2004 to 2020

UK HealthCare: Growing to Serve Kentucky UK HealthCare – Growing to Serve Kentucky 2004 to 2020 1 UK HealthCare: Growing to Serve Kentucky PLANNING AND GOVERNANCE STRUCTURE Financial Planning Board of Trustees Hospital Board President Academic Planning EVPHA Advisory Board Executive Committee Committees Facilities Planning Strategic Planning 2 UK HealthCare: Growing to Serve Kentucky FACILITIES PLANNING Process Objectives  Reassess the long-range functionality of existing buildings at the UK Chandler Medical Center  Assess adequacy of ambulatory care space and develop appropriate on and off campus opportunities for additional outpatient care  Develop a zoning vision for the future and incremental phasing plan  Identify and address any immediate tactical space issues  Develop an implementation plan  Estimate costs of the early phases 3 UK HealthCare: Growing to Serve Kentucky FACILITIES PLANNING Good Rating Fair Rating Poor Rating Not Rated Non-Medical Center Buildings 4 UK HealthCare: Growing to Serve Kentucky FACILITIES PLANNING Ambulatory Care  Ambulatory care facilities are inadequate  Kentucky Clinic will remain main ambulatory site for tertiary and quaternary programs  Student Health Services will move to new space adjacent to Kentucky Clinic  Build additional space for ambulatory care  Reallocate space in Kentucky Clinic to increase efficient use 5 UK HealthCare: Growing to Serve Kentucky FACILITIES PLANNING Site zoning for clinical, research and education  Hospital development to the South  Parking replacement across S. Limestone  Changes to vehicular circulation on Hospital Dr., Rose St., and Virginia Ave.  Kentucky Clinic remains patient care  Student Health outside Kentucky Clinic envelope  Future research across (west of) S. Limestone E – Education C – Clinic H – Hospital R – Research SH – Student Health  Include new vivarium  Education zoned to overlap with both clinical and research as appropriate 6 UK HealthCare: Growing to Serve Kentucky FACILITIES PLANNING 7 UK HealthCare: Growing to Serve Kentucky FACILITIES PLANNING Proposed Phase 1a development  Replace parking  1,000 spaces potentially built across S. Limestone  Construct new beds and shelled D&T platform      ~240 beds New kitchen New CSR New ED 200,000 DGSF shelled D&T space Phase 1b  New bench research facility & vivarium  New shared education building 8 UK HealthCare: Growing to Serve Kentucky STRATEGIC PLANNING Comprehensive strategic planning requires an understanding of the following:  Facility Needs  Patient Throughput and Quality  Market Development  Strategic Clinical Initiatives Strategic Initiatives Market Development Patient Throughput and Quality Facilities Needs 9 UK HealthCare: Growing to Serve Kentucky STRATEGIC PLANNING Patient Throughput and Quality We have undertaken a number of operations initiatives focused on:  Maintaining High Quality Care  Improving Customer Satisfaction  Increasing Operational Efficiencies Customer Service Patient Access and Throughput Patient Safety & Quality Operations Initiatives Care Management Imaging Operative Services 10 UK HealthCare: Growing to Serve Kentucky STRATEGIC PLANNING UK HealthCare must stabilize and improve the provider base of its secondary and tertiary markets through outreach programs. Patients are moved to Lexington only when specialty services, which are only available at our academic medical center, are required. U K H e a lth C a r e M a r k e tp la c e a n d O u tr e a c h C lin ic s O u tre a c h C lin ic s UK O u tre a c h C lin ic U K M a rk e t D e fin itio n 11 UK HealthCare: Growing to Serve Kentucky STRATEGIC PLANNING Strategic Clinical Initiatives         Cardiology and Cardiovascular Surgery Neurology and Neurosurgery Oncology and Oncological Surgery Orthopedics Digestive disorders Minimally invasive and