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  • 1. SOM Chief Financial Officer 1. What is the organizational and functional structure of the Finance Department? UTHSC Practice Plan (Hernandez): There are 3 divisions: Accounting (9 FTE) who perform payroll and submit financial reports, decision support (4 FTE) who are in charge of the budget and business development, and Reporting (4-5 FTE) who do Epic reporting. All professional fee income is placed in a trust – the MSRDP – which contracts with UT Medicine since the SOM cannot accept risk contracts or capitation. In 2000, the “UPG” was expanded to do HR hiring and purchasing since it allowed more flexibility. Currently, many services are being duplicated between the SOM and UTM and therefore, a phased integration is being planned. UTHSC SOM (Allen): The CFO of the SOM has a Manager of Financial Operations, Brian Magness, as well as 8 FTEs of accounting and administrative support. The CFO also works closely with each Department Administrator, the UT Medicine CFO, and the CFOs of each of our hospital partners. UC Davis (McGowan): See organization chart provided, 298 FTEs. Until 1998-9 SOM had financial director under CFO of health system which included the hospital and patient accounting for the medical center. Now SOM has its own CFO and a traditional financial administration, reimbursement, payroll, accounts payable, general ledger, etc. The Health System Controller covers debits and credits for the health system and practice management board. Patient accounting for the hospital and professional services are all in one; the general ledger and accounting are under one director. The SOM generates >1 million visits/year in all locations (on- and off-site clinics and hospitals). UU: Anderson:See organization chart (separate attachment). The structure and organization of the SOM and Hospitals are clear because Lorris Betz (Sr. VP for Health Sciences) is responsible for both. David Bjorkman is the SOM Dean and David Entwhistle is Hospital CEO; Betz supervises both. Cathy Anderson (CFO SOM) works closely with Dr. Betz’ office. Our system is very centralized. It is also friendly. Cathy attributes this to Betz controlling both. They are separate entities but both are part of the University. Separation may make a system more competitive, but it makes it harder to work well together. Because SOM and Hospitals/Clinics are all under the same financial umbrella it doesn’t do any good for either to try to redistribute income from the other. The only clear benefit is to increase the bottom line for the institution as a whole. The UUMG (medical group) is also part of the University. Therefore, all the pieces fit together so it is easier to make integrated decisions. Primary Children’s Medical Center and Huntsman Cancer Hospital are different because they are jointly owned/administered by the University and Intermountain Healthcare, a “not-for-profit” insurance company that owns a number of hospitals around the state. Between them, University Healthcare and IHC cover about 75% of Utahns. CFO FOM (Levy): The organization is comprised of 4 financial officers and the CFO. The task of the team is to provide oversight on the accounts of the 52 cost centres within the faculty on a monthly basis and to serve as intermediaries between the cost centers and financial services on main campus. Additional Comments: • The 52 cost centers have either full or part time financial managers that are responsible for ensuring the center stays within its budget and that the budget is balanced at year-end.
  • 2. • There is high turnover of staff in the financial departments • The accounting system (PeopleSoft) has introduced numerous errors, both due to human and systemic errors. UNM SOM (Gates): • Director • Budget Officer • 2 Financial analysts- one systems/training related, one financial statements • 1 Database tech-supplemental reporting, FAD, AAMC salary report • 1 Acct III-Dean’s five year financial plan • 1 Admin Asst • Although we reside in the SOM there are lines of reporting to HSC. UNM HSC (Ava Lovell) Chief Financial Officer: BS at Northern Arizona, CPA. Worked at a Big 8, and 2-3 Fortune 500 companies. Worked her way up from Accountant III in system. Worked in Grant/Contracts, Property, accounts payable and was noticed by David Harris, then brought to HSC, then asked to come back to do both HSC and Main. Attributes success to boss (Bill Britton) who encouraged her as a single mother to balance work and life, a tradition that carries on since she took over the position from former boss. Now serves as 50:50 VP of finance at HSC and Main UNM UNM HSC (Lovell): VP of Finance reports to HSC EVP, UNM main provost David Harris Under her Liz Metzgar, Sharon in Purchasing, Bob Fondino HSC all equal 2. Who should be contacted to assist with: a. grants or contracts management questions: UTHSC Practice Plan (Hernandez): Contracts