Fiscally Fit

Good morning.

Before I get to today’s topic, I want to make sure you’re aware of the next UMMC 101 session, “Discovery and Research” by Dr. Lee Bidwell, associate vice chancellor for research, in R153 at noon on Friday, Sept. 22. This is a great opportunity to learn more about our research mission area and how biomedical and population health research are essential to an academic medical center. If you are either new to UMMC or in a role where you don’t have exposure to our research activities, this should be especially of interest to you. It’s valuable for the entire organization if more of us have awareness and at least some understanding of how all of our mission areas and various parts work together.

Now, let’s take a closer look at the bottom line – the financial health of the Medical Center.

The strength of UMMC is found in two things: the people who dedicate their time and talent to this institution and the resources we manage to ensure we meet the needs of the Mississippians we have the honor of serving. Without both of these factors operating at their best, we would not be able to bear the responsibilities expected of us as Mississippi’s academic medical center.

I am pleased to share the Medical Center continues to operate at budget in spite of inflation and other financial pressures. For fiscal year 2023 (July 1, 2022-June 30, 2023), UMMC achieved a $5.4 million net margin, which exceeded the budget by $4.7 million. Also, we ended the year with 91 days cash at hand, 10 days better than budget.

For much of last fiscal year, we were trending to end the year below budget. I’m proud of the work each of you did to pull us back on track and realize a favorable variance. We are on solid ground, but we must remain vigilant in our efforts to be financially sound. Digging deeper into the numbers, we can get a better idea of revenue and expenses used to inform decision-making.

Operating revenue exceeded budget last year by $46.7 million, which was primarily related to the fact that patient care revenue was $47.1 million over budget. The increase in patient care revenue can greatly be attributed to better than anticipated outpatient surgical procedures and outpatient clinic visits. Last fiscal year, inpatient surgery cases were 7.3% ahead of the prior year while outpatient cases were 10.4% ahead. Additionally, we received increased disproportionate share payments, which is federal money we receive to offset care for which we provide but aren’t compensated, and saw continued growth in retail pharmacy services.

Great news overall in our revenue streams! Over a five-year period, we’ve continued to experience an upward trend in revenue.

However, on the flip side of our money coming in above budget last fiscal year, our costs were also more than anticipated. Operating expenses exceeded budget by $40.6 million, which was primarily driven by contract labor costs. The Medical Center is not immune to the state and national shortage of health care staff, and we are doing all we can to ensure that our patients and hospital employees have the support they need to keep all hospital beds in operation.

As our patient volume increases, the demand for supplies increases. Supply expenses in fiscal year 2023 exceeded budget by $22.6 million, due in part to inflation driving up the cost of goods. 

I’m certainly happy that we finished the year to the positive, and it’s a testament to your work, but a $5.4 million net margin represents just 0.3% of our overall $1.8 billion budget. That’s cutting it close, but it's good to have landed on the positive side. My preference, to make sure we are stable and able to sustain growth, is closer to a 3% positive margin.

Knowing all the factors that weighed into last year guides us as we execute our plans for the current fiscal year. Staffing in our health system will continue to be an issue and our greatest expense, but we will do all we can to work toward reducing our contract labor costs, improving our patient flow and refining our revenue cycle processes.

An institution as expansive as the Medical Center requires us to carefully examine our finances to balance costs and revenue. We are aware of the important role we have in our state’s patient care system and establishing a firm foundation of financial health gets us closer to our goal of A Healthier Mississippi.