1. 1 Appropriations Committee February 21, 2007

2. 2 UCHC’S Primary Mission: Education and Research 3 Schools: –Medical School (320 students) –Dental School (160 students) –Graduate School in bio-medical sciences (380 students) Research: More than $90 million per year of innovative research is conducted and discoveries are translated into advances in patient care e.g. cancer vaccines, hormone therapies for Osteoporosis, new materials for Dental Implants, and Stem Cell research. Residency Training: For approx 600 residents/year who train in local hospitals John Dempsey Hospital (JDH) and UConn Medical Group (UMG), the multi-specialty faculty practice, are sites for learning and represent key elements in attracting talented faculty who want to teach, do research and provide patient care. (Time/reimbursement pressures mean that fewer community physicians now give time to teaching.)

3. 3 A Worthy Investment Approximately 35% of School of Medicine graduates practice in the State, as do 46% of School of Dental Medicine graduates. Dental School is historically #1 or #2 in the country. Total minority enrollment has increased from 19.8% in Fall 1997 to 26.9% in Fall 2006. School of Medicine national leader in innovative curriculum. JDH is winner of Top 100 Award two years in a row (2005 and 2006). Although Medical School is one of the smallest medical schools in the country (ranking in the 15 th percentile for number of medical students) –SOM ranks 11 th among 29 peer public medical schools in per dollar sponsored research funding per faculty member –Our GME program ranks in the 55 th percentile for numbers of students benchmarked against all public medical schools. The Health Center has 5200 employees (71% union, 12% faculty, 3% managerial and 14% residents/graduate assistants/student payroll) and generates 11,371 other jobs in the state economy and $938 million in Gross State Product.

4. 4 Service to Medicaid Patients Among the top 5 hospitals in state in Medicaid inpatient days as a percentage of total inpatient days Largest single provider of dental services to Medicaid clients and the under-and un-insured 61% of patient visits to the UCHC dental clinic in Farmington are Medicaid clients 70% of all student/intern/resident dental care activity is service to Medicaid clients Clinical Service Collaboration : Department of Public Health, Department of Correction, Department of Mental Health & Addiction Services, Department of Veteran Affairs (Rocky Hill), Department of Mental Retardation Community Service : South Park Inn Medical Clinic (Hartford) South Marshall Street Homeless Clinic (Hartford) Connecticut Poison Control Center YMCA Adolescent Girls Medical Clinic (Hartford) Camp Courant Dental Screening Program Migrant Worker Clinic Covenant House (Willimantic) UCHC : A Resource to the Community and the State

5. 5 Trained physicians and staff of Waterbury and St. Mary’s for regional cardiac surgery and interventional cardiology program. Trained staff and assisted ECHN in establishing a Level II nursery at Manchester Hospital. Pediatric dentistry program at CCMC. Statewide Neonatal Transport Program and Regional Neonatal Intensive Care Unit. In the past 18 months, premature babies came to JDH from 109 Connecticut towns. Provide workforce at Burgdorf Clinic. Provide cardiac perfusionist services to St. Mary’s and Waterbury Hospitals. Regional dental emergency room service. Training site for nursing, allied health schools. UCHC: A Resource to Other Hospitals

6. 6 State Support Is provided to the academic (education and research) enterprise only. There are no state operating dollars (block grant and fringe benefit support) in the hospital Is provided to the academic (education and research) enterprise only. There are no state operating dollars (block grant and fringe benefit support) in the hospital 15.9% of the Health Center budget is state supported15.9% of the Health Center budget is state supported 84.1% comes from other revenues (clinical, research, tuition, philanthropy)84.1% comes from other revenues (clinical, research, tuition, philanthropy)

7. 7 Since FY 2000, $74 million in cost improvements have been realized through a combination of revenue enhancement, cost containment and cost reduction activities. Since FY 2002, the hospital’s financial success enabled it to generate funds sufficient to balance the Health Center’s budget. University of Connecticut Health Center Excess/(Deficiency) by Fiscal Year Before Special Appropriation in FY 00 and FY 01 John Dempsey Hospital Excess/(Deficiency) by Fiscal Year

8. 8 Academic Revenues 8

9. 9 The Academic Gap is the difference between the costs associated with the research and education enterprise, including the costs of meeting state mandates, and the revenues received for that purpose. Those revenues include tuition and fees, research grants and the state support. The State Appropriation has remained essentially level for seven consecutive years. During the same period, the Health Center survived financially by focusing on increasing other revenue sources. After a period of significant growth, tuition and research revenue are now also leveling. Although JDH contributed $19.3 million from 2002 through 2006 to fill the Academic Gap, it can no longer do so. FY 2008 State Appropriation Request is $93.5 million, comprised of inflation increases of $3.1 million and Academic Gap funds of $13.5 million. This request represents a $16.6 million increase over the FY 2007 level. FY 2009 State Appropriation Request is $103.2 million, comprised of inflation increases of $3.2 million and Academic Gap funds of $6.5 million. This request represents a $9.7 million increase over the FY 2008 level.

