university of washington · • improvements to the revenue cycle at uwmc and harborview medical...
TRANSCRIPT
OFFICIAL MINUTES Approved at the meeting of the Board on June 8, 2017.
MINUTES
UNIVERSITY OF WASHINGTON BOARD OF REGENTS
Wednesday, May 10, 2017
Gerberding Hall, Room 142 CALL TO ORDER Board Chair Regent Shanahan called the meeting to order at 5:30 p.m. Regent Shanahan said this meeting was the third in the new format of holding regular meetings on Wednesday evenings to dive more deeply into various topics and aspects of the University. At this meeting the Board will hear more about the fiscal year 2018 operating budget, with a focus on UW Medicine and Research. There is time allowed time for questions and discussion. ROLL CALL The Secretary of the Board recorded the roll. Regents present: Regents Shanahan (Chair), Ayer, Benoliel, Blake, Harrell, Jaech, Rice, Riojas, Simon, and Wright-Pettibone. Others present at the table: President Cauce, Provost Baldasty, Treasurer Scott, Faculty Senate Chair Barsness, and UWAA President Walker. CONFIRM AGENDA Regent Shanahan confirmed the agenda. PUBLIC COMMENT PERIOD The opportunity for public comment was provided to those who signed up at the meeting before the start of the meeting. No one signed up for public comment. BOARD ITEM Preliminary FY18 Operating Budget – UW Medicine and Research (Agenda no. B–1) (Information only) Sarah Hall, Associate Vice Provost, Office of Planning & Budgeting, provided an overview of the budget process. Once the legislature, currently in special session, approves the state budget, the Regents will approve the UW’s FY 2018 operating budget, likely at its meeting in July. Dr. Paul Ramsey, CEO, UW Medicine, Executive Vice President for Medical Affairs and Dean of the School of Medicine, and Jacqueline Cabe, Chief Financial Officer, UW Medicine, provided information about UW Medicine’s budget, which supports teaching, research, and the clinical system. Their presentation focused on the clinical budget. The projected slides are attached to the minutes.
BOARD OF REGENTS 2 May 10, 2017
Dr. Ramsey said his focus will continue to be on patient safety and quality of care and he will provide more financial updates to the Regents. Regent Blake reported the UW Medicine Finance Committee meets monthly and monitors the budget closely and diligently. Regents acknowledged the rapidly changing environment for health care delivery and encouraged continuous strategic planning, budget review, and quality improvement as well as more opportunities for the Board to engage with UW Medicine. Mary Lidstrom, Vice Provost for Research, reported on research at the University, saying it is integral to the education delivered by the UW. She cited challenges:
1) Federal funding; 2) Indirect (F&A) costs are under scrutiny, and the challenge of educating legislators about
this issue; 3) A proposal by NIH to cap research grants to individual PIs.
She projects federal research grants to the UW to be flat and competitive. She reported a trend at the UW to receive a higher percentage of non-federal funding. Although none is projected, she said the UW has the flexibility to respond to a large decrease in federal funding, as 25% of the UW’s research facilities are leased and offers to graduate students each year are dependent on research funding. The UW is modeling other ways to decrease central services and has created a small bridge program to offer funding to current graduate students whose research funding has been cut. See Attachment B–1 ADJOURN The Board will hold its next regular meeting on Thursday, May 11, 2017, in the Husky Union Building, UW Seattle. Committees begin at 8:30 a.m. Regent Shanahan adjourned the meeting at 7:20 p.m.
______________________________ Joan Goldblatt Secretary of the Board of Regents
Approved at the meeting of the Board on June 8, 2017.