are negotiated by Corrine UTHSC SOM (Allen): Jane Younger/Chris Green UC Davis (McGowan): for SOM, Mike Condrin directs Finance, Linda Dickinson assembles financial statments UNM SOM (Gates): Department Administrator or HSC Financial Services Preaward and/or Contract & Grant Accounting UNM HSC (Lovell): Mike Schwantis both HSC and Main b. faculty or staff payroll questions: Gabe Hernandez UTHSC SOM (Allen):Bill Allen or Brian Magness UC Davis (McGowan): Veronica Harshbarger, manager of payables and payroll (HR for rates, performance evaluations, reclassifications, etc. UNM SOM (Gates): UNM Payroll UNM HSC (Lovell): Single payroll (Liz Metzgar) c. 19900 funds questions: ? UNM SOM (Gates): Unknown d. funds transferred from the dean to the dept.:
  • 3. UTHSC SOM (Allen):Bill Allen or Brian Magness UTHSC Practice Plan (Hernandez): Distribution report UC Davis (McGowan): Mike Condrin and/or Bill McGowan for budget for dept. (Janette Lee or Linda D.) UNM SOM (Gates): Data in Banner. Discuss with Department Administrator. SOM Finance. UNM HSC (Lovell): Bob Fondino to: SOM (Kristin), Nursing and Pharmacy, Health Sciences Library and Information Center (HSLIC) e. establishing fund functioning accounts: UTHSC SOM (Allen):Brian Magness UC Davis (McGowan): Linda Dickinson (return is ~4% now) UNM SOM (Gates): Unknown UNM HSC (Lovell): HSC Central, UNM Main Central f. setting up recharge mechanisms for service cores: UTHSC Practice Plan (Hernandez): Expense allocation UTHSC SOM (Allen):Brian Herman or Robin Brey UC Davis (McGowan): Linda Dickinson UNM SOM (Gates): HSC Financial Service Unrestricted Accounting. UNM HSC (Lovell): Main (internal service center) e.g. Telecomm g. indirect cost returns: UTHSC SOM (Allen):There are no indirect cost returns to the Departments UC Davis (McGowan): Linda Dickinson UNM SOM (Gates):Discuss with Department Administrator. SOM Finance. UNM HSC (Lovell): Richard Larson HSC VP Research, Julia Fulghum (Main), Some negotiation goes on at this level 3. Are the financial statements based on cash or accrual accounting? UTHSC SOM (Allen):Modified Accrual (UT Medicine is based on accounts receivable but most are based on cash accounting)
  • 4. UC Davis (McGowan): Both: hospital financial statements on accrual basis; SOM income recognized when revenue received (cash basis) UU (Anderson): It depends. The University (as a whole, including SOM) does audited, accrual financial statements for bonding agencies. The hospital is separately audited and that rolls into the U of U annual financial report. It is on an accrual basis using GAP (general accounting procedures) principles for bond agencies. For the U of U financial report it isn’t separated out but is rolled in using these data. There is not a separate audited statement for the SOM. Source Fbs.admin.utah.edu/download—but I don’t have access. The SOM is done by fund accounting. The SOM has several funds: 6100 funds (state appropriations and tuition); 2000 designated funds (clinical revenue), grants and contracts (5000), 6000 is gifts (donated externally to the university). Within the SOM we have our own financial statements. They are not done in accordance with GAP. There are done both on an accrual and a cash basis: accrual really for clinical side, so isn’t fully accrual. We have a home-grown system for our internal use. Distribution decision-making is mission based. Education funds are distributed through a defined metric and not annual faculty reports of effort distribution. Variance reports are generated for each department on a quarterly basis. Each department is responsible for itself. They can’t come to the Dean for more money if they overspend, especially on the clinical side. Sometimes there are projects that are funded to benefit the institution. The intention is for these to be self funded in the long run. Cathy looks at all chart fields for the SOM monthly; if there is a >$50K deficit she contacts the department financial manager. UMS (Universal Management System) gives a front end to Peoplesoft within each department, so you don’t have to wait for the main financial office to enter (keeps financial accounting near real time). CFO FOM (Levy): Cash basis. This is based on the system used by the University of Calgary. The faculty gets budget to actuals statements monthly along with a variance analysis. UNM SOM (Gates):Modified cash basis, we post accruals in the Banner System. UNM HSC (Lovell): Accounting all the same, HSC main, Accrual by LAW, Modified Accrual means don’t cash out each month a. If both, who receives which? UC Davis (McGowan): See above UNM HSC (Lovell): Monthly: Regents (both special Facultyies and Finance committee and full regents so 2 x /mo) Departments: Daily/Hourly if needed, standard Monthly b. Which do department chairs receive? UTHSC SOM (Allen):Cash UNM SOM (Gates):Banner is accessible by the depts and reports can be generated at any time.
