New UAMS Chancellor Attempts to End Losses

by Mark Friedman  on Monday, Nov. 30, 2009 12:00 am  

Dr. Daniel Rahn says UAMS has "to operate within available resources, and in the recent past we have had expenses outstripping revenue in a number of arenas."

The first phase of the 300,000-SF, $150 million Cancer Institute is scheduled to open in the summer.

Goodhand, the CFO, said that the Cancer Institute needed about $28 million to be complete. That represents a quarter of UAMS' reserves, which stood at about $110 million as of last week.

"With the market coming back so nicely, I hate to sell our reserves, but we certainly have them there," Goodhand said. "We planned to use some of [the reserves] for the cancer center. So we're just trying to avoid [liquidation], if possible.

"We're going to see if we can get by without selling any of the investments," she said. "But it's possible we may have to."

Bad Timing
By the second half of 2008, most university hospitals were slashing costs because of the downturn in the economy, said Dr. Joanne Conroy, chief health care officer for the Association of American Medical Colleges of Washington, D.C.

"Many of them had hiring freezes or delayed capital investments in order to keep themselves in the black," she said.

UAMS, however, was in a growth mode. It added 300 employees to staff its new hospital and Psychiatric Research Institute, which were being completed at the end of 2008. UAMS has about 10,000 employees and is one of the state's largest employers.

For fiscal year 2007, which began in mid-2006, UAMS spent $600.5 million in compensation and benefits. Two years later, the number had jumped to $707.1 million.

UAMS had projected an operating loss of $46.25 million for fiscal 2009 and a net income of $1.5 million after the state funds and gifts were counted. (Last fall, Goodhand and Wilson never included capital gifts when discussing income projections.)

"In spite of a trouble economy nationally, I feel very good about our financial outlook for the current fiscal year and beyond," Wilson said in letter to Arkansas Business in response to an October 2008 story about UAMS' growing operating losses. "Even if our investment income fails to meet expectations, we have reserves from previous years to offset potential investment losses."

At the end of 2008, Wilson was preparing to open the centerpiece of the new campus: A 10-story, 540,000-SF hospital. Wilson had lobbied for a new hospital for years because the one UAMS had was built in the 1950s and was becoming outdated.

The new $200 million hospital opened in January, just as the full brunt of the worst recession in decades was being felt. It featured the latest medical technology, larger all-private patient rooms and neonatal intensive care units.



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