B–1 BOARD OF REGENTS MEETING
B–1/205-17 5/10/17
Preliminary FY18 Operating Budget – UW Medicine and Research INFORMATION: This item is for information only. BACKGROUND This information item provides the Regents with the opportunity for more substantive updates and discussion on two significant components of the preliminary FY18 operating budget – UW Medicine and research. This “deeper dive” discussion is in response to regent request after the FY17 budget presentation. A discussion on the entire FY18 operating budget proposal, including tuition rates, will follow in the regular board meeting on Thursday. The attachments include the UW Medicine and Research sections of budget for ease of reference. This information is identical to information provided in the full budget item. UW Medicine and the Office of Research will provide a detailed overview of this information, along with any additional contextual information that might impact the final budget or anticipated financial performance for FY18. A significant portion of time is allocated to respond to comments or questions from the Board. Attachments
1. UW Medicine Preliminary FY18 Operating Budget 2. Strength of Ideas: Research Enterprise Preliminary FY18 Operating
Budget
Preliminaru FY'IS Oueralinu BudL]
UW MEDICINE
The FY18 budget for UW Medicine is currently in development. The starting point for determining targeted
margins is the long range plan coupled with current year performance. FY17 has been a financially
challenging year across the enterprise, but most notably for UW Medical Center (UWMC) and Northwest
Hospital & Medical Center (NWH). The negative financial performance in 2017 is primarily due to lower
realization of revenue due to payer mix degradation, higher than expected labor costs and, in certain of our
entities, lower than anticipated volumes. Concentrated efforts are underway to reduce expenses across all
eight UW Medicine entities and increase revenue moving into the next fiscal year.
Preliminary financial results for FY17, through February 2017, are included for information in Table 11.
Table 11: Preliminary
uwMedicine
Entity6
HMCUWMCNWH
VMCSUBTOTAL
UWNC
ALNWUWP**
SoM
TOTAL
FY17 financial results as of February, 2017, by UW
Month
Actual
(6,129) [
(9,731) |
(3,871) |
(2,952) |
(22,683) |
(898)(788) |
(264) [
(24,633) |
Margin %
-8%
-11%
-14%
-7%
-10%
-25%
-25%
0%
0%
-6%
Budget
(3,049)
(2,905)
1,638
93
(4,223)
(187)(321)
(2,195)
(6,926)
VarianceTo Budget
(3,080)
(6,826)
(5,509)
(3,045)
(18,460)
(711)(467)
1,931
(17,707)
Prior YrActual
(2,777)
(5,089)
(307)2,232
(5,941)
(57)79
(4,106)
(10,025)
k/ledicine Entity (in $l,OOOs)
YTD
Actual
2,818
(34,054)
(16,849)
(2,364)
(50,449)
(4,344)
2,252
1,189
(51,352) |
Margin %
0%
-4%
-7%
-1%
-2%
-14%
7%
0%
0%
-2%
Budget
776
1,495
(606)9,176
10,841
(2,504)
1,874
(18,266)
(8,055)
Variance
To Budget
2,042
(35,549)
(16,243)
(11,540)
(61,290)
(1,840)
378
19,455
(43,297)
Prior YrActual
(1,565)
(21,958)
(1,332)
10,595
(14,260)
(3,238)
3,375
(9,096)
(23,219)
**Results for UWP are shown after amounts available to the School of Medicine.
The work being done to improve financial performance includes the following:
• Management of staffing mix and schedules within patient care services to ensure most efficient use
of staffing resources. Expense reductions in all other areas in preparation for the FY18 budget,
including elimination of open positions and review of all non-labor costs
• Improvements to the revenue cycle at UWMC and Harborview Medical Center (HMC) to improve
revenue realization
• Enhancement of contract pricing and reduction of utilization through focused supply chain projects
• Care Transformation work, which is a partnership between our physicians and operational
leadership to identify ways to standardize and streamline care based on evidence based practice.
The production of this budget item requires that UW Medicine provide early projections of revenue, by
entity, for the Board of Regents to adopt with all other University revenues. After the annual budget item is
6 Each entity's name is spelled out in full in the Acronym Glossary on page 41.
34
ATTACHMENT 1B–1.1/205-17 5/10/17
Page 1 of 2
arij F/18 OL'eidl.inij Budc]yi.
adopted, leadership from UW Medicine provide a separate annual report to the Regents on the financial
performance of UW Medicine every January or February.
Each UW Medicine entity is developing FY18 budgets to meet their targeted margin goals to present to the
individual board committees of UW Medicine entities throughout the month of May, with final review at the
UW Medicine Board meeting in June, 2017.
The environment in the health care industry nationwide is experiencing significant payment pressure.