  • 5. UC Davis (McGowan): Cash basis, presented monthly; each manager in hospital receives hospital financial statement UNM HSC (Lovell): Modified Accrual c. Which does the university finance office receive? UTHSC SOM (Allen):Modified Accrual UC Davis (McGowan): Hospital financial statement but no SOM cash financial statement because it is in the electronic online system (DAFIS) and university has confidence in the SOM finance and in dept. chairs UNM SOM (Gates): We run reports out of Banner. UNM HSC (Lovell): All the same d. Who is on the distribution list to receive the income statement, balance sheet, and statement of cash flows: UTHSC SOM (Allen):UTHSCSA Executives (Mike Black, Jerry York, Theresa Chiang) and Deans of each School UC Davis (McGowan): SOM chairs and managers; Vice Chancellor and Deans, CIO, CFO and admin team of medical center receive monthly profit and loss and balance sheet for the hospital, which is also given to the faculty and at an annual meeting to the community advisory board. SOM and hospital share chairs disclosure of financial statements, and as public institution these are in the public domain. Hospital financial statement is also shared with the union leadership to facilitate discussions. CFO FOM (Levy): There are no balance sheets. This is in part due to an inability to track fixed assets and capital. Who owns these: The faculty? The University? The researcher? The FOM needs to balance its University budget on an annual basis with any carry-over tracked separately (the $ do not roll in to the next year’s budget). Monthly budget to actuals are tracked by the University’s financial group. Instead of an income statement, there is an annual statement of revenues. Revenues and expenditures are only tracked for the University of Calgary Medical Group (UCMG). Fund tracking for dollars from the University of Calgary is done with a list of revenues and expenditures. This represents only a portion of the Faculty budget. Revenue for the FOM come from (07/08 rounded) – see figures o Research dollars (including salary awards) and overhead (129M) o University of Calgary for operations (44M) o Clinical Salary Recovery (28M) o UCMG Levy (14M) o Other (14M)
  • 6. Faculty salaries from research dollars are tracked and managed by the FOM. All other research dollars are NOT tracked or managed by the FOM, but instead by the individual researchers. Recent auditing from the tri-council found many discrepancies and in appropriate spending. UNM SOM (Gates): Regents, Sr Administration, Core offices and auditors. UNM HSC (Lovell): As a PUBLIC university, the Regents, EVPs, Deans, Chairs all have access 4. How are clinical charges determined? UTHSC Practice Plan (Hernandez): Charges for E&M are based on 200% Medicare. Charges for procedures are based either on 200% of Medicare or 75th percentile for the region. UC Davis (McGowan): Not exact function of cost, set to generate dollars needed for services and equipment, building, increasing wage and benefits and increased pharmacy costs. So, they back into revenue needed to set rates with an algorithm to get revenues weighted for volume and cost. The litmus test is what is charged in the community (but not price-fixing, which has legal implications) to compare major rates to stay competitive UU (Anderson): If two clinical departments are doing the same thing, our contracts are the same for the same code. There are some codes you have to have certain training to use, which creates some differential, but there is no differential for the same code. It is controlled by contract. UUMG does the contract negotiation. Some things in psychiatry are negotiated separately because they are provided through the county. Clinical costs are done, but it is confusing with the hospital and SOM being reported together. It is tracked through various clinics. You can’t see it easily on SOM statements because the expenses are mixed together. Faculty salaries are especially tricky to track. That is the area where we are a little bit weak here. The cost per dollar from clinical activity we don’t track well. Now there is more emphasis on that for MBM. For example, the CV service line is trying to drill down and see what is making money. You need both pieces. Don’t make money losers bigger unless there is a reason; don’t cut money winners without thought. Losers need to be balanced by winners—don’t cut winners. MBM started when Betz arrived--- about 1999-2000. Costs are done per department. Ask Mike Cahalan (Chair Anesthesiology) or Dale Benson (UUMG) for more details. Clinic managers also know more. UNM SOM (Gates): Charge masters we have 3 UH, UNMMG, & CRTC UNM HSC (Lovell): All through SOM/UNM Hospital a. are charges the same for the same services in different departments? UTHSC Practice Plan (Hernandez): Yes UTHSC SOM (Allen):The charges are the same for the same service in all departments.
