May 18, 2001

The hospital has had a strong financial performance in the first six months of this fiscal year, despite a slight lag behind budgeted targets, senior management reported at a leadership meeting May 16. Efforts are under way to better manage hospital capacity by opening more available beds and further reducing length of stay to address the increasingly high patient volume.

According to Sally Mason Boemer, vice president of MGH Finance, although the operating gain and hospital volume are behind budget, the financial standings are positive. The operating gain for the first two quarters of FY 2001 is nearly $2 million behind budget and $3.5 million behind last year's performance. Volume also lagged behind the budgeted target but exceeds last year by 2.8 percent. The revised financial forecast for the remainder of the year is expected to be 3 percent ahead of last year's performance.

Length of stay (LOS) crept up to nearly 6.0 days, which is 0.11 days above budget and .04 days longer than last year. However, several initiatives launched by the Clinical Performance Management program aim to improve patient flow and further reduce LOS.

Katie Hope, budget director for Finance, reported that the hospital's revenue is on target despite volume being behind budget. Relief from the Balanced Budget Act and negotiations with insurers contributed to favorable patient revenue. A 9 percent increase in research revenue also was a factor in the overall positive revenue results.

Expenses continue to be a challenge, particularly in medical and surgical supplies and utilities such as steam and electricity, which recently have increased in cost. Because of the tight labor market, managers have been hiring more expensive temporary employees and using permanent employees for more overtime, which also has contributed to higher expenses.

Budget planning for FY 2002 is under way, and preliminary plans suggest that a $20 million gap will have to be closed for the hospital to achieve its margin target of 3 percent. This target is below the average for academic medical centers around the country and is vital for the hospital to be able to fund any critical capital investments.

"There is a mix of good news here," said James J. Mongan, MD, president of the MGH. "Because of the hard work and dedication of everyone throughout the hospital, our financial performance is solid, and I want to thank all our employees for their commitment to our patients. However, the challenges never seem to end. To continue to see positive results moving forward, we need to stay focused on managing the budget process while continuing to provide the same high-quality care to our patients."

Other hospital activities:
Jeff Davis, senior vice president for Human Resources, continued on a positive note by announcing the hospital's acquisition of the Charles River Park Health and Fitness, Pool and Cabana Club, a full-service fitness center located next to the hospital.

After a few repairs and renovations, the health club will be open to MGH employees who wish to join, beginning in July, at a discounted rate with no initiation fee. Davis introduced Kate Brill-Daley, who will continue as manager of the club, and Eric Desmond, who livened up the meeting by getting the audience — consisting of senior management, department heads and supervisors — on their feet for a sample of his exercise "boot camp," including jumping jacks, toe touches and running-in-place exercises.

Davis also announced that in addition to the hospital's regular wage and salary program, significant salary market adjustments have been made during the year. The adjustments have been made throughout the hospital's various staff positions – the most recent one being for nurses during National Nurse Recognition Week.

"Even though the hospital is slightly behind budget, making these salary adjustments shows the great commitment of the MGH to its employees," Davis said. "These adjustments add up to well over $3 million, which wasn't in this year's budget. But it is an important investment to help recruit and retain employees in this tight labor market."

Jeanette Ives Erickson, RN, MS, senior vice president for Patient Care Services and chief nurse, concluded the leadership meeting with the news that more beds are opening to help alleviate high-capacity issues.

These additions will give the hospital 877 beds — an increase of 22 — plus 35 bassinets. Plans are being considered to open more beds on Ellison 13, 18 and 19 and on Blake 11 and 14.

"It is an understatement to say the hospital is very busy," said Ives Erickson. "We need to continue to make these capacity management decisions so that we can care for our patients, get them home in an appropriate time and admit patients who need to access our services. We are at capacity and are successful, and we couldn't manage it without the hard work and high energy of all of our employees."