Payment rates are continuing to decline, which further highlights the need for expense reduction. This trend
is challenging as labor represents the most significant portion of UW Medicine expense and it is anticipated
that salaries and benefits will rise in FY18. Concurrently, drug inflation is projected to run near 8% in the
next fiscal year. UW Medicine continues to be focused on expense reductions and strategies for providing
care more efficiently without sacrificing quality, patient safety or experience.
Additionally, the Seattle market is facing a significant new competitor in the market with Kaiser's acquisition
of Group Health. This new entrant as well as the competitive threat from Providence St. Joseph Health
makes it imperative that we continue to provide high quality care in the most efficient manner possible
while improving access and the patient experience.
Preliminary projected revenues and margins for the R^17 and FY18 budget are as follows in Table 12:
Table 12: UW Medicine Budgets and Operating Margin Estimates (excluding the uw School of Medicine)
UW Medicine
UW Medical Center
Harborview Medical Center
Valley Medical Center
Northwest Hospital
UW Physicians*
Airlift NW
UW Neighborhood Clinics
UW Medicine
(excluding School of Medicine)**
FY17UW Regents
Adopted
1,160,000,000
950,000,000
568,000,000
392,000,000
304,000,000
48,000,000
49,000,000
3,471,000,000
FY17Subsequently
AdoptedRevenues
1,167,000,000
944,000,000
602,000,000
401,000,000
302,000,000
49,000,000
51,600,000
3,516,600,000
FY18Projected
Revenues
1,224,000,000
965,000,000
603,000,000
366,000,000
350,000,000
56,000,000
50,000,000
3,614,000,000
FY18Target
Margins
32,000,000
9,600,000
0
(3,700,000)
0
2,200,000
0
40,100,000
FY18Target
Operating
Margin
2.6%
1.0%
0.0%
-1.0%
0.0%
3.9%
0.0%
1.1%
* Note that UW Physicians targets a zero margin as cash generated from UWP is intended for use by the clinical departments tofund salaries and operations.
** Also note that UW School of Medicine projections are included within the Auxiliary/Self-Sustaining and Core Operating BudgetAreas of the campus budget, so are excluded here. The UW School of Medicine projeded budget for FY18 includes projectedrevenues of $1,420,000,000. Thus, the total projected revenues for UW Medicine for FY18 are $5,034,000,000.
As work progresses and assumptions are better defined, the numbers above are subject to change.
35
B–1.1/205-17 5/10/17
Page 2 of 2
PrLJ[iminanj FY18 Ouefaunu BLidci^i
STRENGTH OF IDEAS: RESEARCHENTERPRISEThe UW's record securing federal research funding is truly exceptional - it is one of the few universities in
the United States with total research expenditures exceeding $1 billion. Since 1979, with the exception of
only one year, 2009, the UW received more federal research funding than any other U.S. public university.
Since 1969, the UW placed in the top five for total funding for all public and private universities. Continued
success in securing research grants and contracts translates to consistently high scores in national and
international rankings. The National Taiwan University ranks the UW sixth overall (fourth nationally) and first
in public universities worldwide for the quality and impact of research endeavors; last year, Reuters ranked
the UW the most innovative public university in the world.
Another measure of success in research competitiveness is in terms of the UW's share of federal
expenditures compared to other higher education institutions. As Table 14 shows, the UW's ability to
maintain its share of total federal and non-federal research expenditures has remained consistent over the
last four years, despite increasing competition for limited funds.
Table 14: UW Research Expenditures - Federal and Non-federal Market Share (in $l,OOOs)
Total expenditures
Total UW
Market share (percent)
2012
52,096,000
1,040,000
2.00
2013
52,029,000
1,121,000
2.15
2014
51,412,000
1,111,000
2.16
2015
51,956,000
1,121,000
2.16
Source: National Science Foundation Higher Education Research & Development Survey (HERD), 2015.
Total funding reached $1.3 billion in fiscal year 201 6 (FY16), with federal funding making up 73 percent of
the total. There are almost 5,000 grants, with over 1 80 funded at over $1 million each.