  • 7. UC Davis (McGowan): The charges are supposed to be the same, but inpatient is more expensive. The prices were originally set the structure of the demand for health care – less concern on inpatient, but the assumption was invalid. The Health System is working on making them the same. UNM SOM (Gates):Yes b. if not, how are the charges determined? UC Davis (McGowan): Regulated by Medicare UNM SOM (Gates): NHE c. how are clinical costs determined, ie, what elements are included in the cost calculations? UTHSC Practice Plan (Hernandez): Direct expenses include space, clinical staff and supplies. Shared overhead will be allocated based on wRVU (50%) and total revenue (50%). The cost per square foot at the MARC will be $20. UTHSC SOM (Allen):Clinical charges are based on 200% of Medicare allowable except for some exceptions in surgery (which are based on 250% of Medicare). In addition, indirect costs will be calculated using a new formula effective Jan. 1st. Indirects will be allocated based on a formula of 50% wRVUs and 50% total revenues. This should help reduce the need for a primary care subsidy. UNM SOM (Gates): UH-Medicare Cost Report, UNMMG Cost establishment including, faculty, non-faculty medical providers, staff, OH. CRTC-Discreet cost and HSC/SOM overhead. 5. Does the SOM do mission-based budgeting? UTHSC SOM (Allen):No – not for the past 5 years UC Davis (McGowan): This was tried a few years ago (considering research, education, clinical costs and where the dollars came from), but for reasons that are unclear, the institution lost interest. However, the Dean looks at the budget this way in considering allocations. UU (Anderson): Yes CFO FOM (Levy): Moving in that direction. See Budget Process Communication Oct08 UNM SOM (Gates): Yes, but not the strictest of models. In true mission based budgeting revenue is directly tied to expenses. In our case, we do not have enough funding in each mission area, so there is limited cross subsidization.
  • 8. UNM HSC (Lovell): Don’t use, have tried, but can only do mission-based REVENUE. EVP/Dean has always wanted to do, but still trying to at least parse out Clinical Missions. a. Do the departments do prospective budgeting? UTHSC Practice Plan (Hernandez): Yes – in February, the clinic managers are given a budget module to review. Budgets are then forwarded to the Finance Committee, approved by the Board and then sent to the SOM. UTHSC SOM (Allen):Yes. The budget process begins in January and budjets are finalized in late April or May (later in the year if it is a year in which there is a legislative session). Budgets are based on UT Medicine revenue/expense projections as well as MSRDP income/expenses related to faculty salaries and state funds. UC Davis (McGowan): Yes. They prepare annual 12-month budgets, and the SOM does simulations with focus on the department contribution to disposable cash and how it is used. More emphasis now on 3-year operations and expenses due to the current financial situation. Additional debt financing is unavailable but needed, so the institution needs to be positioned properly to still focus on research and education and then borrow $100M to invest in research and education when the economy turns around to take advantage of low interest rates when they become available. UU (Anderson): Yes. We do a one year budget, not multiple year. We start the process in Jan for the July fiscal year. It is detailed—down to individual employees. It is not by position yet but HR is working on that and that will hook in to what Cathy is currently doing. Each position is a chartfield. CFO FOM (Levy): Starting to move in that direction. UNM SOM (Gates): Yes, annually during the Annual Department Budget Reviews. UNM HSC (Lovell): Main campus does not have ability to do as much prospective budgeting because of limited sources of revenue. b. How often are budgets to actuals monitored? UTHSC Practice Plan (Hernandez): Every month UTHSC SOM (Allen):Each month UC Davis (McGowan): Every month with complete reports and financial statements to departments. UU (Anderson): Yes, monthly via Peoplesoft for each department. They are also monitored quarterly external to the department (at MBM, Dean’s level). UU (Anderson):Each department is different, but generally monthly, for MBM/Dean quarterly.
