Dear Colleagues:

On many occasions I have had the opportunity to review the importance of generating positive operating margins as we guide the hospital through challenging times. Often times these conversations feel cold, impersonal and ancillary to the notion of providing exceptional care to all of our patients. In the past, discussions of operating performance were typically present in boardrooms and not medical faculty offices. But today they are essential to our understanding of the full spectrum of health care.

I am often asked why it is so essential that the hospital sustain a 3 percent operating margin. The simple answer is that we must generate a positive margin to meet our commitments to our patients and to the community. A 3 percent margin provides us with the ability to maintain up to 100 days of cash on hand and meet our debt service requirements. But, even then we must rely on external sources, such as fundraising or debt to meet projected demands. Each year we must close a very substantial budget gap and cannot possibly fund our depreciation adequately.

In the years ahead, we face significant cost drivers associated with labor, blood products, new technology, pharmaceuticals, information systems, capital investments and academic support. In addition to that, we must make sense out of an increasingly complex regulatory and legal environment that continues to place new and expansive demands on hospitals.

To sustain our success, we must stay focused on the importance of meeting our margin targets. Doing so will provide us the means to meet our mission.

As we continue to address these pivotal issues, we need to stay informed about the relevance and importance of operating performance on our ability to provide the highest quality care available to all patients. As we do so, the conversations once reserved for boardrooms, must be a part of our orientation as physicians and researchers as well.

Sincerely,

Andy Whittemore, MD
Chief Medical Officer