Four major grants from FY1 6 include:
• $5.5 million for five years for the Washington, Wyoming, Alaska, Montana and Idaho (WWAMI)
regional medical education program Practice Transformation Network from the Centers for
Medicare and Medicaid Sen/ices to improve health outcomes and reduce hospitalization and
unnecessary healthcare utilization.
• $4.5 million for five years from the National Science Foundation's National Nanotechnology
Coordinated Infrastructure (NNCI) program to advance nanoscale science, engineering and
technology research in the Pacific Northwest and support a new network of user sites across the
country.
• $11 million for five years from the National Institute of Diabetes and Digestive and Kidney Diseases
for the University of Washington Center for Nuclear Organization and Function.
• $1.3 million from the National Oceanic and Atmospheric Administration (NOAA) to support ocean
scientists and developers who are investigating new technologies and modelling techniques to
improve tsunami monitoring and forecasts.
37
ATTACHMENT 2B–1.2/205-17 5/10/17
Page 1 of 3
cifu FY'18 Operatinu BudL]et
ECONOMIC AND EDUCATIONAL IMPACT
The University of Washington's research enterprise has a deep impact on the economy and education in the
state of Washington and the Pacific Northwest.
In FY16, UW launched 21 start-up companies based on UW research advances, bringing the 11 -year total to
136 technology start-ups. UW technologies generated over $15 million in licensing revenue. More than 7,400
students worked under the guidance of UW faculty mentors devoted to research. Sponsored projects
supported over 5,700 employees during FY16.
Based on economic multipliers provided previously by the Washington State Higher Education Coordinating
Board, UW research funding generated about 25,000 jobs statewide. Currently, more than 2,800 graduate
students and 1,463 post-doctoral fellows are being supported on research grants and contracts. Graduate
and undergraduate students contributed to 41 percent of the 652 patent applications that the UW filed.
FEDERAL OUTLOOK
As noted, at the time of publication, the UW administration analyzed available information from President
Trump's budget, but had little knowledge about potential congressional action. Significant uncertainty
regarding federal policy towards higher education is the new norm, specifically pertaining to research and
financial aid funding. The highly politicized nature of federal appropriations fuels this uncertainty, which will
persist until Congress passes appropriation bills and builds out the national discretionary budget.
At this time, all that we know about the future of federal research funding is that it is uncertain and the UW
administration is both monitoring the situation and developing plans to quickly respond to any changes in
federal funding. The UW administration believes that National Institute of Health (NIH) funding will not be
cut significantly, but it is half of our total funding; we are monitoring developments closely. The
Administration expects that Environmental Protection Agency (EPA), climate change, and some fetal tissue
research may be reduced, which would put $15-20 million of research funding at risk.
PROJECTED RESEARCH EXPENSES
Table 15, below, shows a breakdown of projected sponsored research expenses in FY17 and FY18. Please
note that direct (and indirect) research expenditures do not necessarily align when comparing them to
expected revenue streams. Typically, grants are not fully expended in the year in which they are received.
Further, federal and state fiscal years have different calendars. As seen below, the vast majority of the
University's research expenses are associated with federal grants, which means they are often received and
expended in alignment with the federal fiscal year. The projected decline in federal research expenses is
reflective of the uncertainty noted above (under "Federal Outlook").
Table 15: Projected Sponsored Research Expenses
Federal
State & local grants
Non-federal
Total
FY17
1,024,523,000
95,618,000
232,017,000
1,352,159,000
FY18
985,477,000
95,384,000
243,545,000
1,324,406,000
Percent Change
-3.80%
-0.20%
5.00%
-2.10%
38
B–1.2/205-17 5/10/17
Page 2 of 3
PreliminarLj FY'18 Opefdting Budget
Figure 6, below, provides a historical look at the UW's total grant and contract awards by year.
Figure 6: Total Grant and Contract Awards by Year (1995-2016)
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
0^ ^fP ^ ^> ^0°> ^0 ^- „€?- ^ ^ ^ ^<0 ^ ^ ^?) ^ -.\N ^ -.\b ^ ^ -'\<0^J^^'^^'^^'^^^^^^'^^'^J^^^^V~^^V
1/1c0
l Total Awards nARRA
As the figure shows, the UW's grant and contract awards have steadily increased with time, and are now
roughly flat. Note that FY13 numbers are artificially low because of delays in awards due to sequestration.
