A Bump in the Road

Good morning!

Before I give you an update on our budget, I want to take a moment to acknowledge the national holiday that will occur Monday.  That’s when we celebrate the life and legacy of a true American hero, Dr. Martin Luther King Jr. 

In keeping with the spirit of his life’s mission, yesterday we observed the second annual Pillars awards, which recognize the “service and inclusive excellence” of several of our own heroes in the UMMC community.  I also appreciate that many of our students, faculty and staff will be out Monday doing service work in the wider community.  Thank you all.

Switching gears, on Wednesday of this week I shared the news with deans, department heads and unit managers that we will be pursuing a budgetary course correction during the second half of our fiscal year, which will end June 30.

As we’ve monitored UMMC finances during the first two quarters, our expenses have grown faster than our revenues.  If this trend continues, we will finish the year with an operating loss, which is not acceptable.  To avoid that outcome, we are adjusting the financial plan for the remainder of the year.

I want to emphasize that this is not a repeat of the financial emergency of 2017, when we faced a $35 million shortfall due to cuts in Medicaid and state government payments deep in our budget year.  Our current situation is not dire, as it was then.  We are experiencing 4 percent revenue growth, despite patient capacity issues, but our expenses have grown by 6 percent.  We need to take action now to rebalance our revenues and expenses in a fiscally responsible manner.

As we make these adjustments, it is essential that bedside care and the patient experience are protected.  As is often said, we can’t cut our way to financial sustainability.  Revenue growth is our most vital long-term financial strategy.  There are areas where we have opportunities to generate additional revenue growth that are dependent on the completion of strategic initiatives currently underway.  (Along this line, I'm happy to share that two leases that will provide additional ambulatory capacity were approved yesterday at the IHL board meeting.)

A number of corrective measures have been identified and have been put in place at the enterprise level to decrease expenses.  It is also necessary for units in each mission area and the service area to reduce expenses for the remainder of the fiscal year.  The overall goal is a 3 percent reduction.

Managers have the discretion to make these adjustments using a variety of methods, with the exception of salary reductions, which will not be considered.  Decreases in staffing outside of ongoing performance management should be considered a last resort when savings cannot be achieved in any other way.

Areas where we will achieve much of the anticipated savings are:

• A managed hiring plan is now in place to ensure that any new or replacement hires are mission critical; that is, hiring will occur only when not filling a position would compromise patient care or jeopardize some other institutional imperative, such as accreditation.
  
  
• Overtime pay in nonclinical areas must be reduced as much as possible and should be no more than 50 percent of the annualized amount spent in the first five months of the year.
  
  
• All overnight and air travel – and particularly international travel – using institutional funds will be managed to achieve a 50 percent reduction in travel expense for the remainder of the fiscal year.
  
  
• Use of institutional funds to purchase food associated with meetings, events, recruitment or other activities should be similarly managed to the 50 percent target.
  
  
• Plans for new consulting contracts and non-revenue-producing projects should be carefully examined and postponed where possible.