  • 9. CFO FOM (Levy): Same as FOM – monthly with oversight by the financial team (4 people overseeing 52 cost centers). UNM SOM (Gates): Departments typically review their data monthly. My office reviews monthly. In-depth reporting quarterly. UNM HSC (Lovell): Monthly with regents c. Who receives the feedback from this (b)? UTHSC Practice Plan (Hernandez): Chairs, Department Administrators, Board of Directors UTHSC SOM (Allen):Department Chairs, Department Administrators, UT Medicine Board UC Davis (McGowan): Dean and administrative team and Council of Chairs UU (Anderson): The report is sent out to clinical and basic sciences administrative managers and department chairs. It is their responsibility is to go out further if necessary. CFO FOM (Levy): Department heads and their financial managers. UNM SOM (Gates): I review monthly and work with Dept Administrators and related partners ie UH or HSC budget Office to explain/resolve the issues. Chairs receive the quarterly actuals in the COC. Dr. Roth and Sr Leadership attend quarterly reviews. At the reviews dept actual revenues and expenses are reviewed and discussed. I follow up with departments for explanation/resolution. Chairs and Departments have access to their financial information at all times with the Banner system. In many departments, Administrators and/or Accountants generate monthly reports for the Chairs to review. HSC Regents and UNM Board of Regents receive monthly reports. UNM HSC (Lovell): Each VP gets feedback from regents, for example when unrestricted accounts had deficits, golf courses, main campus research, Popejoy (fine arts), Student Health center, Main campus utilities with unexpected overage…New buildings now required to fill out Proforma financials for payment for utilities: Examples: New cancer treatment center. State of NM does not cover because not Education. Neither do they cover research. These expenses come out of “top slice” for projected utilities, new alarm systems, etc. With regard to West Side expansion for UNM campus and Hospital: Will look at other sources of revenue, for example medical office buildings, pharmacies, even eateries since being built in undeveloped area d. If a department is short of their revenue target, do other departments cover the shortfall or does the Dean cover?
  • 10. UTHSC SOM (Allen):Some Departments have a deficit balance. Departments can operate in the red in the short-term but the expectation is that they will get out. UC Davis (McGowan): Other departments do not, Dean has in past. Currently the dean won’t have the ability to cover all departments that are short. So, the hospital will have to help because the SOM has fewer sources of funds than the hospital. UU (Anderson): No. They have to cut expenses. The deficit sits in an account and the department pays interest. If something unanticipated/catastrophic happens the Dean might cover, but there would be strings. Departments set their own priorities and what they are going to do, so they are responsible for the budget. Departments generally have independence for everything. CFO FOM (Levy): Overages and under spending balance each other (in the first year). Not clear what the consequences are to a unit that exceeds its budget. UNM SOM (Gates): Typically, the dept has to cover shortfalls. However, if a significant operating deficit is identified then the dept and I work together to develop a deficit recovery plan. This is reviewed be Dr. Griffith and sent to the appropriate Sr. Dean for review, ie a clinical operating deficit would be reviewed and discussed with Katz, if he agrees with the assessment, he will take this request to UH for support. UNM HSC (Lovell): Never end up short unless overexpend. It must be covered within the college, now have electronic version of nonsufficient funds. e. What is the Dean’s tax used for? UTHSC SOM (Allen):The tax is used ofr bridge funding and for the recruitment and retention of key faculty. The tax is 2.75% for the Dean’s office and 2.75% for the President’s office (total of 5.5% of clinical revenues). UC Davis (McGowan): Supports administrative staff and the dean’s office; given back in recruitment packages to the departments/recruits; reserves for special circumstances. A billing tax and a dept. tax also exist. UU (Anderson):The Dean’s tax is 2% of clinical income. It is basically used centrally for things like genetic counseling start up costs, other program start up costs; Chair start up costs. They keep it focused on growing clinical programs because it comes from clinical programs. But it is also used a little for education and research because they are not self supporting. That support is short term. There is always transparency from MBM. We have one of the lowest Dean’s taxes in SOMs. It ties to our philosophy of what pays for what. Other places the Dean’s tax pays chair salaries but then the Dean also tells departments what to do. We collect 4.4% of clinical revenue—the remainder goes to UUMG, the compliance office, and the business office to support those. CFO FOM (Levy): There is not a Dean’s tax, but there is a Dean’s account. This is a cost center and the University of Calgary provides the operational budget. There is no oversight beyond meeting budgetary limitations.