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12. 12 Why Can’t JDH Continue to Fill the Academic Gap? John Dempsey Hospital (JDH) faces the same set of challenges as the state’s other 29 acute care hospitals : Low Medicaid reimbursement Low Medicaid reimbursement 22.3% of JDH inpatient days are paid by Medicaid22.3% of JDH inpatient days are paid by Medicaid One of top 5 hospitals in the State for inpatient Medicaid daysOne of top 5 hospitals in the State for inpatient Medicaid days Medicare cutbacks Medicare cutbacks Uncompensated care Uncompensated care Nursing and other health care professional shortages Nursing and other health care professional shortages Surviving in an intensely competitive marketplace Surviving in an intensely competitive marketplace

13. 13 Financial Challenges Unique to JDH A more complex delivery system due to the education and research functions of an academic medical center. A more complex delivery system due to the education and research functions of an academic medical center. Using its profit margin to support the medical and dental schools ($19.3 million over the past 5 years) rather than reinvesting in capital plant.Using its profit margin to support the medical and dental schools ($19.3 million over the past 5 years) rather than reinvesting in capital plant. Paying state fringe benefit rates. (In 2005, that rate was 38.7%, far higher than the CHA member hospital average of 27.4%. The dollar value of the difference between those rates was $8.1 million in 2005 alone. The ’07 state rate is 40.9%, estimated to cost $10.5 million more than the average hospital rate.Paying state fringe benefit rates. (In 2005, that rate was 38.7%, far higher than the CHA member hospital average of 27.4%. The dollar value of the difference between those rates was $8.1 million in 2005 alone. The ’07 state rate is 40.9%, estimated to cost $10.5 million more than the average hospital rate. Underwriting certain unprofitable essential health services because of its public mission. Examples:Underwriting certain unprofitable essential health services because of its public mission. Examples: Department of Corrections inpatient services Department of Corrections inpatient services Higher percentage of inpatient psychiatry beds Higher percentage of inpatient psychiatry beds Department of Mental Retardation dental services Department of Mental Retardation dental services

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15. 15 Current JDH Financial Condition The hospital saw profits from 2002-2006 because of increases in patient volumes, expense management and revenue enhancements. Financial stability is now stymied by physical constraints; without new space, JDH cannot meet growing demand *.The hospital saw profits from 2002-2006 because of increases in patient volumes, expense management and revenue enhancements. Financial stability is now stymied by physical constraints; without new space, JDH cannot meet growing demand *. Following the one-time appropriation in 2000 to stabilize Health Center finances ($16.9 million and $3.1 million to support the Research Strategic Plan), UCHC has achieved $74 million in cost reductions and revenue enhancements, including a $9 million FY 07 plan, which is on target.Following the one-time appropriation in 2000 to stabilize Health Center finances ($16.9 million and $3.1 million to support the Research Strategic Plan), UCHC has achieved $74 million in cost reductions and revenue enhancements, including a $9 million FY 07 plan, which is on target. FY 07 year-to-date, the Health Center has experienced an additional $13.6 million deficit, leaving it $12.0 million behind the budget plan. We are forecasting this loss to be $20.8 million for the year. This shortfall is attributable to less than expected hospital revenues as a result of changes in payor mix and inadequate payor reimbursement levels, increasing utility costs and declining research revenues.FY 07 year-to-date, the Health Center has experienced an additional $13.6 million deficit, leaving it $12.0 million behind the budget plan. We are forecasting this loss to be $20.8 million for the year. This shortfall is attributable to less than expected hospital revenues as a result of changes in payor mix and inadequate payor reimbursement levels, increasing utility costs and declining research revenues. This shortfall cannot be addressed by cuts; personnel reductions of this magnitude will cause additional significant losses in revenue. As a result, we must ask you for assistance in the current year, as well as an adjustment in State support going forward.This shortfall cannot be addressed by cuts; personnel reductions of this magnitude will cause additional significant losses in revenue. As a result, we must ask you for assistance in the current year, as well as an adjustment in State support going forward. Hospital space is insufficient to maintain the financial and service status quo. A replacement hospital, with expanded bed capacity, is a key element of a long-term financial solution.Hospital space is insufficient to maintain the financial and service status quo. A replacement hospital, with expanded bed capacity, is a key element of a long-term financial solution.

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