robotic surgery Pediatrics sub-specialties Transplantation 12 UK HealthCare: Growing to Serve Kentucky STRATEGIC PLANNING In order to meet our growth demands, a significant investment must be made in the strategic initiatives. Clinical Initiative Investment Requests (in millions) $12 $10 $8 $6 $4 $2 $0 1.2 4 .0 8 .0 7.2 5.8 4 .5 3 .3 6 .1 1.3 2 .3 1.1 2 .8 1.0 1.0 2 .8 3 .0 3 .0 1.0 FY05 FY06 FY07 FY08 FY09 FY10 13 Faculty Support Staff Support Capital/Other UK HealthCare: Growing to Serve Kentucky STRATEGIC PLANNING The strategic initiatives include a significant increase in the projected growth of discharges over the next five fiscal years. Projected Growth in Discharges 30,000 25,000 20,000 15,000 10,000 5,000 0 21,188 21,188 21,188 21,188 21,188 1,033 170 2,022 340 2,863 513 3,531 686 4,191 861 FY06 FY07 FY05 Budget FY08 Population Growth FY09 FY10 Stategic Initiatives 14 UK HealthCare: Growing to Serve Kentucky STRATEGIC PLANNING Incremental growth in discharges will increase the average daily census (ADC). The annual rate of growth in the ADC is not unrealistically aggressive given the commitment of resources to these initiatives and can be accommodated by the present licensed capacity of UK Hospital. Potential Growth in Average Daily Census 450 400 350 300 250 200 150 100 50 0 FY06 FY07 FY08 FY09 FY10 16 31 3 5 44 8 54 11 66 14 337 337 337 337 337 FY05 Budget Population Growth Strategic Initiatives 15 UK HealthCare: Growing to Serve Kentucky FINANCIAL PLAN Capital Investment Summary* FY 2005 – FY 2010 Expected On-going Capital** Major Equipment and Information Systems Facility Renovations Program Development $186 $40 $59 $285 Funding Source Operations Operations Operations Proposed Facility Projects Ambulatory Facility Patient Care Facility*** $20 $330 - $375 $350 - $395 * Dollars in millions ** Estimates based on department *** Estimates includes new patient care facility, replacement parking garage, connecting bridge, site work, utilities capacity and distribution, and medical equipment and furnishings; excludes capitalized interest and financing costs. Operations Bonds/Operations 16 UK HealthCare: Growing to Serve Kentucky FINANCIAL PLANNING The leadership of UK HealthCare recognizes that we will have to be responsible for all clinical programs that we initiate and all clinical building projects that we commence through the use of:  Cash flow  Debt  Philanthropy 17 UK HealthCare: Growing to Serve Kentucky FINANCIAL PLAN Historical Activity and Projected Growth The clinical activity of the last two years shows we have regained lost volume. General market trends and specific program development will allow us to retain the volume and realize the growth necessary for future plans. Discharges by Fiscal Year 25,000 20,000 15,000 Discharges - YTD November 20,682 19,845 19,098 19,675 21,188 12% 8% 10,000 5,000 2001 2002 2003 2004 2005 Budget 2004 YTD Nov Actual 2005 YTD Nov Budget 2005 YTD Nov Projected 8,081 8,728 9,087 18 UK HealthCare: Growing to Serve Kentucky FINANCIAL PLAN Historical Activity and Projected Growth The growth required to meet our strategic and capital plans is well within the total potential growth we may experience. Potential vs. Required Growth 35% 30% 25% 20% 15% 10% 5% 0% 2006 2007 2008 2009 2010 Potential Cumulative Grow th Required Cumulative Grow th 19 UK HealthCare: Growing to Serve Kentucky FINANCIAL PLAN Access to Capital    Operating and balance sheet ratios are well within current norms for an excellent investment grade rating. UK HealthCare is committed to maintaining a strong credit rating after initial investments. Will continually monitor and re-project our proformas and make adjustments expeditiously. Operating and Balance Sheet Ratios Ratios / Statistics Profitability: Operating Margin Operating Cash Flow Margin Debt Position: Debt to Capitalization Liquidity: Days Cash on Hand (days) Actual FY 2004 5.6% 9.7% 1.2% 249.8 Projected FY 2011 4.3% 14.2% 25.1% 222.2 Moody’s AA Median 2.5% 6.3% 34.3% 219.8 20 UK HealthCare: Growing to Serve Kentucky FINANCIAL PLAN In summary, our financial models demonstrate that through operating cash flows and debt of approximately $250 million, we will be able to fund Phase 1A and still sustain an appropriate financial position to continue with subsequent phases. 