Key Messages from UPG Board of Directors Meeting June 15, 2017

Financial Performance and Operations

UPG Interim CFO Beth Allen provided information on UPG financial performance and operations. The consolidated balance sheet at the end of April showed a 0.8% decline in net assets over the 10-month period in FY2017, while cash on hand remained strong at $33.5M. The consolidated accrual-based UPG income statement for FY2017 showed an operating deficit of $12.3M through April, reflecting the first year of a new Health System Funds Flow model and transition to mission-based financial reporting for the clinical departments. Total revenue was marginally favorable to budget (1%), and indigent care revenue was over budget with mid-year projections indicating that this revenue would exceed budget for the year by roughly $7.8M. Total pension expense for the fiscal year is expected to be $25.8M; the unbudgeted cost of which is expected to be $15.3M. While this is not a direct cash outlay, it reflects annual expense and therefore can create an operating loss. Workload trends reflect strong productivity in March with lower productivity in April, and higher productivity is expected in May and June based on trend data from FY2015 and FY2016. Clinical departments as a whole are exceeding the 65th percentile in productivity. Investment results for the 9-month period ending March 31, 2017, showed positive returns with strong market conditions. Cash collections from patient care services exceed cumulative year-to-date targets but April results reflect low collections due to a Medicare processing issue. Ms. Allen submitted resolutions for approval of the FY2018 Consolidated Budget, and Approval of the Group Practice Fund Budget for 2018. Both were unanimously approved with no abstentions.

Fiduciary Training

Mr. David Pettit, outside counsel for UPG from firm Lenhart Pettit, provided training information with regard to the fiduciary duty of the UPG Board of Directors as the governing body of the Foundation. The function of the UPG Board of Directors is to make decisions about the operations of UPG, and to exercise oversight and planning to enable UPG to fulfill its best interest and mission in support of UVA Health System. Directors are legally bound to discharge their duties in accordance with their good faith business judgment of the best interests of UPG. Mr. Pettit emphasized the point that in order for a decision to be made in good faith, UPG directors must be fully informed of all the facts and circumstances associated with the decision before they take action.

Ufirst

UVA EVP COO Patrick Hogan addressed the Board with regard to the letter he had received from UPG Board Chair Dr. Kate Acuff on May 30, 2017, about the Ufirst initiative, which stated that UPG Board members felt that that they needed more information and proof of concept to outsource UPG’s Human Resources and Payroll functions to the University as a vendor. Mr. Hogan stated that he would be happy to provide further information on the initiative before asking them to vote on the issue of UPG participating in Ufirst. Mr. Hogan stated that a 15% savings could be promised by participation in Ufirst. A number of options were discussed regarding UPG employees, including employees remaining at UPG and UPG using the Workday IT platform. Mr. Hogan stated that he plans to present more data to the UPG Board at its meeting in September.

Audit Plan

UPG Board of Directors charter requires partnership with an independent audit firm. Members of the Audit Committee voted to engage BDO for the third consecutive year. A resolution to engage BDO for the FY2017 independent audit was passed unanimously with no abstentions.

Consent Agenda

A resolution approving Scopes of Practice for UPG Outreach Practitioners was approved, as were resolutions honoring retiring Department Chairs Thomas Leinbach, D.D.S. and M. Norman Oliver, M.D., M.A.

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