Friday, April 3, 2015

UMMC Revenue: I'm Showing You the Money

Published in VC's Notes on April 03, 2015

UMMC Revenue:Â I'm Showing You the Money

April is the month for spring flowers, warmer temperatures and -- if you have four teenagers like I do -- the beginning of the end of the school year.

The other thing that gets our attention in April is money -- in the form of paying taxes, of course, and in developing the UMMC budget for the coming year.

The legislature wrapped up its work this week and so we now know what funding we will receive from the state for the fiscal year that begins July 1. Â

As is typical most years, it's a mix of good and not-as-good news. We were happy to receive $6 million in the bond bill toward the construction of a new Children's Hospital and $3 million in our appropriation for The MIND Center. But we were disappointed that we did not receive funding to support Graduate Medical Education or our plans to create a clinical research center in the adult hospital, one of our strategic priorities.

Of course, we'd always like to receive more money from the legislature to fund our core activities -- what's called our appropriation. We realize our state has many competing needs. So if we can't get an increase, we at least want to avoid a decrease. The $188.7 million appropriated this year keeps us whole, and we're grateful for that. Â

And that's really what today's column is about -- where the money comes from to run UMMC.

Generally we think of five sources of revenue to fund our operations:Â tuition, state appropriations, grants and contracts, philanthropy, and patient-care revenue.

The graph below reflects each of these sources of funding and their relative proportion of total revenue during the last few years.

UMMC_Source_Revenue.jpg

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As I look at this graph, these thoughts come to mind:

  • Tuition, that thin blue ribbon that you can barely see at the bottom, makes up a very small portion of our overall revenue. Even large increases in tuition have little impact on our revenue picture.Â

  • Our state support, although a relatively small part of our revenue at about 14 percent, compares favorably with our peers in other states, most of whom receive single-digit support. Almost all of this state money is directed toward our education mission.

  • Revenue from grants and contracts has remained fairly stable, which is an achievement given that funding for research nationally has contracted.

  • Philanthropy, barely visible in this graph between the green and orange bars, has grown as we have rebuilt our Office of Development. These dollars, some of which are discretionary, will be increasingly important to us in the years ahead.

That brings me to patient-care revenue. Clearly it represents the lion's share of our funding and is driving the recent growth of the Medical Center. All of our other revenue sources have basically stayed flat during this time period.Â

We're happy about the recent growth in patient-care revenue, but we can't take it for granted. We can't assume the high volume of patients we've experienced recently to continue indefinitely. That's why our efforts to deliver higher-quality care more efficiently must continue. Better informed consumers, more transparency in health-care pricing, reductions in the growth of Medicare spending, and more efficient models of health-care delivery are all transforming the economics of health care. And we are responding to all of these trends.

We're also actively engaged in growing all our revenue streams, to keep this mix as diversified as possible. We have exciting plans to expand our traditional strength in basic science research to encompass clinical research and population studies, partly fueled by our collaboration with the Mayo Clinic. And while we're thrilled to receive comparatively strong support from the state, we're going to continue to tell our story that UMMC is one of the best investments our state can make in terms of economic impact.

Even though our revenue comes to us in different streams, when it's possible to do so, we may allocate it for another purpose. This cross-subsidization is part of our management philosophy that "all money is blue." (UMMC blue, that is.) Â

We have to be good stewards of the money we are fortunate enough to receive. We don't have, and will never have, all the money we need to do everything we want to do. So we have to stretch it as far as we possibly can and be accountable for how it's used.

Finally, today's column has been about the sources of our money. On another day, I'll talk about how we use the money we receive, and the difference between the restricted-use money we spend for capital projects like the School of Medicine (state bond funds) and the Translational Science Center (mostly federal funds) and what we are able to spend on operating costs like salaries and benefits.  Â

During the last 10 years, UMMC has just about doubled its revenue from all sources. That's amazing, and it should be a source of pride for all of us. But the pride comes in knowing what that growth represents -- more students gaining access to an education, more and better health-care services for more patients, and more discoveries that expand our capacity to help others. That's our mission, the one we live every day, on our path to A Healthier Mississippi.Â





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