1. Pathology Faculty Meeting - Financials
March 26, 2014

2. UMHS Consolidated FY14 February MTD Financials2 2

3. UMHS Consolidated FY14 February YTD Financials3 3

4. Pathology Fiscal Year Comparison
Pathology - Hospital
FY 2014 YTD Feb
FY 2013 YTD Feb
YoY % Change
Billed Tests
3,494,978
3,649,717
-4.24%
Inpt Billed Tests
1,551,351
1,566,766
-0.98%
Outpt Billed Tests
1,943,627
2,082,951
-6.69%
Charges
$397,454,303
$352,870,296
12.63%
Expense
$66,457,713
$64,724,563
2.68%
FTEs
548
532
3.01%
Pathology- Department
Work RVUs
183,203
163,898
11.8 %
Net Pt Care Revenue
$12,503,845
$11,785,174
6.1 %
Practice
$11,556,287
$10,821,314
6.8 %
Component Billing
$947,558
$963,860
(1.7)%
Margin Before Market Changes
($1,098,051)
($1,873,105)
41.4 %
Margin With Market Changes
$4,578,723
$211,549
2,064.4 %
ACU Total Margin (in Millions)
$77.2
$39.4

5. The University of Michigan Medical School Department of Pathology
Forecast All Funds Budget FY 2014 and FY 2015
REVENUE
FY 2013
FY 2014
FY 2015
FY14 vs FY13
FY15 vs FY14
Net Patient Care Revenue
$20,517,696
$22,291,601
$24,987,159
8.6%
12.1%
Net Grant/Contract Revenue
$21,830,460
$22,188,127
$22,968,584
1.6%
3.5%
UMHS Service Payments
$6,256,536
$6,281,561
$6,277,168
0.4%
(0.1%)
General Fund Tuition & Provost Allocation
$615,974 $0
(100.0%) -
Other Income (Gifts, Recharges
$1,496,383
$1,396,470
$1,370,359
(6.7%)
(1.9%)
Total Revenue
$50,717,049
$52,157,759
$55,603,270
2.8%
6.6%
EXPENSES
Faculty Salaries
$21,996,332
$21,571,721
$22,914,023
1.9%
(6.2%)
Other Salaries
$12,126,695
$11,896,715
$13,980,758
(17.5%)
Benefits
$8,137,943
$8,361,596
$8,953,312
(2.7%)
(7.1%)
Total Compensation
$42,260,970
$41,830,032
$45,848,093
1.0%
(9.6%)
Supplies
$11,001,005
$10,495,680
$11,689,627
4.6%
(11.4%)
Other Expenses
$6,709,672
$7,745,706
$7,747,204
(15.4%)
(0.0%)
Total Expenses
$59,971,647
$60,071,418
$65,284,924
(0.2%)
(8.7%)
Total Operating Margin
($9,254,598)
($7,913,659)
($9,681,654)
14.5%
(22.3%)
Total Non-Operating Income
$16,467,081
$7,238,558
$11,040,384
(56.0%)
52.5%
Total Margin
$7,212,483
($675,101)
$1,358,730
(109.4%)
301.3%
STATISTICS
Faculty FTEs
127.26
125.94
132.63
(1.0%)
5.3%
Other Staff FTEs
225.78
227.05
248.39
0.6%
9.4%
Total FTEs
353.04
352.99
381.02
7.9%
Work RVU Totals
250,146
279,217
287,500
11.6%
3.0%

6. AP Year to Date Actuals and Forecast
FY14 YTD Feb
FY14
FY15
Revenue
$30,389,330
$46,074,682
$48,237,278
Expense
$5,071,804
$7,956,448
$8,726,755
FTEs 58
Billed Test
158,105
239,316
249,807

7. CP Year to Date Actuals and Forecast
FY14 YTD Feb
FY14
FY15
Revenue
$301,938,870
$457,118,603
$485,336,251
Expense
$25,787,471
$38,814,935
$40,301,376
FTEs
240
241
Billed Test
2,968,294
4,462,684
4,641,191

