UMass Memorial CFO: System well ahead of budget in 2015

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By Emily Micucci

The state’s Center for Health Information and Analysis reported last week that Central Massachusetts hospitals collectively have the lowest total margins among all regions of Massachusetts.

But that doesn’t mean the picture is grim. Sergio Melgar, chief financial officer for UMass Memorial Health Care, said one has to look beyond margins and operating surpluses and losses for fiscal 2014, as detailed in the center’s recent report, to appreciate the bigger picture.

While operating margins hovered around one percent for most of the four UMass Memorial hospitals in fiscal 2014 (total margins, including non-operating income and expenses, fell between zero and four percent), the region’s largest provider and employer is operating with a surplus of $23 million — about $18 million ahead of budget for the first nine months of fiscal 2015, which ends Sept. 30.

Melgar cited the system’s quarterly report, dated Aug. 25, published just two days before CHIA released its numbers for fiscal 2014. In addition to being significantly ahead of projections for the year as a system, Melgar noted that, in aggregate, UMass Memorial’s four individual hospitals are operating about $7 million ahead of budget as well.

After suffering a $55 million operating loss in fiscal 2013, the system finished 2014 about $55 million in black, for a swing of $110 million. In part, that was due to cutting expenses through the sale of certain businesses and trimming services at UMass Medical Center in Worcester, Melgar said. But it was also a function of improving the flow of patients into the system.

By making it easier for patients to get into the UMass Memorial system by streamlining entry points such as the Emergency Department, the system has been able to boost volumes by as much as four or five percent. Meanwhile, Melgar said otheracute-care hospitals have seen patient volumes increase a more modest one percent statewide, on average.

Like UMass Memorial Health Care CEO Dr. Eric Dickson, Melgar joined the system at a pivotal time. The administration has taken steps to reverse the downward trend in patient volumes. Melgar noted that in the first quarter of 2014, volume was down as much as 10 percent. An important step was recognizing that the system had an access problem it had to correct since patients have a good number of alternatives for health care providers. Many of those providers have lower costs for patients who are increasingly subscribing to tiered network plans, Melgar said. These plans incent them to seek providers that are deemed lower cost.

“I think part of it is a very big improvement of access into the system,” Melgar said.

Tenet hospitals: Saint Vincent on top, MetroWest Medical struggles

Saint Vincent Hospital in Worcester finished with the largest margins of any Central Massachusetts hospital in fiscal 2014. A for-profit hospital owned by Dallas-based Tenet Healthcare, Saint Vincent finished the year with a profit of $65.2 million, on a margin of 15.6 percent. That was the largest profit turned in by any individual hospital outside Greater Boston, and Saint Vincent made more money than Boston’s Beth Israel Deaconess Medical Center, according to the CHIA report.

Steve MacLauchlan, CEO at Saint Vincent, responded to those results in a written statement this week.

“Our efforts have included incorporation of clinical and operational best practices, which allow us to be a provider of choice for patients and payors in Central Massachusetts, particularly as limited network plans become more common. We are very proud to be a significant contributor to the well-being of the Greater Worcester area, as a healthcare provider and also as an economic contributor to the community, since we are a taxpaying entity and a major employer in the area,” MacLauchlan said.

On the other hand, MetroWest Medical Center, with campuses in Natick and Framingham, has struggled to turn around while other hospitals have rebounded in the last couple of years. Like Saint Vincent, MetroWest Medical was acquired by Tenet in 2013 when the company acquired former owner Vanguard Health Systems.

MetroWest Medical lost $1.3 million in fiscal 2013, and losses jumped to $6 million in fiscal 2014, according to CHIA.

In a written statement, CEO Barbara Doyle alluded to the hospital’s geographic challenges. The hospital is located within short driving distances to many competing hospitals in Greater Boston.

“We are in a highly competitive geography for a healthcare provider, with patients having access to multiple academic medical centers and community hospitals very close by,” Doyle said. “We have focused in several key areas over the last year to continue to improve performance, including expansion of our behavioral health unit (in Natick), and a focus on bariatric services and maternity services, all of which are important health services to the MetroWest community that we serve.”

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