Prognosis looks promising for Health System financesBy Emily Caldwell, onCAMPUS staff
The intensive care given to Ohio State's Health System finances has resulted in a $32 million turnaround in the operations budget since Fiscal Year 2000 at the same time the system has seen an increase in its local market share, growing recognition for patient care and technology innovations, and a recent all-time-high report of patient satisfaction.
R. Reed Fraley, vice president for health services, said the system should break even at the end of Fiscal Year 2002, which ends June 30. A University first-quarter budget report in early December noted that the Health System continues to significantly improve its financial status.
A financial recovery plan has been in place since March 2000, the same year the system recorded $42.6 million in operating losses out of a $600 million-plus total budget.
The fact that improvements continue to be made in patient care and technology enhancements during a time of financial difficulty is evidence of hard work and focus across the Health System, Fraley said.
"Physicians and staff are very committed to doing the right thing," he said. "Even if there might be frustration with some of the change that is occurring, nobody is losing sight of the fact that we need to do what is best for our patients."
That commitment to patient care is both a state mandate and a moral obligation, Fraley said, and decisions about programs and services are not based solely on their money-making capacity. To dramatically illustrate his point, he said that to be truly "profitable," the University Health System would have to consider closing specialty services such as its burn unit, transplant services or its HIV/AIDS programs. Such action would never be taken, he said, especially considering Ohio State is the only provider of such services in central Ohio and sometimes even beyond that geographic region, as well.
"It's important for people to understand that some of the programs and services that cost the most money are those that are either the most fully developed or the only one in the region," Fraley said. "Based on our academic mission, we can't walk away from providing that care."
The Health System budget takes into account the finances of five system components: University Hospitals, the Arthur G. James Cancer Hospital and Richard J. Solove Research Institute, University Hospitals East, OSU/Harding Behavioral Healthcare and Medicine, and the Primary Care Network sites.
Last fiscal year's total system deficit of $18.2 million represented $10 million in operating losses; $2 million in one-time costs to provide academic mission support, assisting the College of Medicine and Public Health in retaining physicians; and a $6 million actuarial adjustment related to the system's malpractice self-insurance, which, despite the hit to the books late in the year, actually is a 20-year-old strategy that positions the Health System well relative to other hospitals in the nation, many of which are finding their insurers poised to opt out of the malpractice insurance business.
Ohio State compares well nationally in other areas: Within a national peer group of 20 other comprehensive teaching and research health systems, Ohio State ranks in the best quartile of expenses per admission and the best quartile in productivity. Fraley also noted that some other major academic medical centers have also recorded significant operating losses in recent years, reflecting the national complex nature of today's health care environment.
Over the course of improving its finances, the Health System has never leaned on the rest of the University for financial support, Fraley emphasized. The Health System maintains reserves to cover any losses it incurs, and in fact has continued to make its overhead payments to the University, as well as planned contributions to the College of Medicine and Public Health.
In addition, monthly surveys of system patients recently indicated that three out of four patients rated their care at 9 or 10 on a scale of 1 to 10, and said they would tell others that the Ohio State Health System provides quality care. That figure exceeds system goals.
Meanwhile, several challenges complicate balancing the books, Fraley said; negotiating managed care contracts and accommodating under-reimbursement from the government for treatment of Medicaid/Medicare patients tend to rise to the top of the list. As recently as 1997, the government paid 100 percent of Medicaid/Medicare treatment costs. As of late 2001, reimbursement stood at approximately 72 percent of costs, amounting to a shortage of about $120 million in billing, Fraley said.
"We know what the government will pay, but we don't know how much it will cost to treat you until you leave the system," he said. "Therefore, often what we receive in payment does not match the actual cost of providing the care."
The same holds true for managed care contracts, where cost and payment aren't aligned, and that's why the Health System will be negotiating "tough" with managed care companies in an effort to more closely match reimbursements with treatment costs, he said.
"The challenge continues to be can we get payers to pay us an adequate amount of money for the services we render?" Fraley said. "That's more important than ever now that we have other systemwide costs under control."
Employee compensation also remains volatile in such a fiercely competitive market, which forces the Health System to provide competitive salaries, incentives and bonuses while providing the generous benefits package available to all University personnel, and to be creative and strategic in employee recruitment practices.
"When it comes to financial management, there is always room for improvement," Fraley said, "but I feel confident that we can turn these losses around for good this year."
Four Ohio State physics faculty named APS FellowsBy Pam Frost Gorder, Research Communications
The American Physical Society (APS) has recognized four members of the Ohio State faculty for their contributions to physics research.
Richard Furnstahl, Ulrich Heinz, Ciriyam Jayaprakash and Robert Scherrer, all professors of physics, were among 190 Fellows named by the APS this year.
"I am proud of the new recipients of the prestigious nomination," said Robert Gold, dean of the College of Mathematical and Physical Sciences. "I am pleased with the progress that the Department of Physics continues to make towards increased national and international recognition."
The APS Fellowship Program was created to recognize members who made advances in knowledge through original research and publication, or made significant and innovative contributions in the application of physics to science and technology. They may also have made significant contributions to the teaching of physics or service and participation in the activities of the society.
Each year, no more than one-half of 1 percent of the society's members are recognized by their peers for election to the status of Fellow in The American Physical Society.