Financials Update

Good morning.

Today, I want to give you a brief update on how the Medical Center is looking financially. We are past the midway point in the current fiscal year, and the budget planning process for FY25 is underway. So, it’s a good time to share our status, end-of-year expectations and plans for the next fiscal year.

Overall, our financials are looking good. We came out of January a little above where we budgeted thanks to strong revenue numbers – bringing in about $25 million more than budgeted. However, expenses are also above budget, and we are spending more than budgeted in just about all categories. We need to be diligent in managing expenses over the next several months to end with a margin that will allow us to consider growth and investment opportunities, including those that are prioritized in UMMC 2025, the Medical Center’s five-year strategic plan. 

I want to single out our surgery teams (and all who support them) because increases in the number of cases they’ve done this year are major drivers of our patient revenue success. Just in January, inpatient surgeries were 2% over budget, and outpatient procedures were 8%. Great work.

The expense area that has been and continues to be the biggest concern is labor. We’ve spent more than $16.5 million over budget in this category this year. The good news is that this line is trending down, thanks to efforts by clinical leadership to identify ways to reduce labor costs with little to no operational impact. Hopefully, by the end of this fiscal year, these measures will have made enough of an impact to significantly reduce how much over budget we will be in this category, setting us on the right path to have more control over this next year. 

If you hear me talk about our finances or see one of our reports, you’ll notice we put a premium on the Days Cash on Hand metric. This data point shows how many days a business could remain operational without any additional cash collections and gives a clear picture of an institution’s financial standing. It is a critical metric monitored by IHL. We are budgeted to end FY24 at 88 days cash on hand and have set a target to end FY25 at 92 days cash on hand and a long-term goal of reaching the level we feel puts us in a strong financial position – 105 days cash on hand.

Certainly, our financial picture can fluctuate without much warning, but I’m encouraged with where we are at this point in the fiscal year. A good current status and a positive outlook going forward are because of your efforts. Thank you.

While we are still doing all we can to end this year above budget, we have started the process to set a budget and targets for the fiscal year covering July 1, 2024 – June 30, 2025. We want to improve our performance in revenues and expenses to be able to implement some key strategic initiatives. In particular, we want to add market- and merit-based adjustments to the budget during the next fiscal year. This has been a priority for several years, and I’m determined – barring any unforeseen circumstances – that these measures will be possible next fiscal year.

The bottom line is this – we are in good shape, and we should end up meeting budget or better than planned. And we are somewhat unique in Mississippi and many other parts of the southeast, where academic medical centers, hospitals and health care institutions are experiencing financial hardships.

Coming out of the tough COVID years, we’ve made thoughtful and deliberate financial decisions so that we can get to the very place we are, where planning for growth is possible. Even at an institution where the annual operating budget is nearing $2 billion, our margins are tight. It takes a significant amount of planning, evaluating and calculating to ensure that any decision we make doesn’t throw us off our plans. And, ultimately, everything we do, everything we budget for or remove from the budget, is done for one reason – to get us closer to A Healthier Mississippi.