39
B–1.2/205-17 5/10/17
Page 3 of 3
UW MEDICINE │ TITLE OR EVENT
UW MEDICINE BUDGET
PAUL RAMSEY, M.D., CEO, UW MEDICINEJACQUELINE CABE, CFO, UW MEDICINE
MAY 10, 2017
1
BOARD OF REGENTS
ATTACHMENT 3B–1.3/205-17 5/10/17
Page 1 of 12
2017 Highlights
• CMS 5 star rating• Magnet Nursing Recognition• Leapfrog Grade A for patient safety• Health Grades Patient Safety Excellence
Award• AHA Stroke Gold Plus Award
QUALITY OF CARE
2B–1.3/205-17 5/10/17
Page 2 of 12
UW MEDICINE FINANCIAL OVERVIEW
Healthcare Funding Environment Challenges
• Research funding – NIH budget threatened• Education funding – supported by clinical funds• Clinical reimbursement – flat or declining
reimbursement for clinical services and preparation for value-based reimbursement
B–1.3/205-17 5/10/17
Page 3 of 12
• Research funding – NIH grants up 10%• Education funding – cost effectiveness
of WWAMI program• Clinical programs – revenue and
expense challenges for UW Medical Center and clinical volume challenges for Northwest Hospital
UW MEDICINE PERFORMANCE FY 2017
4B–1.3/205-17 5/10/17
Page 4 of 12
• Total revenue and expense ~$5 billion• Key priorities for FY 2018 Budget
• UW Medical Center revenue cycle improvement and expense management
• Northwest Hospital clinical program growth
• Expense management across UW Medicine entities
UW MEDICINE FY 2018 BUDGET PLANS
5B–1.3/205-17 5/10/17
Page 5 of 12
• Care transformation• Lean expense management• Employee engagement• Integrated clinical network
KEY FACTORS FOR FINANCIAL STABILITY OF ACADEMIC HEALTH ORGANIZATIONS
6B–1.3/205-17 5/10/17
Page 6 of 12
TOUGH TIMES IN HEALTHCARE
7
Brigham and Women's offers voluntary buyouts to 1,600 workers Written by Tamara Rosin | April 27, 2017
B–1.3/205-17 5/10/17
Page 7 of 12
MARCH 2017 MONTHLY PERFORMANCE VS. PY
8
($ 000's)Actual PY Change Actual PY Change Actual PY Change Actual PY Change Actual PY Change
Operating Revenue 84,669$ 87,025$ (2,356)$ 103,927$ 101,991$ 1,936$ 29,156$ 33,126$ (3,970)$ 50,860$ 48,866$ 1,994$ 268,612$ 271,008$ (2,396)$
Total Expense 83,409$ 82,003$ (1,406)$ 102,954$ 102,226$ (728)$ 32,348$ 31,912$ (436)$ 50,992$ 47,370$ (3,622)$ 269,703$ 263,511$ (6,192)$ Total Income (Loss) 1,260$ 5,022$ (3,762)$ 973$ (235)$ 1,208$ (3,192)$ 1,214$ (4,406)$ (132)$ 1,496$ (1,628)$ (1,091)$ 7,497$ (8,588)$ Margin % 1% 6% 1% 0% ‐11% 4% 0% 3% 0% 3%
Actual PY Change Actual PY Change Actual PY Change Actual PY Change Actual PY ChangeOperating Revenue 4,261$ 3,723$ 538$ 4,458$ 3,936$ 522$ 29,505$ 29,283$ 222$ 132,510$ 117,302$ 15,208$ 439,346$ 425,252$ 14,094$
Total Expense 4,187$ 3,530$ (657)$ 4,761$ 4,228$ (533)$ 29,505$ 29,283$ (222)$ 119,398$ 115,819$ (3,579)$ 427,554$ 416,371$ (11,183)$ Total Income (Loss) 74$ 193$ (119)$ (303)$ (292)$ (11)$ ‐$ ‐$ ‐$ 13,112$ 1,483$ 11,629$ 11,792$ 8,881$ 2,911$ Margin % 2% 5% ‐7% ‐7% 0% 0% 10% 1% 3% 2%
