stanford medicine: a financial management perspective stanford staff leadership & development...
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Stanford Medicine:
A Financial Management Perspective
Stanford Staff Leadership & Development Program
Tina Darmohray
Osman Akhtar
May 6, 2009
Page 2
Financial Management PerspectiveAgenda
Framework: Organization Chart And Funds Flow
Data: Stanford Medicine Resources and External Benchmarks
School of Medicine (SoM) Financial Idiosyncrasies
Health Care Trends Future State and Implications
Page 3
Framework:Organization Chart
Stanford University Medical Center Executive Committee
(1) Reports jointly to President and Provost
LUCILE PACKARD CHILDRENS HOSPITALSTANFORD HOSPITAL AND CLINICS
President and CEO
STANFORD UNIVERSITYPresident
STANFORD UNIVERSITYProvost
STANFORD UNIVERSITY AND STANFORD UNIVERSITY MEDICAL CENTER
Board of Directors
STANFORD HOSPITAL AND CLINICSDean (1)
Board of Directors
LUCILE PACKARD CHILDRENS HOSPITALPresident and CEO
STANFORD SCHOOL OF MEDICINE
Board of TrusteesSTANFORD UNIVERSITY
Page 4
Framework:Funds Flow (A Formula School)
• Formula Schools– School of Medicine
– Graduate School of Business
– Hoover Institute
• Non-Formula Schools– Humanities & Sciences
– Law
– Engineering
– Earth Sciences
– Education
• Responsible for financial self-sufficiency
• Tax on all revenues to pay for university services– Police, fire, grounds– Central administration– President/Provost
• FY 2008 tax rates– Tuition
• Graduate Tuition-11.04%• Undergraduate Tuition- 21.83%
– Research 6.24%– Designated 4.32%– Gifts 9.05%
• University allocation for undergraduate teaching
Page 5
Data: Sources of SoM RevenueFY 2001 – FY 2006
Sources of Revenue(LCME Annual Questionnaire)
(FY 2007 Data Not Accumulated)
(200,000)
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006
$ in Thousands
Tuition and Fees State Appropriation UniversityGrants and Contracts (direct) Indirect Cost Recoveries Practice PlansGifts and Endowments Hospitals Other Revenues
Page 6
Data: Our SoM Resources vs. Benchmarks
Page 7
Data: Hospital Finances
Highlights from the 2008 Annual Report:• LPCH and SHC operating surplus of $147M down 8% from
2007• As of 8.31.08, net assets of $2.2B vs. $2.0B in 2007• SHC Patient revenues increased by 8%, other income
increased by 5%, and expenses increased by 11%• SHC financial position reflects continued investments in
facilities and infrastructure.• LPCH generated $42M from operations an increase of $21M
from 2007, while volume remained flat due to better payor mix, rate increases, and revenue cycle enhancements.
• LPCH financial position reflects volume limited by capacity with plans on increasing beds and satellite operations.
Page 8
SoM Financial Idiosyncrasies
• Fungibility• Perceived ownership of funds• Faculty: how are they promoted, setting policy
and the tenure decision• Cost control incentives or spend it all incentives?• Pressure to cover your salary• Market competition for clinical faculty• What is the legacy of a Dean or Chair or etc?• The cost of accepting a gift • Etc., Etc., and Etc.
And Health Care Spending Rises: What we can expect without other significant accelerators
By 2016, national health expenditures will more than double to $4.1T
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
E
2007
E
2008
E
2009
E
2010
E
2011
E
2012
E
2013
E
2014
E
2015
E
2016
E
Public Private Out-of-Pocket
Source: CMS, Booz Allen
Tot
al E
xpen
ditu
res
($ in
bil
lion
s)
ACTUAL
PROJECTED
2016 Spend:
Private: $1.7B
Public: $2.0B
Out of Pocket: $0.4B
2016 Spend:
Private: $1.7B
Public: $2.0B
Out of Pocket: $0.4B
9
10 ©2008 Aetna
Physicians per 100,000 people (2005)
0
50
100
150
200
1965 1970 1975 1980 1985 1992 2000
Physician supply growth has been solely in specialty medicine
Generalists
Specialists
Total
Source: American Medical Association, Association of American Medical Colleges, Council on Graduate Medical Education
11 ©2008 Aetna
1995
1990
No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30%
2005
Source: Behavioral Risk Factor Surveillance system, CDC.
Obesity trends among U.S. adults
Overall quality ranking
1
11
21
31
41
51
3,000 4,000 5,000 6,000 7,000 8,000
Annual Medicare spending per beneficiary (dollars)Baicker and Chandra, “Medicare Spending, The Physician Workforce, And Beneficiaries’ Quality of Care,” Health Affairs Web Exclusive, April 7, 2004
NH
HI
VTME
UT IAND
WI
LATX
CANU
ORMN
MT
COCT
VAWA
SD
MA
RI
NEDE
ID NC WY NYMDMIMO
PA
INAZ KS
SC AKWV NVNM
OH TNKY AL
OKILGAAR MS
FL
No relation between spending and quality: The Dartmouth atlas
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Future State and Implications
Clinical
● Squeeze on Margins
● Cost vs. Quality
● Consumer Savvy: more “skin in the game”
● Less invasive and lower inpatient days
● www.hospitalcompare.hhs.gov
Education
● Shortage of Primary Care Physicians
● Gear Up to Teach Primary Care Physicians
● How to Incent
● How to manage chronic disease
Research
● Increase Demand for Cost Effectiveness Studies
● Translating research to clinical treatment
● Chronic disease require interdisciplinary approach (engineering, medicine, ethics and etc.