July 15, 2005

Leadership meeting focuses on operating budget, information systems and JCAHO lab survey

Progress with finalizing the FY'06 operating budget process was the major topic of a hospitalwide leadership meeting July 11, with the most important news being the significant reduction of a $100 million budget gap to $9.5 million. "We have made tremendous progress in developing a budget plan that will meet our financial targets and allow a 4 percent growth in FTEs — which translates into 350 new positions," said Sally Mason Boemer, vice president of MGH Finance. "And this plan will enable us to fund several new strategic initiatives, which will position us well going forward."

The initial budget gap can be attributed to modest revenue and volume assumptions and a large number of nearly unavoidable expenses that were added to the budget. Targets were set to close approximately 40 percent of the budget gap through volume and payment rates and 60 percent through slowing the rate of expense growth.

On the revenue side, the hospital exceeded its target of $40 million in improved rates and volume by $6 million. And while significant progress has been made in reducing additional expenses, the hospital still is slightly behind its targeted goal. Several strategies are being implemented to further close the remaining $9.5 million gap. Mason Boemer emphasized the importance of the hospital's plan to close the gap and achieve a $112.9 million margin, since operating margins are the primary funding source for hospital investments in new facilities, equipment and information systems.

She also reviewed the key drivers of the budget. Inpatient volume is at a 2.1 percent growth rate comparing second-quarter FY'05 to FY'06 budget. Outpatient volume is projected to grow at a higher rate than inpatient volume for several key services. Total net patient service revenue is projected to grow 10.3 percent compared to the FY'05 forecast. Nonpatient revenue is expected to grow modestly, and total expenses currently are growing at 8.7 percent compared to the FY'05 forecast. In addition, senior management is working with departments to determine the hiring priorities so that the target of 350 full-time-equivalent (FTE) positions can be reached.

“Through a combination of revenue and volume growth and slowing the rate of expense growth, we should be able to achieve our financial targets and accomplish some important objectives,” said Mason Boemer. These objectives include funding several initiatives aimed at expanding capacity and better managing volume, launching several clinical growth plans, supporting the employee wage and salary program and making the Richard B. Simches Research Center fully operational.

Jim Noga, chief information officer for the MGH, presented an update of the current Information Systems (IS) projects and goals for FY'06 and beyond. He gave a status report on 36 current IS projects — including the electronic medication administration process project, the further deployment of the longitudinal medical record, the expansion of the patient tracking system beyond the Yawkey Center for Outpatient Care, and more upgrades to the Patcom and IDX systems as a part of the PACE program.

Important initiatives are underway that will affect the hospital's IS infrastructure, including discussions with IS industry leaders to develop a high-end medical-grade network; introducing the next generation of Windows software throughout the hospital; increasing security and intrusion detection; implementing more electronic security measures established by HIPAA; and targeting areas in the hospital to support a wireless environment.

Maryanne Spicer, director of MGH Compliance, gave a brief update about the hospital's preparations for a lab survey to be conducted by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). The MGH recently was notified that one surveyor will conduct the lab inspection from Sept. 19 to Oct. 3. Spicer emphasized that this survey can include all areas of the hospital because of the new tracer methodology being used by JCAHO surveyors. "These surveys aren't just about labs anymore," she said. "By using the tracer methodology, a surveyor can trace a lab result back to a patient and his or her course of treatment. This means that anyone involved with a particular patient could be involved with the lab survey." For more about the lab survey, see story in this week's Hotline.