Emory Report

June 28, 1999

 Volume 51, No. 34

Emory Healthcare restructures clinic's financial situation

Emory Healthcare has announced a package of eight new initiatives in support of Emory Clinic that will significantly reduce the clinic's overhead costs over the next seven years.

Led by Executive Vice President for Health Affairs Michael Johns, the agreement was worked out between the Woodruff Health Sciences Center, the University and Emory Healthcare's board of directors. It is intended to help the clinic physicians complete the transition of operational and clinical services in the hopes of becoming the premier group practice in the Southeast.

The plan includes:

  • external support totaling $27 million to fund on an interim basis obligations of the clinic to the School of Medicine for its teaching and research mission.
  • total forgiveness of the entire $10 million loan (including related interest) that funded the clinic's 1997 retirement plan.
  • removal of all financial responsibility from the clinic for funding the Emory Primary Care Network. Primary care will remain a clinic section and will be managed accordingly.
  • a contribution of $1 million in fiscal year 2000 to offset the clinic's financial responsibility for Emory Clinic North operations.
  • an agreement to provide a "buffer fund" for FY00 and FY01 to assist clinic sections temporarily affected by the financial restructuring.
  • an agreement to advance to the clinic funding necessary to implement a new information systems project that will improve billing and collection efficiency and patient service functions. Repayment will be deferred.
  • maintaining the FY99 level of support from the hospitals for Emory Clinic/Emory Healthcare initiatives in FY00-more than $7 million above the original projection for FY00.
  • restructuring existing clinic debt using the strength of the University's credit rating to gain better interest rates and terms.

Altogether these initiatives are part of a complex realignment of costs within Emory Healthcare and will remove almost $20 million from the clinic's originally projected FY00 obligations. For the next seven years Emory Clinic's financial commitments will be reduced by $8 million per year below current FY99 obligations.

"This represents an unprecedented commitment to-and a resounding vote of confidence in-the work ongoing within the clinic to realign and improve service and operational capabilities in this challenging new health care environment," said Clinic Director Rein Saral.

However, these unprecedented financial commitments are being provided under the express condition that the clinic rigorously evaluate needed strategic and operational changes in its business enterprise over the next 120 days. To accomplish this, Johns has convened an assessment committee co-chaired by Saral and Emory Healthcare President John Fox.

The committee is to provide specific recommendations and identify dates for implementation. These recommendations will be forwarded to the clinic's Leadership Council for review and feedback. They will then be forwarded to Johns for review and approval, then to the clinic and the Emory Healthcare boards, and ultimately to the Health Sciences Center board.

"Generally, I am not in favor of committees," Fox said. "However, in this situation, where a cross section of clinic leadership is needed, the structure is appropriate as long as it produces specific actions and timetables for real change."

Saral agreed. "Given the massive changes in health care today, it is absolutely critical that we look at the mission and purpose of what we are doing in Emory Clinic, and the committee is doing just that," he said.

--Sylvia Wrobel

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