President Herbst Presentation to Appropriations Committee, 2014

None of this will be easy, but we will do our best to continue to provide the best academic and student services possible.

Health Center

As the state’s only public academic medical center, we serve Connecticut through excellence in education, research, patient care and outreach to prevent disease and improve health and health care across the state. We are the state’s primary source of new physicians and dentists; a key provider of vital health services to some of our most vulnerable citizens; and an engine of economic growth generating nearly $1 billion in Gross State Product each year. We touch every corner of CT.

Bioscience Connecticut

The UConn Health Center is in the midst of its most significant transformation since it was first chartered in 1961. Through the Governor’s and General Assembly’s generous support of Bioscience CT, we are building and improving facilities to better meet the needs of patients and an expanded number of learners—future doctors, dentists, scientists and other health care professionals. Construction has employed more than 1,650 people; CT companies have been awarded 78% of our 134 construction contracts; and we have significantly exceeded state requirements for small and minority, women’s and disadvantaged businesses participation.

All of our construction projects are on-time and on-budget. We have torn down buildings to make way for the Jackson Laboratory, constructed two parking garages for patients and employees and are looking forward to opening our new Outpatient Pavilion in less than a year followed by the new hospital tower in early 2016.

Bioscience CT is also enabling us to bring world-class clinician scientists and researchers to the Health Center. Our exceptional faculty-old and new- have defied national trends of declining research funding by growing research awards to the Health Center by more than 17% compared to the prior year.

In the last six months alone, our faculty has received $54.5 million in new research awards, to include a $3.2 million joint award with our colleagues at Jackson Laboratory. In addition, we have submitted a number of proposals with Jax that could lead to another $2.3 million in research funding. These outstanding achievements exemplify how the Health Center can contribute to the Governor’s and legislature’s goals of long term, sustainable economic growth through bioscience research, innovation, entrepreneurship and commercialization.

The initiative also supports the expansion of our Medical and Dental school classes which began this year and will ramp up even faster once the facilities to support more students and faculty recruitment are completed. We have also begun a comprehensive reform of our curriculum to train doctors, dentists and health care professionals for the dynamic future of health care.

FY14 and FY15 Budget

Despite all this positive news, the UConn Health Center has financial challenges. Our financial health is a major driver of our ability to meet our goals of excellence in research, education and clinical care. The State has stepped up and funded the Health Center over the years and for that support we are grateful. But, as we look at that support adjusted to inflation, funding has been flat for over a decade, and during these tough economic times we have sustained reductions in patient care reimbursement and reductions in our state appropriated block grant (a total of $15m since FY13). We receive only 23% of our revenue from the State of Connecticut; 77% comes from other revenue sources with nearly 43% coming from patient care.

While many health systems have further limited the care they provide to uninsured patients and those covered by Medicaid, as part of our public mission, we are delivering care to an increasing percentage of this population. From fiscal year 2012 to fiscal year 2013, UMG’s percent of Medicaid encounters grew from 17.5% to 19.2% of total encounters for the practice.

If Medicaid payments were set at Medicare rates, this would have increased $3.4 million to our bottom line. UCHC Dental Clinics also continue to serve the Medicaid population with over 68% of total visits attributable to Medicaid. Hospital stays covered by Medicaid have also grown from 23.1% in fiscal year 2012 to 25.7% in fiscal year 2013. Care of Medicaid patients in our hospital resulted in a $8.5 million loss to the Health Center in FY13.

The impact of declining revenues is compounded by increasing expenses, many of which are beyond our control. Approximately 57% of the Health Center’s expenses are salaries and benefits. State-mandated salary and fringe benefit increases resulted in additional expenses of $26.6 million in FY14. We have also seen a sharp rise in our fringe benefit rate as eligible employees have either initially opted for or transferred from the alternate retirement plan to the state employees’ retirement plan—a difference of 43.5% in the benefit rate that we (and all higher education institutions) must pay.

In FY14, the Health Center anticipates an $11 million deficit that will be funded with cuts to our capital spending; this is a short-term fix. Ongoing pressures on our operating and capital dollars cannot easily be resolved without consequences to the quality of our educational, clinical and research programs. To meet the challenges we have initiated a number of initiatives as outlined in the next section.

To maintain a forward trajectory and fully realize the vision championed by Governor Malloy and supported by the General Assembly through the creation of Bioscience Connecticut, we ask that you maintain our state funding at $135.9 million—the level you approved last session and that the Governor has included in his FY15 mid-term adjustments.

The NEW UCONN Health Center—UCONN Health

As we look to the future, we have developed a three-pronged approach that will get us to where we want to be and where we must be.

First, we continue to improve performance in all operating units of the Health Center. Last year we realized cost reductions and revenue enhancements totaling $8million that assisted us in reducing the shortfall for the year. Additional savings and revenue enhancements must be achieved, so we have contracted with an outside performance improvement firm, the Berkley Research Group, who has a team on the ground to work closely with all of our faculty and staff to find and implement efficiencies throughout the Health Center and enhance revenues.

Second, to be financially viable, especially in this new healthcare landscape, we must demonstrate improvements in health care delivery and strengthen our clinical volumes through targeted growth. These efforts will not only improve our bottom line, but will support our academic missions of research and teaching—as we better cover our fixed costs, we can reinvest in ourselves. To achieve this goal we have focused on quality and safety. Our clinical outcomes in many areas lead the state and the nation. For example, time from the “door to doctor” in our emergency department over the last year has been 19 minutes on average. Our door to balloon time which measures the time between a heart attack patient’s arrival at the hospital to the time he/she receives an intervention is 48 minutes; the state average is 58 minutes. Patient satisfaction and easy access to the medical center and its health professionals is a top priority.

Third, through new communications strategies, we are letting patients, referring physicians, industry and private donors know about the extraordinary improvements that are happening at the Health Center.