UAMS Sees Financial Upturn Under Patterson

UAMS Sees Financial Upturn Under Patterson
Cam Patterson, the UAMS chancellor, has presided over a period of financial improvement.

The University of Arkansas for Medical Sciences has seen its financial condition improve under Chancellor Cam Patterson, who assumed the role in June 2018.

During his first full fiscal year, which ended June 30, UAMS, which includes the state’s only teaching hospital, saw a surplus of $39.8 million. The previous year, UAMS reported a deficit of $15.5 million. And for its fiscal year that ended in 2017, the loss was $19.9 million.

Patterson told Arkansas Business recently that UAMS’ improved financial outlook wasn’t attributable to one specific thing. “It’s been a lot of hard work,” Patterson said in his office at UAMS. “It’s the team pulling together. It’s focusing on our mission, and it’s making sure that we are not wasting any resources.”

UAMS is now focused on its three missions: research, education and clinical care. “If you can’t check at least one of those boxes, it’s something that we ought not to be doing,” Patterson said.

UAMS experienced a turbulent fiscal year beginning July 1, 2017 — before Patterson arrived. Months into that fiscal year UAMS’ deficit — which had been budgeted for $39.2 million — was on track to reach $72 million.

The dire financial projection resulted in UAMS slashing about 600 positions, 258 of them filled, in January 2018. A month later, UAMS, which employs about 10,500, said it would eliminate another 125 positions through attrition.

“I think there was some pain involved along the way, but I think we are a much more efficient organization,” Patterson said.

UAMS’ fiscal 2019 budget was the first balanced budget it had submitted to the University of Arkansas System Board of Trustees in several years.

Patterson said UAMS hasn’t stopped hiring employees. “But we’re being very careful and very selective about adding new positions to our workforce,” he said.

Technology Upgrades

Patterson said that UAMS also is focused on being a “more technologically savvy organization” so employees aren’t “being bogged down in trivial work that can be displaced by technology.”

He said UAMS is considering using automated tools to improve clinical coding, which is key in getting insurance reimbursements for patient services.

Patterson said that UAMS also is “investing in digital health, which makes it cheaper, both for UAMS and for our patients, to access health care.”

Earlier this year, UAMS created the Institute for Digital Health & Innovation. The institute seeks to provide patients with equipment so they can take part in live video consultations 24 hours a day and seven days a week with doctors and other providers, according to a UAMS news release. That technology also allows providers to collect health information from patients, reducing the need for office visits or trips to the emergency room.

“There are many ways that we are introducing technology to make ourselves not only a more financially efficient organization, but a more patient-friendly organization,” Patterson said.

In addition, Patterson said, UAMS is looking at using artificial intelligence programs to help manage patient flow through the hospital. “We’re deep in thought about how far we want to go with this,” Patterson said. “We haven’t begun to implement anything yet.”

NCI Designation

UAMS’ recent addition of Dr. Michael Birrer, an oncologist who specializes in gynecologic cancers, as vice chancellor and director of the Winthrop P. Rockefeller Cancer Institute is expected to help the center reach its goal of achieving designation by the National Cancer Institute, Patterson said.

The NCI designation would bring to UAMS clinical trials and therapies not currently available in Arkansas.

UAMS has said getting the designation would mean a $72 million economic impact on Arkansas and about 1,500 new jobs over five years.

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While the financial support from the state of Arkansas to UAMS is expected to remain flat over the next several years, the state will provide $10 million a year for the next several years for UAMS to seek NCI designation.

Before joining UAMS, Birrer had been director of the O’Neal Comprehensive Cancer Center at the University of Alabama at Birmingham, which has NCI designation.

Patterson said he recently spoke with Dr. Ned Sharpless, a former director of the NCI who returned to the director position this month. Patterson said that Sharpless was “very bullish on the idea that UAMS will be well received when our application is submitted,” which is expected to be in a few years.

The NCI said it couldn’t comment on pending applications.

Record Numbers

For the fiscal year that ended in June, UAMS’ operating revenue was $1.625 billion, a record.

One of the drivers of financial improvement was a 5.7% increase in net revenue from patient services, to $1.3 billion, compared with the same period the previous year.

Patterson said UAMS doesn’t have a problem finding patients. “Our problem is trying to find the capacity to take care of patients,” he said.

Amanda George, vice chancellor for finance and chief financial officer, said inpatient volumes were up about 1% and outpatient volumes were up 2% in the recent fiscal year. She also said a one-time third-party reimbursement settlement of $15 million increased the net patient service revenue.

UAMS’ total operating expenses, however, were $1.621 billion, also a record. Supplies and other services increased by $17.9 million, or 3.6%, in fiscal 2019, largely because of increases in costs of medical supplies, primarily for surgeries, and drugs and medicines for patient care, according to the auditors’ report by KPMG LLP of Dallas.

“When your net patient services revenue goes up, you do expect your supply costs to go up too because they’re supplies associated with the increased volume,” George said.

UAMS also submitted a balanced budget to the UA Board of Trustees for the current fiscal year that began July 1.

Through the first quarter of this fiscal year, George said, UAMS’ positive financial performance has continued, and it is seeing “strong” patient volumes.

Still, UAMS continues to look for ways to be more efficient. “Just because you’re doing well doesn’t mean that you can allow inefficiencies to accumulate,” Patterson said.

UAMS Financial Statement

  Fiscal Years Ended June 30 (in thousands)
  2017 2018 2019
Total operating revenue $1,446,158 $1,521,503 $1,625,095
Total operating expenses* $1,532,579 $1,600,792 $1,621,710
Operating income -$86,421 -$79,289 $3,385
Total nonoperating revenue** $64,079 $58,859 $30,305
Increase in net position -$19,886 -$15,563 $39,853
*Includes depreciation and amortization
**Includes net state appropriations and gifts
Source: Auditors’ report for UAMS

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