UC medical centers show increase in revenue

Financial schedules from the UC Office of the President show that annual revenues for the university’s medical centers grew to almost $6 billion in 2010, an increase of nearly $2 billion over the medical centers’ revenue only six years before.

UC medical centers are planning to use the increasing revenue generated by the five teaching hospitals — the profits of which were over $850 million in 2010 — to fund $5 billion in capital needs over the next five years, as well as to support UC medical schools.

“We’re trying to do the best we can to cover the future costs we won’t be able to afford in the future,” said Santiago Munoz, UC Associate Vice President of Health Sciences and Services. “We have an accumulated debt that has to be paid.”

The UC’s medical centers are located on the university’s Los Angeles, Irvine, Davis, San Francisco and San Diego campuses.

A large part of the revenue will fund a variety of capital projects, including a $1.5 billion hospital complex at UCSF Mission Bay, which is scheduled to open in 2015, according to UC spokesperson Ricardo Vazquez.

Munoz said the costs for the UCSF Mission Bay project will be spread out over several years.

Other campuses have also pursued new building or reconstruction projects, according to Vazquez. UC Irvine opened a new hospital in 2009, and UC Davis opened a new surgery and emergency services pavilion in 2010 — the largest construction project in UC Davis’s history.

Vazquez added that the medical centers need the funds for a variety of improvement projects, including electronic medical records and state-mandated seismic safety upgrades. The state’s seismic regulations are “unique and expensive,” according to UCSF’s website.

“In the event of a seismic event, the state requires that our buildings not only remain standing but also remain operational,” Munoz said. “That becomes very expensive.”

Between the 2004-05 and 2009-10 fiscal years, the medical centers’ revenues have exceeded their expenses by over $3.4 billion. This margin not only helps fund capital projects but also insurance payment shortfalls from patients on Medicare and Medi-Cal, according to Munoz.

“When we receive payments from (Medicare and Medi-Cal patients), there are restrictions on how those dollars are used,” he said. “Often those payments fall far short of covering the costs.”

Forty percent of UC patients are uninsured or covered by Medi-Cal, according to UC Health’s website. Vazquez said in an email that the medical centers provided over $445 million of charity care in the 2010 fiscal year.

However, the excess revenue generated by the medical centers remains within the clinical enterprise, Munoz said. Without retaining these funds, the medical centers would not be able to operate, he said.

For example, under the systemwide merit-based pay program recently announced by the Office of the President, revenues from the medical centers will only be used to pay for pay raises for eligible hospital employees, he said.

Vazquez added that the medical centers use part of their revenue to help UC medical schools, providing over $400 million in support last year alone. In August, campus officials identified nearly $2 million for UCSF medical students on financial aid to offset recent tuition hikes, according to a UCSF press release.

“In addition to (funding projects), we help support the schools of medicine,” Munoz said. “We’ve been able to maintain five world-class hospitals.”

UC medical centers are, for the most part, financially independent, receiving less than 1 percent of their budget from state funding, according to UC Health’s website. A budget report from the Office of the President shows that over half of the medical centers’ budget is composed of private health care plan payments.

“UC medical centers are self-supporting enterprises that operate in extremely competitive health care markets,” Vazquez said in the email.

Damian Ortellado covers higher education.

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