  • 11. UNM SOM (Gates): The Dean’s tax serves several purposes. One aspect of the taxation structure is the HSC “Gap Tax” this amount covers the difference between what the State gives us and HSC expenses. We currently pay about 46% of the total HSC Gap Tax. This includes services like Legal, Compliance, Administration, etc. We also use the Dean’s tax to support strategic initiatives like the P30 in the Cancer Center, securing the CTSC, Chair’s Packages, new programs, etc This type of funding is often used to support various department requests for support. UNM HSC (Lovell): No Dean’s tax main campus. Have just instituted Provost tax which totals $1M as compared to SOM Dean’s tax of $18-20 M. Provost tax used for additional graduate teachers, minority faculty f. To what extent is the usage of the dean’s tax discretionary? UTHSC SOM (Allen):It is not discretionary. An annual presentation regarding how the tax is being used is presented to the Chairs. UC Davis (McGowan): Totally for appending. Most goes back to struggling departments, both basic science and clinical, Peds is the largest at $4.2M. UU (Anderson): Totally. There are no bounds or limits on it because it doesn’t pay departmental expenses. UNM SOM (Gates): Somewhat, there is a specific amount that is already allocated like the HSC tax and SOM administration. As new dollars are added or as some commitments end that makes funds available to invest in other programs/projects. UNM HSC (Lovell): Completely (does use advisors) g. Who provides oversight of the usage of the dean’s tax? UTHSC SOM (Allen):The CFO and the Dean. The President’s office also get involved in matters of faculty recruitment and retention. UC Davis (McGowan): No one, it is her discretion; the CFO records the operating budget, which is overseen by the Regents. 83% of health system reserves were from the clinical departments, 10% from research, 3.2% from state and 0.4$ from tuition. UU (Anderson):The Dean’s Tax is overseen by MBM—it’s all transparent. UNM SOM (Gates): Dr. Roth makes all commitments. My office monitors the commitments and ensures they are awarded at the correct levels and utilized for the purpose awarded. UNM HSC (Lovell): SOM, HSC budget office, Provost office for Main
  • 12. 6. Does the SOM do mission-based management across departments? How is it working? UTHSC Practice Plan (Hernandez): No. UTHSC SOM (Allen):No. UC Davis (McGowan): Yes, when present department budget for funds flow for research, education and clinical missions. Works well but don’t formally build budget on missions, rather analyze expenditures based on mission. UU (Anderson):We look at it on a departmental level and pull together a compilation. But we don’t tell departments how to use the money. In an indirect way it happens from the Dean’s tax —you don’t get back exactly what you put in. The education money a department gets may or may not be used for educational support. The pool of dollars is divided based on a formula for, eg education. The money is allocated by department, but the department is free to use the money as it sees fit. The intention is they should use on education, but how that is done is up to the department and depends on how departments are run—some are more centralized some more MBM. It’s working well. CFO FOM (Levy): This is being implemented along with mission-based budgeting. A formal mechanisms has not be established. – See Budget Process Communication Oct08 UNM SOM (Gates): No UNM HSC (Lovell): See other interview 7. Does the faculty participate in any risk agreements that involve risk sharing between provider and payer? UTHSC Practice Plan (Hernandez): No. UTHSC SOM (Allen):No – There are no capitated agreements UC Davis (McGowan): Yes, but less and less; have full risk contracts with health system for all clinical care and directed by professional and hospital practices, including department risk, health center risk; performance on risk contracts revenue <<$25M UU (Anderson): Not really unless you are looking at a couple of service lines, eg cardiovascular and neurosciences service lines. We don’t with malpractice insurance. If everybody loses everybody loses and vv. UNM SOM (Gates): Yes, we have one agreement in OB/Gyn for 400K with Lovelace UNM HSC (Lovell): See other interview
