UMMC budget cuts likely to cause expense reductions, layoffs

JACKSON, Miss. (WJTV) — The University of Mississippi Medical Center has to save about $24 million in the next few months.

To get to the savings goal, they will have to make some cuts.

Vice Chancellor for Health Affairs Dr. LouAnn Woodward sent a letter to employees this week about the financial action plan.

The letter said bedside patient care would not be affected. However, in order to meet the savings goal, Woodward said all other measures are on the table, including eliminating programs and reducing the size of the workforce.

UMMC officials said they would not be able to reach the financial goal without some reductions in staffing. They also hope to reach the savings goal through expense reductions or revenue increases.

We’re told that they’ve been watching their financial situation and the cuts are necessary. They said the primary reason for the budget shortfall is that funding they receive through the Division of Medicaid is $35 million below their initial projection. UMMC also received more than $8.2 million in reduced state funding for the current fiscal year, which ends June 30.

Woodward said in the letter that achieving this $24 million in savings will not solve the problem. Revenue sources will continue to be under pressure, so this focus on cost will not end after the current fiscal year.

Below is the complete letter that was sent to faculty and staff on Feb. 22:

For the last few months we have been closely watching our financial situation as we’ve experienced unanticipated cuts to our revenue.  Late this afternoon I met with about 100 senior administrators to announce an action plan to improve our financial position for the remainder of the fiscal year that ends June 30.

By March 6, I have asked for detailed plans from all divisions that will allow us to save approximately $24 million during the next four months.  At the administrator’s discretion, these savings can be achieved through a combination of expense reductions or revenue increases, but the reality is that most of it will likely come from expense cuts.

Knowing that our hospitals have been working hard on labor expense management, I am protecting bedside patient care from this cut.  All other measures to meet this savings goal are on the table, including eliminating programs and reducing the size of our workforce.  Regrettably, we will not be able to reach our financial goal without some reductions in staffing.

As I mentioned in a recent VC Notes, a number of factors have contributed to our present financial difficulties.  Chief among these is a decrease in our disproportionate share (DSH) funding, which we receive through the state Division of Medicaid for providing care to large numbers of Medicaid and uninsured patients.  Our DSH allocation is always difficult to predict, but this year it currently stands at $35 million below our initial projection.

On top of that cut, as of Tuesday we now have received more than $8.2 million in reduced state funding for the current fiscal year.  Revenue cuts of this magnitude, although painful, would be manageable in a normal year, but coupled with the DSH reduction they require a more aggressive response.

Even as we’ve experienced these reductions in funding, we have been working on a number of projects to decrease expenses or increase revenue.  As was reported in Monday’s eCV newsletter, our value analysis teams have achieved $19 million in supply chain savings since 2015.  Other groups have been working hard to improve revenue cycle management, shorten length-of-stay, and drive clinical quality improvement and the savings it yields.  These and other efforts to become a leaner organization will continue.

As we look to be more efficient, we can’t ignore the need to invest in our future.  For example, we’ve grown our clinical programs substantially during the last two years, even though it will take some time for those investments to pay for themselves.  We have to be thoughtful about how we shepherd our resources and look for opportunities that are sustainable and will move us toward our ultimate goal of improving our state’s health status.

You’ll learn more about the financial action plan as it develops at the unit level.  I ask that you please be patient and let your administrators work through this process in an orderly way.

Our current financial challenges are not unique to us.  Across the country, academic medical centers and other industry players are struggling to cope with a historic period of change and disruption.  Clearly we have to continue to excel at our core missions of education, research and patient care and maintain the integrity and quality of those pursuits.  But we also must sustain – for the rest of this year and beyond – sound business practices of expense control, wise investment and decisive action in a changing marketplace.

I want to be clear.  Achieving this $24 million in savings will not “solve” our problem.  The fact is that our revenue sources will continue to be under pressure, so this focus on cost will not end on June 30, 2017.  In some ways, this is the “new normal” for us and for other academic medical centers.

The target I’ve set for us to reach by year-end will be hard on everyone.  But it is achievable.  We’ve faced bigger challenges before, and with everybody pulling together, we’ll face this one, too. Thank you for your commitment to UMMC.

–Dr. LouAnn Woodard, Vice Chancellor for Health Affairs

 

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