Health system approaches financial turnaround

Ohio State's health system has put a substantial dent in its operating deficit in the past year, and officials credit a team approach and a consistent focus on the Medical Center's mission for seeing the system through the worst of its financial problems.

Officials told the Board of Trustees in December that what was a nearly $14 million deficit at the same point last year had been reduced to just under a $1 million operating deficit at the end of the first quarter of fiscal year 2001. And even through the most trying times, the Medical Center reported significant advancements, including national rankings and enhancements to its surgical technologies and maternity unit (see related story, below).

The Medical Center also was able to meet its obligations to the University, which amounts to several million dollars annually, said R. Reed Fraley, vice president for health services.

"The expectation is that the health system will be self-sufficient financially," Fraley said. Operating losses of $42.6 million last fiscal year -- out of a $600 million-plus total budget -- were covered by separate financial reserves previously generated by the Medical Center.

A financial recovery plan was launched in March 2000, a month after Medical Center employees were informed of the pending operating loss and establishment of a task force to identify ways to reduce the losses. A committee of 30 hospital board members, physicians, Medical Center administrators, practice plan representatives and academic leaders in the health sciences met weekly for four to five months to finalize the plan, which translated into the health system's 2001 budget.

The plan calls for a $50 million turnaround, and, ideally, will result in a $6 million "profit" at the end of this fiscal year. Any revenues above operating costs are to be reinvested into new technologies and facilities supporting the research, patient care and teaching mission of Ohio State's health system.

The plan has included increased rates, renegotiation of payment schedules from managed care providers, consolidation of duplicate services, closure of some services and investments in additional revenue sources. In addition, the health system has undergone an aggressive cost-reduction initiative to examine supplies and services to include everything from prosthetics to pharmaceuticals.

"We have had to make some difficult decisions during the past year," Fraley said. "However, we are turning things around financially while holding true to our commitment to excellence in all parts of our mission."

The deficit was attributed to a number of factors, including the national climate concerning declines in governmental and private reimbursement for services, and a tight labor market that had forced the hospitals to recruit more vigorously and offer bonuses. In addition, patients have been staying longer and are sicker.

The national-scale changes occurred more quickly than anticipated -- for example, officials estimate that as a result of the Balanced Budget Act, University hospitals will lose $60 million in reimbursement between 1998 and 2003. And Ohio State's Medical Center faces some challenges that competing local private-sector hospitals do not -- including purchasing policies that require a bid process, costs associated with the generous OSU benefits package provided to University personnel, and participation in collective bargaining.

The consolidation plan has included closing MedOhio Family Care Centers in Hilliard and Reynoldsburg (both communities that can be served by other nearby MedOhio facilities); closure of a sports medicine facility in Westerville; closure of the hospice program; and a shift of all psychiatric services from the Worthington campus (Harding Hospital) to the main Medical Center campus.

Fraley said the OSU/Harding shift has created some misunderstanding in the community. He emphasized that Harding behavioral health traditions have continued since Harding and OSU merged, but have been relocated to the Ohio State campus area -- saving on costs of operating such services as a separate cafeteria and pharmacy at the Harding facility in Worthington. The Worthington campus remains open, and now is home to an OSU Family Care Center. Ohio State also leases space to educational and treatment facilities there, which has produced new revenue for the health system.

The system-wide changes, consolidations and closings have resulted in relocation and reassignment of employees in some cases, and a total employee reduction of about 50 -- with only 10 being laid off. Overall, however, the health system now employs more nurses than it did a year ago.

The Medical Center also reports a 5 percent increase over a year ago in the number of patients per day, which stands at 644 -- meeting the goal of between 600-650 patients per day to fulfill the academic mission and just missing the 650 to 700 patients per day sought to meet financial obligations.

At the same time, Ohio State has built and is building new areas of specialization -- for example, bariatric surgery to treat patients who are morbidly obese. And plans continue for development of a Heart Hospital at OSU.

"We have been working on our strategic plan for heart services for a while now, and with our research and teaching missions, as well as the opening of the Dorothy Davis Heart and Lung Research Institute, the Heart Hospital is the next logical step for us," Fraley said.

Though no more closures are expected at this time, Fraley said exploration of ways to streamline costs will continue.

"We'll rigorously review programs and services -- those that have been changed and those that have not been reviewed to date," he said. "We're asking ourselves what contributes to the academic mission and what makes financial contributions that offset our operating expenses."