  • 13. a. What percentage of the clinical practice is based on shared risk? UC Davis (McGowan): ~5% UU (Anderson): Minimal. UNM SOM (Gates): < 1% b. What effect is it having on clinical practices and on the finances of the SOM? UC Davis (McGowan): 15% of practice is capitated on gross, 13.3% on net dollars received, varies by department, not much and getting less (should never have been capitated), will improve net revenue (not as much as PPO or HMO contracts; 33.9% return from capitated 19% UNM SOM (Gates): None 8. What are the effects of the recent change in the economy on: UNM HSC (Lovell): All within consolidated investment fund, some reduction of principle, some reduction of interest, 15-20% loss, but NO loss of operating funds in bonds, capital, project funds. a. SOM endowments UTHSC SOM (Allen):Value of corpus has decreased but continues to generate 4.5% rate of return. UTIMCO is the Fund Management arm of the UT System. UC Davis (McGowan): no report since June but guess decline consistently with pension funding (32-35%) UU (Anderson): N/A UNM SOM (Gates): Our endowments live in the foundation. The foundation board determines the percentage return we will receive. Regents review and approve distribution. We receive the distribution at the end of each fiscal year. b. Philanthropy to the SOM UTHSC SOM (Allen):Overall, philanthropy has decreased, however UTHSCSA has received several very large gifts over the past year (Greehey 20 million, Long 25 million). UC Davis (McGowan): $9.8M now, was $33M 2 years ago UNM SOM (Gates): UNM and even moreover the SOM philanthropy efforts is relatively young and are starting to take shape. We have done well over the last year, with the Cancer Center leading the way with their 10M donation. UNM HSC (Lovell): John Straut: VP overall endowments c. SOM capital
  • 14. UTHSC SOM (Allen):We obtain SOM capital through the UT System. We have received funding for a new Education building and a Research building. UC Davis (McGowan): now stopping all capital expenditures for the SOM and hospital, except those funded by outside ( eg, $28M stem cell and $32M for telemedicine) and hospital Pavilion – committed to finish this building UNM SOM (Gates): The impact on the State budget will have an impact on capital as the legislature pulls back money. Currently proposed is reducing some of the Equipment replacement and renewal. As well as reductions in Building replacement and renewal funds. UNM HSC (Lovell): Still ok, recently passed bonds for $17 M Cancer center, Biology, Engineering, PIT (Basketballl), all approved moving ahead, but LAW must use as appropriated (must not misappropriate) d. making opportunities in the SOM – UTHSC Practice Plan (Hernandez): Economy has impacted the number of Carelink and Self-pay patients that are seen through UT Med. UTHSC SOM (Allen):Texas has not been hit as hard by the economic downturn. UTHSCSA is fortunate to be a public university supported by some “hard money”. UC Davis (McGowan): infrastructure and development and investment capital encouraged by philanthropy and capital dollars, bad for hiring educators and researchers because people are staying put because it is hard to move to California (with state budget and earthquake risk and high housing prices) which may have devastating effect on growth UNM SOM (Gates): Dr. Roth puts patient care, trainees/students, and faculty & staff first. I would anticipate funds that may have gone into new programs being utilized to stabilize existing mission critical areas. 9. How many days of cash on hand does the SOM have relative to its debt service? UTHSC Practice Plan (Hernandez): 120-180 days UTHSC SOM (Allen):90-100 days UC Davis (McGowan): No debt service in the SOM so days of cash is nebulous in the SOM. In the hospital, number of days of spendable cash is 46.5 days, which is about 15 days less than UC recommends and about 55 days less than desired. We are spending $13-16M/month on the Pavilion. So, plan is to get to UC recommendation but will get worse through January 2010 without additional loans. UNM SOM (Gates): We have an annual debt service of ~250K for the CRF. Debt service for the BBRP is carried at UH and the HSC carries debt service on other buildings.