8. Blood Year to Date Actuals and Forecast
FY14 YTD Feb
FY14
FY15
Revenue
$59,567,055
$90,644,757
$91,765,811
Expense
$13,424,391
$20,355,140
$20,887,049
FTEs 47
Billed Test
307,888
468,988
479,117

9. Admin Year to Date Actuals and Forecast
FY14 YTD Feb
FY14
FY15
Revenue
$5,559,048
$8,644,580
$8,022,273
Expense
$21,545,451
$32,512,657
$33,242,351
FTEs
188
190
195
Billed Test
60,691
91,049

10. Pathology Hospital Year to Date Actuals and Forecast
FY14 YTD Feb
FY14
FY15
Revenue
$397,454,303
$602,482,622
$633,361,614
Expense
$65,829,118
$98,343,295
$101,602,855
FTEs
533
534
542
Billed Test
3,494,978
5,262,037
5,461,164

11. UMHS Benefit Programs Update

12. Challenge
In order to meet the growth and investment aspirations of the Health System, margin improvement initiatives of $250M will be necessary through 2017
We must look ahead and act on future risks and anticipated changes today to ensure sustained operational and strategic success
Changes are reflective of the significant health reform and reimbursement changes that the entire health care industry is facing
Way patients want to receive health care
Way insurers and government pay for health care
Way government is regulating health care

13. Challenge
Must continually find ways to adjust to be more efficient; lower rate of cost growth without compromising provision of high quality, safe and excellent services
Improve productivity while demonstrating value to those who purchase our services

14. Prior and Ongoing Efforts
Operations Improvement Plan
Care Management
Throughput Initiatives
Strategic Activations
Supply Chain Initiatives
Capital Spending Pause
Labor Savings Initiatives
Productivity Improvements

15. LABOR SAVINGS
Benefits changes

16. Background and Committee Charges
Committee on Retirement Savings and Retiree Health
Committee on Paid Time Off Programs
Executive Vice-Presidents charged committee
Scope: All University faculty and staff
Retiree Health: new hires only
Propose specific ways to reduce the cost of UM’s retirement savings plan while maintaining a competitive benefits package
Minimum recurring annual savings
$5M to general fund
$8.7M to other non-general fund units
$8.5 M for HHC
EVPMA charged committee
Scope: UMHS staff
Review and make recommendations on options to reduce the UMHS cost to provide the current paid time off programs to UMMS staff and HHC staff:
Consideration of a UMHS (UMMS & UMHHC) Paid Time Off program that integrates Season Days, short-term sick, Vacation and PTO into one comprehensive plan
Modification to the existing, different, paid time off plans in UMMS and UMHHC
Modification to the existing, shared, short-term disability plan
Savings target
$15 million cumulative, FY15 – FY18
These committees were charged and met from September through December.

17. UM Faculty vs. Provost Peers: Overall Results Summary
12/13
8/9
8/9
5/6
7/8
5/6
11/12
9/10
9/10
15/16
15/16
16/17
12/13
19/20
15/16
11/12
Average for Peers = 100
17-23
17-23
All Benefits: Retirement Income, Health Care, Paid Time Off, Death, Long-Term Disability, Dependent Tuition All H&W and Retirement: Retirement Income, Health Care, Death, Long-Term Disability, Short-Term Disability Paid Time Off: Holidays, Vacation, Short-Term Disability Percents under the graph labels indicate the percent of the employer-paid All Benefits BI score a particular benefit represents for the University of Michigan faculty 17

18. UMMS Peer Group Columbia University Cornell University Duke University
Emory University
Harvard University
Indiana University
The Johns Hopkins University
Massachusetts Institute of Technology
Northwestern University
Ohio State University
Stanford University
University of California
University of Chicago
University of Maryland
University of North Carolina at Chapel Hill
University of Pennsylvania
The University of Southern California
University of Texas System
University of Virginia
University of Washington
University of Wisconsin
Washington University in St. Louis
Yale University