He also said that because of complicated formulas affecting reimbursement programs, the hospitals are unable to predict some financial outcomes.

"I'm optimistic, given the things we've got in place, that we will meet our goals, or, at the minimum, that we'll break even at the end of this year," Fraley said. "I'm optimistic because of the commitment physicians and staff have shown to doing all that it takes, and to working as a team, to fulfill our mission and continue to move forward."

Medical Center boasts new technologies, Top 100 ranking

Ohio State's health system has reported several major accomplishments in recent months, including a new national ranking, enhancements to surgical technologies and a design award for its maternity unit.

A top hospital

A health care research firm has included Ohio State University Hospitals on its recently released list of the nation's 100 Top Hospitals. The list is the result of a study to recognize the nation's hospitals that have achieved benchmark status in several areas.

Ohio State was the only Columbus hospital included on the list.

Selection of the 100 Top Hospitals was based on several factors, including quality of care as measured by mortality and complication rates, efficiency of operations and overall financial performance.

Sixty-three percent of the hospitals on this year's list, including OSU Hospitals, have been named to the list more than once. Ohio State has made the list four times since the list's inception in 1993.

According to the HCIA-Sachs Institute, the firm that conducted the study, this year's results reflect the financial distress hospitals have encountered in the wake of the Balanced Budget Act of 1997. Despite these difficulties, the benchmark hospitals were able to maintain top clinical performance, and in the aggregate, a relatively better financial performance than their peers. This year's top hospitals were determined based on 1998 and 1999 data as reported to Medicare and other publicly available sources.

HCIA-Sachs reviewed 6,000 acute care hospitals for the study. OSU Hospitals was one of 15 major teaching hospitals to make the list.

Robotic technology

The Food and Drug Administration has granted surgeons at the Ohio State Medical Center permission to expand their use of robotic surgery to perform complete heart bypass operations. The surgeons will be the first in the country to perform the operation with robot intervention, the most complex application to date of robot technology in surgery.

Heart surgeons at Ohio State have been using the robot instrumentation to perform certain stages of heart surgery for more than a year as part of a clinical trial. Meanwhile, general surgeons at OSU have been using robotic technology for performing many types of laparoscopic procedures.

The FDA's approval is the next step in a process that may eventually make robotic instrumentation a common practice for hundreds of surgical procedures, according to Robert Michler, director of cardiothoracic surgery at the OSU Heart Center.

Surgical suite

A futuristic operating room suite that opened recently at University Hospitals East may forever change the way surgery is conducted in Columbus -- and perhaps even the world. Voice-activated instrumentation, ergonomic furniture, ceiling-mounted booms and consoles, and ultra-modern surgical tools were designed into the technologically advanced "endosuite," which will be used for arthroscopic and other video-assisted surgical procedures.

After more than a year in development, the new operating room also will be used as a model for operating room construction in the United States and a demonstration site for new surgical technologies.

The room is unlike any other in the Midwest and is based on the anticipated needs and design standards of hospitals years into the future. The new endosuite offers teleconferencing capabilities so video from surgical procedures can be projected to other locations in the Medical Center -- or around the world -- where other doctors or medical students can observe the surgery for teaching purposes.

Ohio State completed renovation and construction of the operating room in partnership with Stryker, a worldwide designer and manufacturer of operating room equipment and systems. Stryker chose Ohio State as a demonstration site because of the Medical Center's growing reputation as a destination point for surgeons wanting to learn the latest techniques in orthopedic and minimally invasive surgery. The nationally recognized physicians and scientists in the Musculoskeletal Institute at University Hospitals East are involved in the research of bone and joint diseases, as well as the treatment of patients from throughout the Midwest who have muscle and bone disorders and injuries.

Design award

The recently completed labor and delivery unit at the University Medical Center has received one of the nation's top awards for architectural design. The competition was sponsored by Modern Healthcare magazine and the American Institute of Architects' Academy of Architecture for Health.

From a field of 208 entries, Ohio State's maternity center was one of two facilities to receive awards. The 32,000-square-foot unit provides a "sense of warmth and serenity," according to one judge.

The unit, which includes 12 private labor and delivery rooms, is highlighted by large windows, raised ceilings and skylights, and light maple hardwood floors and paneling. NBBJ of Columbus was the project architect.