Volume 24 • No. 5 • MAY 2000
A
Novel Thought?
Hospital turns toward service
Response prepared to national medical errors report
The joint budget process for Stanford Hospital and Clinics and Lucile Packard Children's Hospital was launched at a meeting of both institutions' managers April 1 - the day both hospitals formally separated from UCSF Stanford Health Care.
Malinda Mitchell, CEO of SHC, and Packard CEO Chris Dawes announced that a primary goal of the 2000-'01 fiscal budget would be to identify $45 million in revenue-enhancement and cost-cutting measures to ensure that the two hospitals break even in the next fiscal year. For the first six months of this fiscal year, the hospitals together registered a $20.3 million net operating deficit, which translates to an annual loss of $40.6 million.
The budget process will be addressed on three tracks - SHC, LPCH and joint services. While the process is similar to that used before the UCSF Stanford merger, Dawes noted that both Packard and SHC will share responsibility for income generated and expenses incurred from joint services. In the past, he said, Stanford sometimes functioned as a vendor "selling" services to Packard. Now the expenses and income will be assigned to the appropriate institution's balance sheet as they occur, so that shared service budgeting will reflect actual costs to each entity.
As in past years, task forces representing physicians, managers and staff will work to address the current budget gap. Task forces, which include a steering committee and specialty committees at each institution, will focus on expense reduction, efficient utilization of resources and patient volume.
Their findings will be incorporated in next year's budget planning. At both hospitals, inflation is the largest component of the operating income gap - $34 million. LPCH is forecasting a reduction in its disproportionate share payments (DSH) next year - about $6 million. Other components include a loss from depreciation, $5 million, and loss of governmental payments from the federal Balanced Budget Act, $5 million. The losses are expected to be offset by $10 million in additional payments from non-governmental payers, primarily private insurance companies.
SHC patient activity is projected to remain relatively flat next year, while LPCH is projected to continue modest growth in patient days and an increase of about 2 percent in outpatient visits.
The payor mix at both SHC and LPCH is projected to remain about the same, except for a shift from capitation to traditional Medicare and other managed-care plans.
