A decade after the University of Miami purchased a 560-bed hospital across the street from its medical school campus in downtown Miami, UM is struggling to turn a profit at the facility as operating expenses skyrocket and patient admissions dwindle.
A recent Securities and Exchange Commission filing for UM shows that the university lost $94.5 million operating the hospital during the year that ended May 31. That’s more than double the $45 million UM lost on the hospital during the prior year.
Overall, however, the UM Health System or UHealth — including Sylvester Comprehensive Cancer Center, Bascom Palmer Eye Institute and a physician practice — remains profitable, earning $83 million in 2017. The year before, healthcare operations earned $169 million. Financially, healthcare is a significant part of UM, generating about 50 percent of the university’s total revenue in 2017, the SEC filing shows.
Lisa Worley, a spokeswoman for UHealth, said UM had nothing to add to the SEC filing, which included an annual report for the university and a separate financial disclosure on the hospital.
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UM bought the former Cedars Medical Center from the HCA hospital chain in 2007 for $260 million, raising eyebrows among hospital experts who wondered whether the university had paid too much for the facility compared to similar purchases in South Florida. The purchase also put UM in competition with its longtime academic medical partner, Jackson Memorial, which is across the street.
The primary culprit for the hospital’s poor financial performance? Operating expenses, which rose by nearly 10 percent in 2017 over the prior year — and by 28 percent since 2014.
Nationwide, not-for-profit hospitals such as UM’s facility are seeing higher operating expenses and lower reimbursement from private insurers and public programs, including Medicare and Medicaid, according to Moody’s Investor Service, a credit rating agency.
But patient admissions also have nosedived at UM’s hospital. Occupancy of licensed beds fell from 81 percent in 2016 to 63 percent this year, while the average number of patients per day dropped to 322, the lowest point in five years.
As patient admissions plummet, revenue follows, said Sal Barbera, a former hospital executive who teaches healthcare management at Florida International University.
When operating expenses rise and patient volumes drop, hospital administrators must manage labor costs, Barbera said. The SEC filing does not disclose the number of employees at UM’s hospital, but university administrators began a round of layoffs at the facility in May.
Barbera noted that many hospitals are seeing a drop in patient admissions and revenue. But there is also an increase in outpatient visits that do not require an overnight stay at the hospital. At UM Hospital, outpatient volumes were down in 2017 by about 4 percent from the prior year.
With healthcare ranking among the university’s most high-profile activities in South Florida, UM’s president, Julio Frenk, announced an executive team restructuring in June, which included new responsibilities for the UHealth CEO, who then resigned in August.
This month, UHealth announced a reorganization of its healthcare facilities, consolidating UM Hospital, Bascom Palmer and Sylvester Cancer under a single hospital license to create “a fully integrated academic healthcare system,” Worley said.
As part of the change, UM renamed the hospital UHealth Tower and now requires that all doctors practicing there be part of the faculty at the university’s Miller School of Medicine.
Worley said an “all faculty” hospital was part of UM’s vision when it bought the hospital in 2007.
“This was really realizing that goal,” she said.