HMC UWMC NWH VMC Total Hospitals
ALNW UWNC UWP SOM UW Medicine Total
B–1.3/205-17 5/10/17
Page 8 of 12
MARCH 2017 YTD PERFORMANCE VS. PY
9
($ 000's)Actual PY Change Actual PY Change Actual PY Change Actual PY Change Actual PY Change
Operating Revenue 746,699$ 706,335$ 40,364$ 881,953$ 844,788$ 37,165$ 265,347$ 279,728$ (14,381)$ 437,732$ 416,927$ 20,805$ 2,331,731$ 2,247,778$ 83,953$
Total Expense 742,621$ 702,878$ (39,743)$ 915,034$ 866,982$ (48,052)$ 285,388$ 279,847$ (5,541)$ 440,228$ 404,836$ (35,392)$ 2,383,271$ 2,254,543$ (128,728)$ Total Income (Loss) 4,078$ 3,457$ 621$ (33,081)$ (22,194)$ (10,887)$ (20,041)$ (119)$ (19,922)$ (2,496)$ 12,091$ (14,587)$ (51,540)$ (6,765)$ (44,775)$ Margin % 1% 0% ‐4% ‐3% ‐8% 0% ‐1% 3% ‐2% 0%
Actual PY Change Actual PY Change Actual PY Change Actual PY Change Actual PY ChangeOperating Revenue 38,313$ 34,798$ 3,515$ 36,124$ 32,324$ 3,800$ 269,222$ 242,905$ 26,317$ 1,021,329$ 962,289$ 59,040$ 3,696,719$ 3,520,094$ 176,625$
Total Expense 35,986$ 31,230$ (4,756)$ 40,771$ 35,854$ (4,917)$ 269,222$ 242,905$ (26,317)$ 1,007,028$ 969,902$ (37,126)$ 3,736,278$ 3,534,434$ (201,844)$ Total Income (Loss) 2,327$ 3,568$ (1,241)$ (4,647)$ (3,530)$ (1,117)$ ‐$ ‐$ ‐$ 14,301$ (7,613)$ 21,914$ (39,559)$ (14,340)$ (25,219)$ Margin % 6% 10% ‐13% ‐11% 0% 0% 1% ‐1% ‐1% 0%
HMC UWMC NWH VMC Total Hospitals
ALNW UWNC UWP SOM UW Medicine Total
B–1.3/205-17 5/10/17
Page 9 of 12
•Strong volumes over prior year• Admissions up 4% to 14,144
• Inpatient surgical cases up 5.7% to 5,051
• Emergency Dept. visits up 5.2% to 20,775
•Degradation of reimbursement within commercial
•Payer mix shift from commercial to governmental payers
•Changes in approaches from payers requiring revenue cycle changes
•Failure to meet budgeted expenses, especially related to compensation
KEY DRIVERS IMPACTING UWMC FINANCIAL PERFORMANCE
10B–1.3/205-17 5/10/17
Page 10 of 12
SHIFTS IN PAYER MIX AND MEDICAID EXPANSION HAVE IMPACTED EARNINGS
11B–1.3/205-17 5/10/17
Page 11 of 12
UW Medicine wide modeling of 2%, 4% and 6% reduction on FY 2017 budget began in FebruaryRevenue cycle improvement project
• Focus at UWMC in the past 12 months (e.g., accounts receivable days at 10 year low)
• Nationally recognized consultant engaged to assist in realizing recurring net revenue benefit as well as one-time cash benefit for UWMC and HMC (June 1 start)
• Estimated total benefit is $45M - $70M (including annual, recurring benefit of $26M to $37M and one-time cash flow benefit)
Expense management• Decrease overtime, premium and hourly FTEs and agency (outside staffing) spend
• Care transformation aimed at continued improvements in health workforce organization and staffing
• Nationally recognized consultant assisting in achieving savings
KEY FINANCIAL PERFORMANCE IMPROVEMENT INITIATIVES (SELECTED EXAMPLES)
12B–1.3/205-17 5/10/17
Page 12 of 12