nearly 800 inpatient beds, the campus in recent months has reported a stark nursing shortage, even as its daily census continues to soar — setting a record one-day record in October of 740 inpatients and coming in over budget and over last year in every volume indicator, from patient days to average daily census.

To address the nursing shortage, the hospital has held recruiting fairs and targeted employees who might have been cut during a recent round of layoffs at nearby Mercy Iowa City, which announced in September plans to cut 115 positions — including 65 layoffs and another 50 positions left vacant.

Hospital officials have said those cuts, which come amid ongoing financial struggles, include full- and part-time employees mostly in administrative and support positions.

“We specifically targeted Mercy Iowa City staff that might have lost their positions,” Kates said. “That’s a wonderful community hospital.”

Recent hires have cut the UIHC nursing vacancy rate from 13.6 percent in March to 9.9 percent, according to Kates.

To make up for the continued gap, however, UIHC has been relying on traveling nurses — who are paid at a premium. In June, the university reported a traveling nurse full-time equivalent of 216, up from nine in 2014. At that total, travelers account for about 8 percent of the more than 2,600 UIHC nurse total.

Traveling nurses are paid a starting hourly rate of $59 — meaning the university could spent more than $26 million a year if the 216 travelers work the standard 2,080 hours a year. Minimum starting salary for inpatient staff nurses, meanwhile, is $54,679 — not including additional premium pay and other differentials. That amounts to $26.29 an hours, based on 2,080 hours a year.

“While the agency nurses do a wonderful job, they’re a lot more costly,” Kates said. “We want our full-time staff.”

UIHC also is improving its collection percentage, and administrators on Thursday reported some improvement in payments yet to be received and the time it takes to receive payment. Its bad debt, however, reached an all-time high of $5.8 million in July and August.

Slated to take on these challenges is J. Brooks Jackson, who the Board of Regents on Wednesday agreed to hire to succeed Jean Robillard, who is stepping down from his leadership post as vice president for medical affairs at UIHC and dean of the Carver College of Medicine.

Jackson, coming from a similar academic health center at University of Minnesota, is scheduled to start Nov. 30. Earlier this year, UIHC hired a consultant to evaluate a potential partnership with a larger regional system, which analysts say could help the university reach clinical, research, and teaching goals.

A report from that consultant is due back by the end of the year.

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