OHSU Leaders Approve $3 Billion Spending Plan

The university is paying down its Public Employees Retirement System, or PERS, debt faster than required and making minor cuts as it anticipates the risk of an economic downturn.

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OHSU aerial photo

OHSU’s board voted unanimously to approve a $3 billion spending plan for the fiscal year that starts July 1, a 6 percent increase from 2018.

The budget, approved Thursday, includes a tuition increase for students in the university’s nursing, dental and medical schools of no more than 3.5 percent. That hike maintains the university’s commitment to freezing tuition for each class, so that students pay the same amount in their last year of study as in the year when they enrolled. And even as growth and new partnerships fuel the increase in spending, OHSU’s leaders continue to look for ways to cut.

The budget aims to steel the institution against an uncertain economic future which could bring cuts and changes in federal health care and spending.

“We are in the second largest economic expansion since the Civil War, and how long that will last is uncertain,” said Lawrence Furnstahl, OHSU’s chief financial officer, as he outlined budget-writers’ attempts to balance growth today with future risks.

Furnstahl noted that a threatened congressional repeal of the Affordable Care Act could significantly undermine revenue at the hospital, if were to pass. The act significantly expanded the number of Oregonians with health insurance or Medicaid, leaving far fewer medical bills unpaid. President Trump’s proposal to cut Medicaid funding could also strain the budget. And beyond that political risk, OHSU has seen the cost of providing medical care climb more rapidly than the amount it is paid for those services – a trend that seems likely to continue.

“We want to create options for the future,in a time of change and uncertainty,” Furnstahl said.

OHSU expects hospital costs to climb by $115 million in the coming year, as it hires more medical providers, spends more on services and supplies and opens a second Center for Health &Healing building, currently under construction.

One major new expense required approval from the state Legislature in February: paying down OHSU’s debt to the state’s underfunded Public Employees Retirement System.

“There is about a $20 billion unfunded liability across the state of Oregon,” Furnstahl said. “Our share of that is $500 million. Under the policy set by the PERS board, we would pay that off over 20 years, at about a 7.2 percent rate of interest.”

To save on long-term interest, OHSU plans to pay $10 more than the minimum next year. “We are starting to chip away at this liability,” Furnstahl said.

Higher revenue, expected to climb 6 percent to $3.1 billion, will help pay for spending plans for the year ahead. Some of that reflects higher patient reimbursements and expected gifts and grants.

More significant: The state transfers a portion of its Medicaid budget to OHSU each year to offset official reimbursements that are less than the cost of paying for care. That intergovernmental transfer is climbing 32 percent, to $112 million.

Meanwhile, an effort to eliminate waste and become more efficient, dubbed Accelerate OHSU, identified $40 million in budget cuts, in part by eliminating some jobs and finding supply chain savings.

And with two major construction projects slated to open in 2019, the Knight Cancer Center and the second Center for Health &Healing Building, OHSU expects to spend $309 million on capital – down from $423 million budgeted for the current fiscal year.

The university’s faculty were closely involved in reviewing and shaping the budget, said Faculty Senate President Derick Du Vivier, who applauded OHSU leaders for listening to their concerns and priorities in setting next fiscal year’s financial goals.

Joe Robertson, attending his final board meeting as OHSU president ahead of his successor’s Aug. 1 start date, said that the coming leadership transition also affected budget priorities.

“OHSU continues to have a strong performance in the midst of a challenging operating environment,” Robertson said. “This strong financial base will allow our new president, Dr. Danny Jacobs, to develop a new strategic plan, together with faculty and staff, that will chart OHSU’s development for the next decade.”

Reach Courtney Sherwood at [email protected].

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