University of Iowa Hospitals reporting deficit in new budget year

Processes underway to restore operating margin

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IOWA CITY — University of Iowa Hospitals and Clinics’ operating income for the 2017 budget year that ended June 30 was down nearly 50 percent from its budget and more than 72 percent from the previous year.

The hospital’s budget in July — the first month of the new fiscal year — follows a similar pattern, with its operating income showing a deficit of nearly $7.2 million, compared to a budget of $1 million in the positive and more than $3.8 million at the same point last year.

The university health care enterprise is not alone in its struggles — with a surge in academic medical centers like Iowa looking toward partnerships to address fiscal and environmental challenges across the health care landscape.

University of Iowa Hospitals and Clinics, likewise, has hired a consultant to evaluate a potential partnership with a larger regional system, which analysts say could help the university in its clinical, research and teaching endeavors. Cedar Rapids-based UnityPoint Health, in 2014, announced a partnership with the Mayo Clinic of Rochester, Minn., making it part of Mayo’s care network — which includes 27 other organizations.

University of Iowa Hospitals and Clinics has not identified potential partners, and administrators did not mention the prospect during their presentation to the Board of Regents on Wednesday.

They did, however, address the budget by identifying several challenges in the market, including more Medicaid Managed Care denials, state budget cuts and commercial payers exiting the insurance market.

Medicare reimbursement policies also are tightening, and new provider-owned health plans are offering narrower networks, affecting options available to prospective patients.

Jean Robillard, outgoing vice president for medical affairs of UI Health Care and dean of the Carver College of Medicine, urged the hospital must respond by lowering its cost structure “due to the declining payer reimbursements, the need for transparency and increased consumerism.”

The enterprise additionally must become more nimble and pursue a service experience that meets patients’ shifting expectations.

Several processes are underway to restore the UIHC operating margin, according to CEO Ken Kates. They include expense reduction initiatives, lowering full-time equivalent staffing, deferring capital projects where possible, investigating revenue enhancement initiatives and improving the hospital’s collection percentage.

Robillard said staff reductions will not affect patient care.

“We are reducing the number of people by attrition mainly, and mainly in non-patient care areas like administration,” he said. “We are trying to flatten the organization and make sure we can deliver the same service, but without all the people.”

Deferred capital projects also will not affect patient care, and Robillard stressed the build-out at its popular Iowa River Landing clinic in Coralville will continue as planned.

Financial numbers for August show marked improvement over July, according to Robillard, who expressed confidence the enterprise will bounce back after slow start to the new year.

“I believe we will recoup probably all that in August and be back in the black completely, if not in August, in September,” he said.

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