19. Retirement Savings Plan Changes Effective date: 1/1/2015
University-wide change – certain components of salary, in addition to base pay, such as administrative and added duties differentials, one-time lump sum payments, faculty honors, overtime, PTO sell back, and payments for PTO/vacation accrual upon termination will no longer be eligible for retirement savings plan contributions.
Applies to current and future faculty and non-bargained for staff of the University.
Saves the University $4.4M annually ($2M of this UMHS)
Retains the University’s competitive position relative to 23 Provost peer academic institutions at an overall Benefit Index of 100.
No change to Retiree Health Benefits at this time. Scheduled for review again in 2016

20. Average Annual Savings Adjusted All Retirement Income Benefit Index
Additional Health System Changes: HHC and Shared Services Staff Effective date: 1/1/2015
Retain 2 for 1 Match
University contribution capped at 9%,
Employee contributes 4.5% to receive the 9%
Changes apply to:
Current and future non-bargained for staff of UMHHC and Shared Services
This change will not apply to Medical School staff
Will remain aligned with staff of the other academic units of the University and their labor market
Retirement savings index was “162” for both local and national peers. Remains highly competitive for one of the most highly valued staff benefits. Local peer average employer contribution: 7.3%
Changes
Applies to
Average Annual Savings
Adjusted All Retirement Income Benefit Index
UMHHC vs.
6 Local Peers
(2013)
11 National Peers
(2012)
Cap University Contribution at 9%; Employee Contribution to receive: 4.5%
Match on base pay only
Current and future non-bargained for
UMHHC/Shared Services
$ 4,965,000
136
Rank: 1-2
134
Rank: 2-3

21. UMHS Committee on Paid Time Off Programs
Changes to program elements are responsive to employee preference, manager feedback, and aim to generate productivity improvements
Apply to non-bargained staff in UMHHC and Shared Services
Staff of the Medical School will remain aligned with staff of the other academic units of the University.
Therefore, there will be no changes to the current Vacation/Sick/Season Day time off plan or extended sick time plan for Medical School Staff
As part of the process, the committee surveyed staff and managers and conducted focus groups to hear preferences for any changes to the benefit packages. We heard the most important consideration for staff is base salary, followed by time off and retirement savings. The most important aspect of PTO benefits to staff members is the amount of PTO accrual. Other aspects, such as sellback, payout upon termination and extended sick time were relatively less important
For recruitment and retention purposes, we examined how positions are filled within the HHC and the Medical School. Of those filled internally in the Medical School, almost a quarter of the positions were filled by staff from other University of Michigan departments, while less than 10% of positions filled in HHC were filled by staff from “Campus”.

22. Changes to PTO Plan
Applies to current and future non-bargained for staff of UMHHC and Shared Services:
Sellback – effective immediately
Discontinue sellback for Exempt staff
Limit sellback to 40 hours for Non-exempt staff
Payout at termination – effective July 1, 2014
No payout if leaving the organization within first 2 years of employment
Eligibility – effective July 1, 2015
Increase FTE eligibility requirement from 20% (8 hours/wk) to 50% (20 hours/wk) appointment
High priority system issues prevent an earlier implementation of the “eligibility change”. No system implications of sell back or payout changes. These are policy changes that can be implemented this year.