21 UK HealthCare: Growing to Serve Kentucky EARLY SUCCESSES  Increase in clinical activity  Improved financial performance of the hospital and practice plans  Successful recruitment of senior leaders from outside UK and retention and appointment of senior leadership from within  Substantial new research funding 22 UK HealthCare: Growing to Serve Kentucky EARLY SUCCESSES • Operating Margins up to 9.6% from 8.9% the first quarter of last year Operating Margins • Clinical Discharges up 13% from the first quarter of last year Discharges 6,000 5,000 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2004 Quarter 1 2005 Quarter 1 5,458 4,813 8.9% 9.6% 4,000 3,000 2,000 1,000 - 2004 Quarter 1 2005 Quarter 1 Practice Plan Billings $80 in millions $60 $40 $20 $0 $66.5 $72.2 2004 Quarter 1 2005 Quarter 1 • Practice Plan billings are up 8.5% from the first quarter of last year 23 UK HealthCare: Growing to Serve Kentucky EARLY SUCCESSES External Recruits Michael Karpf, MD Jay Perman, MD William Balke, MD David Moliterno, MD Kevin McDonagh, MD John Rinehart, MD Leslie Crofford, MD Timothy Bricker, MD Richard Lofgren, MD Sergio Melgar Raymond Gagliardi, MD Deborah Erikson, MD Executive Vice President for Health Affairs Dean, College of Medicine Sr. Assoc. Dean for Clinical Research Chief, Cardiology Chief, Hematology and Oncology; Deputy Director, Markey Cancer Center Director, Clinical Oncology and Clinical Research, Markey Cancer Center Chief, Rheumatology; Gloria Singletary Chair Chair, Pediatrics Chief Medical Officer, UK HealthCare Chief Financial Officer, UK HealthCare Director, Minimally Invasive Surgery Professor of Urology, Department of Surgery Internal Senior Appointments Roger Humphries, MD James Buck, MD Joseph Springer, MD Chair, Emergency Services Chair, Radiology Cardinal Hill Endowed Chair in Rehabilitation 24 UK HealthCare: Growing to Serve Kentucky EARLY SUCCESSES • The College of Medicine has increased its sponsored project awards through the first four months of this year 20% over the same period last year. • Research planning has begun with arrival of Dean Jay Perman. Sponsored Project Awards $60 $50 $40 Millions $46.8 $56.3 $30 $20 $10 $0 YTD Oct 2004 YTD Oct 2005 25 UK HealthCare: Growing to Serve Kentucky ECONOMIC IMPACT The Minnesota IMPLAN economic impact multipliers forecast that the patient care facility project will create around 1,600 jobs during the peak of construction and approximately 1,300 permanent jobs upon completion, most of which are professional. 26 UK HealthCare: Growing to Serve Kentucky MOVING FORWARD We need support from the state and university including: 1. Approval of a number of projects which must be initiated immediately; 2. Approval to issue revenue bonds when appropriate in an expeditious manner to begin phase 1A, which includes the construction of the parking garage, site and utility work, land acquisition, and the construction of the new patient care facility; and 3. Approval of an ambulatory care building adjacent to Kentucky Clinic South. 27 UK HealthCare: Growing to Serve Kentucky These plans and the people that support them will poise the University of Kentucky to achieve top-20 status as an academic medical center. More importantly, these plans will allow UK HealthCare to serve the citizens and patients of Kentucky better and better in the future. 28