With three months remaining in fiscal year 1997, University Medical Center officials are predicting an annual gain - a stark contrast to its balance sheet one year ago.
Larry Warren, interim executive director of University Hospitals, reported yesterday that the Medical Center grossed a $2.8-million operating gain through the month of February. Last year, the hospital reported a loss of $11 million during the same time frame.
"We would expect by year's end to stay on this course and we will make money," Warren said.
The Medical Center's total revenue from July through February increased from $595 million to $598 million. Expenses in payroll and clinical faculty also dropped from $606 million to $595 million.
The Medical Center's operating budget for fiscal year 1997 is about $900 million.
Warren attributed the gains to the hospitals' cost-effectiveness program, which aims to trim $200 million from the Medical Center's operating budget over the next three years.
Vice President for University Relations Walter Harrison said the surplus of revenue over costs is a testimony of the leadership of Warren, Associate Dean of the Medical School Lloyd Jacobs and interim Dean of the Medical School Lorris Betz.
"In the end, I'm sure we all measure the success of the Medical Center by the lives it's helped, but it's gratifying to know that we can do that in a cost-effective way," Harrison said. "It's gratifying, but the real challenges still lie ahead."
The first phase of the cuts was implemented last July, resulting in the elimination of 1,055 job positions - half of which were achieved through attrition. The number of beds in service were also reduced from 847 to 793, including the elimination of 10 patient beds at the Kellogg Eye Center and a 32-bed general care unit in the main hospital.
The second phase of cuts is still being formulated by a redesign coordinating committee headed by Jacobs. The proposed cuts will be subject to approval by the University Board of Regents this summer.
"The cost-effectiveness program is intended to position us to try to make revenue," Warren said. "Our costs were too high and employers were telling us day in and day out that unless we reduce our costs, patients will go elsewhere."
John Forsyth, former executive director of University Hospitals, estimated last July that the hospitals' cost-per-case was about $2,698 higher than its competitors. The high costs are due to the dual responsibilities of the Medical Center as an academic research facility and clinical care.
In the past 12 years, the hospitals have reported a cumulative operating gain of $218,289,000. It reported yearly operating losses in 1996, 1990, and 1988 of $1.1 million, $5.7 million, and $2.4 million, respectively.
Surplus revenue is stored in a reserve fund, which is estimated to hold a little under $700 million, Harrison said.
Warren said that the Medical Center's final net profit should be available at the end of the fiscal year in late June.