23. Changes to PTO Accrual Effective Date: July 1, 2015
Applies to UMHHC/Shared Services future hires only (non-bargained for)
Modified accrual – Reduce PTO annual accrual as detailed below:
Years of Service
PTO (days/year)
Non-Exempt
Current
New
Exempt
1-4 20 19 26 24
5-9 25 32 30
10+

24. Extended Sick Time Plan Effective date: July 1, 2015
Applies to current and future (non-bargained for) HHC/Shared Services staff:
Eligibility –
Increase FTE eligibility requirement from 20% to 50% appointment
Decrease waiting period to access benefit from 2 years of service to 1 year of service
Renewal – Change renewal cycle from every 5 years to every 2 years
Waiting period – Decrease waiting period from 2 weeks to 1 week
Pay structure – Implement tiered pay structure moving from 1st 26 weeks time off paid at 100% to:
10 weeks time off paid at 100%
16 weeks time off paid at 66.67%
2nd 26 weeks remains at 50%
Changes to program elements are responsive to market competitive practices

25. Paid Time Off Program Savings and Benefit Index
Changes
Applies to
Average Annual Savings
Adjusted Paid Time Off Benefit Index
UMHHC vs.
6 Local Peers
(2013)
11 National Peers
(2012)
Changes to eligibility, sellback, payout at termination, and extended sick time plan
Current and future non-bargained for UMHHC/Shared Services staff
$ 2,365,000
103
Rank: 2-3
Rank: 5-6
Changes to accrual schedule
Future non-bargained for
UMHHC/Shared Services staff
Additional productivity savings (not quantified) are anticipated with less available paid time off as result of these changes.

26. Overall HHC/Shared Services Savings Final “All Benefits” Index
Changes
Average Annual Savings
Adjusted All Benefits Benefit Index
UMHHC vs.
6 Local Peers
(2013)
11 National Peers
(2012)
Paid Time Off
Accepted changes to paid time off programs, and
 Retirement Savings
Cap University Contribution at 9%; Employee Contribution to receive match = 4.5%, and
Match on base pay only
$ 7,330,000
107
Rank: 2-3
110
Rank: 3-4

27. UMHS Benefit Program Savings

28. Results
We strive to offer an outstanding “total rewards” package that includes a robust benefit program, competitive pay, numerous work life programs and many career development opportunities
After these changes, benefits package continues to be competitive and above average
Overall savings to Health System: $8.3M annually ($7.3M HHC; $1M Medical School)
Union contract provisions govern these benefits. Current contracts open for negotiations in 2017
$8.3M includes $7.3M from HHC/Shared Services and $1M from medical school faculty and staff on “base only” retirement contributions

29. RESOURCES Further information:
Questions

30. Supplementary Aon Hewitt Information

31. Peer Groups UM Medical School Peer Group UMHHC Peer Group
The UMMS Benefit Index peer list is a Provost Peer list that consists of the University's top 23 peer institutions based on actual, documented faculty recruitment and retention cases.
UMHHC Peer Group
The national Healthcare Peer list consists of 11 national academic medical centers that the University competes with for faculty as well as staff. The local Healthcare peer list consists of six local Healthcare organizations. While there is a focus on the results relative to the six local peers, full analysis has been completed and summarized relative to the national peers and the combined local and national peers.
The study is based on one package offered by each company: generally the one for newly hired exempt corporate salaried employees.

32. UMMS Peer Group Columbia University Cornell University Duke University
Emory University
Harvard University
Indiana University
The Johns Hopkins University
Massachusetts Institute of Technology
Northwestern University
Ohio State University
Stanford University
University of California
University of Chicago
University of Maryland
University of North Carolina at Chapel Hill
University of Pennsylvania
The University of Southern California
University of Texas System
University of Virginia
University of Washington
University of Wisconsin
Washington University in St. Louis
Yale University

33. UMHHC Peer Group Local Healthcare Organizations Beaumont Health System
Detroit Medical Center
Henry Ford Health System
Oakwood Healthcare, Inc.
St. Joseph Mercy Health System
University of Toledo Medical Center
National Academic Healthcare Organizations
Baylor Health Care System
BJC Health System
Cleveland Clinic
Duke University
Indiana University Health, Inc.
Mayo Clinic
University of California San Francisco Medical Center
University Hospitals Health System
UNC Health Care System
University of Pittsburgh Medical Center
WakeMed Health & Hospitals