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Hospital’s financial problems continue, officials tell Board

by Kristina Goodnough - January 28, 2008

The Health Center administration outlined its ongoing financial difficulties in a presentation to the Board of Trustees last week, advising members that the Health Center is running a deficit of $10.3 million for the first six months of the fiscal year.

The major driver of the current deficit is John Dempsey Hospital, according to Daniel Upton, the Health Center’s chief financial officer. Another problem is reduced federal grant spending, which reduces the amount of money recovered by the Health Center for costs related to facilities and administration.

Expenses also have increased, particularly related to hospital staffing.

The John Dempsey Hospital deficit grew from $5 million in November to $9 million at year’s end, according to Upton. Hospital financial difficulties stem, in part, from lower hospital admissions.

Declining visits to the UConn Medical Group had a negative impact on hospital admissions, since the medical group is the major source of referrals to the hospital.

Patient visits and admissions were affected by December’s snowstorms and mid-week holidays. In fact, the Connecticut Hospital Association reports lower admissions generally for the region’s hospitals.

Another factor is the recent change in the hospital’s patient caseload, with fewer Medicare cases, which have favorable reimbursement rates, and more Medicaid cases, which have unfavorable reimbursement rates.

Expenses related to staffing have also increased, Upton told board members, as the hospital maintains staffing levels appropriate to patient safety needs and regulatory requirements.

The hospital has been successful in reducing staffing costs related to the use of temporary agency nurses, but it has not experienced the expected decline in overtime costs because of the need to provide coverage while newly hired nurses, aides, and unit clerks complete mandatory orientation.

The research enterprise at the Health Center is running a deficit of about $2.8 million, largely because of the decline in spending on federal grants, which reduced the budgeted recovery of costs for facilities and administration by about $1.1 million.

Not all the news was negative, Upton told board members. Patient admissions rose in January, particularly in areas with good reimbursement rates. Surgery cases in the hospital have reached an all-time high.

“We should hit budget targets for admissions,” he said.

The Health Center has hired a consulting team, PriceWaterhouseCoopers, to help develop a turnaround plan for the board’s review.

“Clearly the current deficit doesn’t represent good news,” said Dr. Gerald Burrow, chairman of the Health Center’s Board of Directors.

“The Health Center continues to look for cost containment and revenue enhancement, but the big problem for John Dempsey Hospital is that it is a flawed model. With only 108 medical surgical beds, it’s impossible to be profitable at the current state of reimbursements.”

Burrow explained that the immediate fiscal challenge exists in a larger context.

Last year, the General Assembly recognized the need to address the structural problems by commissioning a study of UConn’s hospital, the needs of the medical and dental schools, and the potential impact of the public academic medical center on other hospitals and on economic development throughout the Hartford region.

This study, undertaken by the Connecticut Academy of Science and Engineering (CASE), is expected to be completed in March.

The CASE report and the hiring of PriceWaterhouseCoopers to identify revenue enhancements and cost containment strategies are important initiatives to help improve the Health Center’s financial situation, Burrow told the Board of Trustees.

In addition, discussions by President Hogan and other university administrators are underway with other hospitals in the region to work on mutually beneficial solutions.

Upton said updated financial information would be provided to the Board before its meeting in March.

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