New C.S. Mott Hospital among projects that will strain University of Michigan Health System budget in 2012

The first phase of MiChart, a new information technology system for U-M clinical care and billing, is the second large undertaking straining the UMHS budget. While the health system is committing to the rollout of the MiChart in phases, it could cost as much as $250 million in the next decade, Strong said. Planning for the electronic record and billing system has already begun.

Though health-care reform calls for the use of standardized billing and electronic health records beginning in late 2012, Strong said the switch to MiChart aligns with the health system’s goals to continuously improve patient care and is not driven by the federal Affordable Care Act.

“Information is at the heart of patient care,” he said.

Strong added that federal stimulus money could be made available to offset the cost of MiChart.

Start-up costs for the new C.S. Mott will amount to $70 million during its first year of operation, he said.

Large-scale projects like these will mean the health system will be able to accommodate more patients in future decades, Strong told the regents.

In a report to the regents, Strong also said the health system expects a positive financial year for the 2011 budget cycle ending June 30.

Revenues are expected to outpace health system expenses by 2.1 percent, a result Strong cited as a major success in the face of an increase in charity care, unpaid hospital bills and more patients using Medicaid and Medicare to pay for health care.

UMHS revenues typically amount to about $2 billion a year.

Just under half of revenues are reimbursements from the federal government via Medicaid and Medicare.

Strong said in May hospitals lose money due to the mechanism by which the cash-strapped state or federal government chooses to repay hospitals for services under these programs. Hospitals currently make up for the loss through commercial insurance plans.

The strong demand for patient care from UMHS resulted in the expected positive financial year, despite the lingering effects of a state economy left reeling in the wake of economic collapse.

The hospital saw an increase in patient activity of about 3 percent in the 2011 fiscal year over 2010, Strong said. Patients came to UMHS from every county in Michigan as well as from other states and nations. That demand “increased our productivity while containing cost growth,” Strong said.

Strong oversees University Hospital, C.S. Mott Children’s and Women’s Hospital, 30 health centers and 120 outpatient clinics.

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