  • 15. UNM HSC (Lovell): None, all cash is at inistitution level. On Main, about 90 days. 10. What is a 501c? Does the SOM have it? Does each department have it? UTHSC Practice Plan (Hernandez): A 501c is a non-profit organization. UTHSC SOM (Allen):A 501c is a not for profit company. UT Medicine was set up as a 501a company in the mid 90’s in order to provide risk contracting. UT Medicine will continue to exist for joint ventures, however the majority of the infrastructure will be integrated back into UTHSCSA in the near future. UC Davis (McGowan): It is a not for profit designation of a corporation granted by the IRS so that no income tax is paid and the institution receives a welfare exemption (no CA property tax). The SOM has this designation, but it is not by department, just one such designation for all of UC UNM SOM (Gates): A 501c3 is a nonprofit entity-, I have included a general definition below. In the broadest terms, a nonprofit is defined as an organization that does not have owners who profit when revenues exceed expenses. In other words, a nonprofit may make a “profit,” but it does not distribute its profit to individuals or shareholders as a for-profit organization would.” The SOM does not have a 501c3. UNM does have the UNM Medical Group, Science and Technology Center, LoboEnergy, and most recently the UNM Foundation. These entities are component units. UNM HSC (Lovell): UNM Medical Group (practice plan), UNM Foundation, Science and Technology Corporation, Lobo Club, Lobo Energy, Alumni Association. Called component units in accounting terms 11. What is net present value? UTHSC Practice Plan (Hernandez): Takes into account the time value of money. UTHSC SOM (Allen):Method for determining the time value of money in order to appraise long- term projects UC Davis (McGowan): Value of $1 today invested at given interest rate that would accumulate X dollars in Y time, eg, $1000 in 10 years would be about $93 UNM HSC (Lovell): Not sure how to describe, nor applicable 12. How are budget cuts determined and projects prioritized? UTHSC Practice Plan (Hernandez): Budget cuts should be based on margin. Try to weed out administrative costs.
  • 16. UTHSC SOM (Allen):Budget cuts are an art not a science. Decisions are made based on the value of programs and how they fit into the overall projects of UTHSCSA. Cuts are evaluated across all mission areas. We are planning for a 5% budget reduction. UC Davis (McGowan): By progress review by the executive administrative group to see if meeting mission and expenses and volume. It is department focused, usually done with budget reduction targets and chair has authority and power. UNM SOM (Gates): This is determined by external requirements and internal processes. The legislature and the Governor start the cutting process. Current cuts are being proposed by both, ultimately their decision will define our starting point. The SOM and HSC Budget Office will work with Dr. Roth to examine the cuts and their programmatic impact. From that he will develop a plan to evaluate funding. Research is Federally funded driven. Clinical, market driven. UNM HSC (Lovell): EVP’s first look at central resource, then each college asked to cut based on their own revenues and priorities (recently experience 5% return of state funding for FY 09) 13. May I have a copy of the LCME annual medical school questionnaire Part 1A for the last 10 years to use in our assignment to plot our trends against national averages? UTHSC SOM (Allen):Revenues and expenses are itemized differently due to varying definitions. UC Davis (McGowan): Received CFO FOM (Levy): Recent ones were provided, but at the time of interview, there was doubt about being able to produce these from the past 10 years. UNM SOM (Gates): Yes. UNM HSC (Lovell): Already received 14. Does the SOM have a copy of the Institutional Profile System (IPS) Annual Report that is available to members of the AAMC (ranking UCD against all others in a number of categories, eg, research revenue)? [If not, can I have the IPSuser name and password to access it online? UTHSC SOM (Allen):Can you provide? UC Davis (McGowan): Faculty salaries are at http://pnet400/aamc.org/fssreports with username WLO, password Equity4WIM UNM SOM (Gates): This is not something I use or am aware of.
  • 17. UNM HSC (Lovell): Main has IPED’s which is a federal system for annual comparisons of financial statements Any thing I neglected? We need to be far more vigilant about internal controls (Sarbone-Oxley , Enron regulations) since we don’t know that info report is accurate. Out new system is far more transparent (Banner) but there could still be flaws, mistakes. How will the state budget cuts affect the SOM? UU (Anderson):It depends on what the legislature does. Governor’s budget is based on timely, targeted investment. Shovel ready capital programs (new business school building, new pharmacy school building which are nearly funded already) may be funded by state bonds to make up the difference in available private funds. Cuts currently are 4%. Being applied strategically, not across the board. Challenge is tenured faculty. Trying not to cut strengths. 2010 cuts may be as high as 17% (aggregate), but may be as low as 7%. Concurrent Medicaid (federal) issue that loses us $100 million in funding may mean a 20-30% cut in medical school class size. Matching funds from legislature could prevent. It’s a bit of a power game (our legislature is quite conservative; Governor also Republican, but progressive). There is some bad blood between legislature and U currently over attempted banning of concealed weapons on the U campus.

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