After years in the black, the University of Connecticut Health Center is suddenly staring at a $23.7 million shortfall.
Hospital officials are already working to avoid a similar fate for the current fiscal year but point to the deficit for the fiscal year that ended June 30 as support for their request to significantly expand the four-decade old Farmington facility.
The crux of the problem for the health center is that the net revenue per adjusted discharge — simply, how much the hospital receives per patient — is falling precipitously. That means that net revenue is dropping even as the number of patients increases.
For a hospital, growing revenue is not about attracting more patients but maximizing efficiency, said Daniel Upton, the UConn Health Center’s chief financial officer.
“It is difficult because we’ve seen the number of patients continue to increase, and it has been for the past five years,” said Upton. “One of the issues has been a shift to a higher percentage of patients that use Medicaid.”
Reimbursement Problems
In the past fiscal year, 22 percent of all hospital patients and 56 percent of dental patients used Medicaid. UConn doctors accept Medicaid patients and the numbers have been trending upwards as other hospitals and doctors decline to do so because low rates that government pays for Medicaid procedures. For every dollar of actual costs, only 67 cents is reimbursed through Medicaid and that accounted for $10.4 million of the Health Center’s loss.
The Health Center is made up of both the teaching school and John Dempsey Hospital. Dempsey is far from the only hospital in the state facing negative margins, said Leslie Gianelli, director of public affairs for the Connecticut Hospital Association.
“There were six other hospitals in the state that ended 2006 operating in the negative,” she said. “We’re hoping that with legislative progress and the Governor’s task force that we’re going to improve the financial status for hospitals.”
Those six were the Hospital of St. Raphael in New Haven, Waterbury Hospital, New Milford Hospital, Stafford Springs’ Johnson Memorial Hospital, the Connecticut Children’s Medical Center and Bristol Hospital.
The Hospital Strategic Task Force, formed in April, has been looking at short- and long-term solutions to Medicaid inequities, specifically the state’s funding of Medicaid reimbursements.
In 2005, the cost to state hospitals for Medicaid care was $848 million while the reimbursement from the state came in at $606 million, or a loss of $242 million for the hospitals. Data for 2006 has not yet been released by the Office of Healthcare Access.
“The first step is an infusion of Medicaid funding from the state legislature,” said Gianelli.
The revenue problem certainly is not caused by the number of patients, as Dempsey has seen admissions increase from 6,900 in 2001 to 10,800 last year. Similarly, outpatient numbers have doubled from 140,000 to 280,000 in the same time frame.
“One thing to note about those figures is that it’s not like we’re stealing patients from other hospitals,” said Upton. “Hospital volume is up for everybody and, at this point, we’re basically running at capacity continuously.”
The health center is also hampered by benefits that are more costly than at other hospitals by virtue of being a state-funded facility.
Paring Expenses
Two ways in which Upton said the health center is trying to combat rising costs are the renegotiation of contracts with third-party insurers and a different approach to recruiting physicians.
To that second initiative, the Health Center is actively seeking more surgeons and surgical services because they provide a higher return per patient.
“It’s something we have to look at and there is a need for it,” said Upton. “Surgical services bring back more revenue for the hospital and we’re making efforts to improve in that area.”
The nature of the health care business can also stunt financial growth. Case in point, the Health Center has seen a shift from cardiology patients, which are reimbursed at higher rates, to general medicine and obstetrics patient cases that are “less well-reimbursed.” There is no way for the hospital to steer patients who need obstetric care to cardiology to boost revenue.
The UConn Health Center is further hamstrung financially by the obvious fact that it acts as a medical school and there are going to be losses attributed to educating students.
