Have an Idea to Reduce Expenses?
Investing in our Future
UW Health is continuing to experience high demand for our services, which puts tremendous pressure on our staff and resources. Yet despite full hospital beds and clinic exam rooms, our expenses are catching up to or outpacing our revenue growth.
Our experience over the last few months is consistent with that of other health care organizations across the country. Our medical supply and pharmacy costs have increased at a faster rate than before leading to decreased operating margins - or money left over to set aside for future use.
As an organization, it’s not enough for us to simply cover our expenses each month. Having money left over after paying our expenses helps fund our future, allowing us to upgrade our technology and equipment, start new clinical programs for our patients or build new facilities. It also helps cover those unplanned expenses like maintenance issues, replacing malfunctioning equipment or purchasing new pharmaceuticals or medical supplies.
An operating margin not only provides us the resources we need to stay agile and competitive in the ever-changing field of medicine, but also acts as a safety net against the unexpected. We must ensure that our financial resources are always used in the best way possible to support our growth and success as a leading health care organization.
What You Can Do to Help Reduce Expenses
Please speak with your manager for more information or to share your ideas on how we can help reduce our expenses. We also welcome your ideas, questions and comments on how to help reduce our expenses and encourage you to use this form to share your ideas.
We will keep you updated on the progress of our revenues and expenses going forward. Together, UW Health will continue to be an example of exceptional patient care, research, education and discovery for many years to come.
Please watch our Briefing series newsletters and this site for continued updates.
What is an Operating Margin?
An operating margin is a measure of our revenue from patient care and other operations. It indicates how much money is left over after expenses are paid. It is typically expressed as a %.
What are some examples of expenses?
- Equipment and maintenance
- Labor (salaries and benefits)
- Medical supplies
- Software licenses
How was the combined operating margin metric originally set at 3.8%?
The UW Hospitals and Clinics Authority Board approved the combined operating margin metric based on historical performance and projected growth.
What is the probability we will receive our annual Employee Performance Payment bonus this year?
Based on our year-to-date financial progress, we will not meet the joint operating margin goal of 3.8% which is required for the Employee Performance Payment Plan, so there will be no FY17 employee payment plan payout.
Does our operating margin goal impact the manager, director and executive incentive plans as well?
Yes, the combined operating margin is one of the multiple metrics that factor into the management performance incentive plans.
How did our expenses get so out of hand?
UW Health’s experience over the last few months is consistent with that of other health care organizations across the country. Our medical supply and pharmacy costs have increased at a faster rate than before. Since 2010, increased pharmacy and medical supply expenses combined with a payer mix that included more government reimbursements brought us to where we are today.
Our census has been full for most of the fiscal year, so why aren’t we bringing in more revenue?
UW Health has many different contractual arrangements with payers. Some of them are capitated contracts, which means that we get a certain amount of money each month from the insurance company (based on the number of members and a negotiated dollar amount) whether we treat one patient or 500 that have that insurance coverage. We are seeing more patients that have this type of coverage, which does not generate more operating revenue for our organization. In January, UW Health saw its lowest percentage of commercial pay for inpatient cases it has ever been at 23.5%, and highest percent of inpatient cases with Medicare as the payer at 41.6%. (Medicare and Medicaid pay less than the cost of services.)
Are we losing money?
Over our fiscal year, UW Health still has a positive operating margin (revenues are greater than expenses) but we are keeping a very close eye on our revenues and expenses and looking for ways to limit expenses as we near the end of Fiscal Year 2017. In January, UW Health’s Wisconsin operations actually lost money. In February and March, our revenues were very close to our expenses.
Is this the new normal?
What we’ve been experiencing over the last few months is consistent with what other organizations across the country are experiencing. Many organizations have seen their operating margins decrease. We will be reviewing expenses in detail and are expecting everyone to be diligent about spending.
What can I do to help limit expenses?
If you have ideas about how to make processes more efficient or have identified items that aren’t essential to UW Health’s mission of providing remarkable patient care, please share these with your supervisor or manager.