Investments Boost UMass Memorial Surplus

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UMass Memorial Health Care Inc. (UMMHC), the largest employer in Central Massachusetts, has its investment portfolio to thank for an improved fiscal 2012, which ended Sept. 30.

UMMHC, which operates the three-campus UMass Memorial Medical Center in Worcester and three other hospitals in Central Massachusetts, saw its net realized and unrealized gain on investments — the biggest piece of its non-operating income — swing up to $44.7 million this year, compared to a loss of $10.1 million in 2011.

Those non-operating income gains drove much of the increase the system saw in its annual surplus, which grew to $53.4 million from a revised $29.7 million last year (UMMHC's 2011 financials showed a surplus of $28 million).

Net patient service revenue ticked up by about 1 percent to $2.11 billion, which was enough to make operations barely profitable. The system eked out $5 million in net income on $2.29 billion in operating revenue. That compares to $35 million on $2.08 billion last year.

The system also ended the year carrying a much higher patient accounts receivable balance, which was at $326.8 million as of Sept. 30, compared to $220.7 million a year ago.

Spokesman Robert Brogna said the 40-percent jump in money owed to UMMHC by private and public payers and patients is the result of a new clinical and patient billing system for the medical center. He said the system, which is also now used at Marlborough and Clinton hospitals, is an improvement and helps UMMHC meet government-mandated billing requirements.

"Whenever a healthcare organization implements a new information technology application which touches all parts of the clinical operation, a temporary rise in the level of accounts receivable is expected as the organization adapts to the new system," Brogna wrote in an email. "Efforts are underway in FY2013 which will reduce the level of accounts receivable to a level more consistent with prior years."

Across the UMMHC system, patient discharges and inpatient and outpatient surgeries all declined over the year. Ambulatory visits climbed 5 percent to 717,491 and emergency room visits increased 3 percent to 273,380.

John O'Brien, UMMHC's president and CEO, who is retiring this year, said in a Dec. 19 online letter to employees that "swift changes in the form of expense reduction and streamlining operations" are necessary to ensure a path to health care affordability for patients and a stable financial footing for UMMHC.

The system cut more than 400 employees during 2012, leaving it with just over 13,200.

"Without a continued, aggressive focus on providing affordable care, we know that our operating margin will be threatened for the foreseeable future," O'Brien wrote. "Over the next 10 years, our health care system needs to plan for and implement about $524 million in revenue cuts from government payers."

Of those employees cut this year, 140 were associated with the medical center's home health and hospice division, which it sold in September to Worcester-based VNA Care Network for $2.8 million.

UMMHC will also be shedding its laboratories division. It announced a purchase-and-sale agreement with Quest Diagnostics in October. The price has not been disclosed, but UMMHC has said it will keep a stake in the business, which Quest is moving to Marlborough. The sale is expected to close this month.

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