ANN ARBOR — When you’re a hospital that’s opening a huge new children’s and women’s hospital, an expansion of your adult emergency department and rolling out a major computer system upgrade, you expect a rough year financially.

The University of Michigan Hospitals and Health Centers certainly did, predicting an operating loss of 1.1 percent.

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But instead, the loss will be only 0.5 percnet, on revenue of about $2.2 billion. Without the major projects, the margin would have been just under 3 percent.

Thursday, in addition to presenting expected results for the 2012 fiscal year that ends June 30, UM Health System leaders also presented the UM Board of Regents with the proposed budget for the 2013 fiscal year. For FY 2013, UMHHC forecasts a positive operating margin of 0.5 percent on estimated revenues of nearly $2.4 billion – a sign of confidence that recent investments will enable UMHHC to accommodate patient demand, and provide better service through a range of new facility and technological investments.

Continued growth and patient demand leads to increased revenue and operating cash flow generation, which in turn fuels the entire Health System’s three-part mission of patient care, education and research. UMHHC and the UM Medical School’s Faculty Group Practice, which includes all of the physicians who see patients at UMHHC facilities, together run the UM clinical enterprise.

Patient activity continued to grow in the last year: Inpatient and observation cases were up 4.5 percent in fiscal 2012, and clinic visits were up 3.6 percent. Strong growth in the number of patients seeking care is expected to continue in FY2013.

UMHHC will be well positioned to match the patient demand for services as the new C.S. Mott Children’s Hospital and Von Voigtlander Women’s Hospital achieve fuller utilization in its first year of operation, and other care expands into clinical space made available by services moving into the new building.

“To see this kind of patient growth, and to beat our own expectations despite the Michigan economy, major investments and great change, is a testament to our entire team,” says Doug Strong, CEO of UMHHC. “Every one of our staff and faculty have pulled together to ensure that we serve patients well, and find every opportunity to improve operations in ways large and small.”

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Said UMHS CEO and UM executive vice president for medical affairs Ora Hirsch Pescovitz, M.D.: “The strategic investments that we have made this past year, or have developed plans to make in the new fiscal year and beyond, will further strengthen our ability to serve patients and the community, perform groundbreaking biomedical research, and educate the next generation of health and science professionals. We are confident we can rise to the challenges that coming years will bring.”

She noted the excellent bond ratings that UMHHC has earned as a result of its performance.

In fiscal 2013, UMHS will open new areas for care, and invest in systems and equipment to support care and care teams. Planning will accelerate for the Northville health center, and the adult inpatient expansion project and neuroscience-focused hospital, both approved earlier this year and targeted for opening in calendar year 2014.

Efforts will also continue to use “lean thinking,” a concept borrowed from the auto industry, to optimize clinical and support functions for better efficiency, quality and patient experience. UMHS also continues to find ways to save money through energy efficiency improvements — 15 projects completed in 2011 are expected to save $528,000 in energy costs this year alone.

UMHS also continues to form alliances with hospitals and physician groups across the state, to ensure that high-quality care is provided in the most appropriate setting. Such alliances include the recently signed master affiliation agreement with Trinity Health-Michigan, the Pioneer Accountable Care Organization with the IHA physician group, the Pennant Health Alliance with hospitals in west Michigan, and the Physician Organization of Michigan with physician groups.

As UMHS patient care continues to grow, employment levels will also increase – as evidenced by the nearly 500 jobs created by the opening of the new children’s and women’s hospitals building.

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