The economy and its impact on UNC Hospitals, UNC P&A and the UNC School of Medicine

A message from Drs. Marschall S. Runge, Etta Pisano, and Mr. Gary Park

Dear Colleagues:

We would like to share with you some of the discussions from recent meetings with Chris Ellington, UNC Hospitals CFO, Hunter Wagstaff, UNC Physicians & Associates CFO, and Patsy Oliver, UNC School of Medicine Assistant Dean for Business and Finance, about the current financial situation and how it impacts UNC Hospitals, UNC P&A, and the UNC School of Medicine.

Chris provided detailed background regarding UNC Hospitals' FY2009 budget. In the spring, the UNC Hospitals and UNC P&A prepared budgets that seemed reasonable at the time. Now, three months into the fiscal year and six months after finalizing our budgets, it is clear that we are not meeting budget expectations. This underperformance is due to several factors including the status of the worldwide financial markets as well as other factors specific to health care.

We know that people are postponing needed medical procedures, not filling prescriptions and having difficulty meeting their financial obligations in many arenas. Like other organizations, we've experienced a poor return on investments and a cut in funding from the state - with more to come. We have already seen changes in our payor mix, skewing increasingly towards Medicare, Medicaid and uncompensated care. In addition, we have fewer inpatients and an increase in outpatients.

Likewise, the School of Medicine has already reported substantial budget cuts from the state, and is anticipating a further reduction in funding from all sources. Over the last few years, the School of Medicine has depended on a greater percentage of income from clinical revenue to fund research and education. Despite these challenges, to meet our mission, we must continue our plans to aggressively pursue research, and commit to train physicians and health care providers.

Considering our situation, we are taking steps now to assure efficient use of resources and prudent management, so that over the next few years we can continue providing the highest quality care to the people of North Carolina, while also innovating and growing as an academic medical center. We may have to prioritize segments of our ambitious strategic plan, but are confident we can continue to move forward.

How can we do this? We must focus on small changes that create big results. First, we will focus on improving quality of care and our core measures scores. Brian Goldstein has been explaining this in departmental meetings and here in the newsletter. Meeting core measures targets in our Blue Cross contract will not only translate into better patient care but also could result in additional payments of millions of dollars that will help us fulfill our mission.

Second, we need to make every effort to assist patients who have financial challenges. Our financial counselors are already in place and working hard to help people enroll in assistance programs and payment plans.

Third, we need to take a broad look at our expenses, especially salaries and benefits. As you know, we are completing a hiring review for all positions at P&A and the Hospitals. We are also asking everyone to reduce costs where possible. For example, trying to keep our travel within North Carolina, eliminating unnecessary catering costs, and considering orders of supplies.

We have the opportunity to work together to remain fiscally responsible within UNC Health Care and the UNC School of Medicine. Our mission is to provide the highest quality care to our patients and to dedicate ourselves to improve the health of all North Carolinians. We all know we can only succeed in our mission if we have the financial standing to do so. We hope you will join us in thinking of ways we can improve our quality of care, meet our quality goals, encourage payment from those who can pay, and reduce costs. Please share your ideas with us, the other members of the leadership team, and your manager or department chair. You can also submit ideas by sending an email to quality@unch.unc.edu or submitting an idea to Glad You Asked.

Marschall Runge, MD, PhD
President, UNC Physicians
Vice Dean for Clinical Affairs, UNC School of Medicine

Etta Pisano, MD
Vice Dean for Academic Affairs, UNC School of Medicine

Gary Park
President, UNC Hospitals

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