UW Health announced Thursday it has set a target of $80 million in reduced expenses and increased revenue to offset years of increasing costs and declining revenue growth.
UW Health which is partnered with the University of Wisconsin School of Medicine and Public Health and which serves as the integrated health system at UW said the $80 million target has been set so the organization can improve its financial performance and continue to offer services in clinical care, education and research.
The organization said reductions in expenses, which will be accomplished over the next 18 months, will be targeted toward specific areas. The cuts will be implemented with a focus on improved delivery costs, labor efficiencies and supply costs.
In the announcement, UW Health CEO Alan Kaplan said financial sustainability is essential if UW Health is to continue offering health services to its patients and the community.
“We exist as a health care organization for one reason: to improve the health of the patients and communities we serve. And like every other organization, we must pursue our mission while maintaining the positive financial margin that sustains our operations,” Kaplan said.
Staff reductions will occur at the organization throughout the next 18 months, with spending cuts specifically targeting agency labor, overtime pay and the filling of vacant positions. Kaplan said these reductions will be carried out in the “least disruptive way possible” for existing staff.
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The costs of treatments for patients on Medicare and Medicaid are higher than the payments UW Health receives for those treatments, a problem which is further exacerbated by commercial sources who are reluctant to close the gap between cost and payment for these patients. This, Kaplan said, was one of the major factors driving this decision.
Additionally, Kaplan cited the growing costs of medications and supplies necessary for patient care as another driving factor in the decision.
In the announcement, Kaplan said the decision is “difficult,” but expressed faith it will benefit patients and the UW Health community in the long-term.
“We have some very difficult decisions to make in the short term but are also confident in the long-term benefit for our patients and community of an efficient and stable UW Health,” Kaplan said.