Page 368 - CEO Orientation

PH is reporting a $2.0M operating surplus at November 30, 2017 which is $0.1M favourable
compared against budget for the period. Integration costs of approximately $1.8M have been
largely offset by the positive impact of a July 31st actuarial pension valuation, positive funding
announcements and vacancy savings within the Hospital. Budget deficits within the Long-Term
Care program continues and is driven by staffing overspend. Management is working closely with
Long-Term Care Program managers to identify a recovery plan. A balanced year-end position to a
$3.1 M surplus budget is expected for Providence Healthcare.

SMH’s $5.1M surplus includes stub period accounting “true-ups” mainly due to $8.9M actuarial
valuation for post-retirement pension benefit obligations and $1.2M reduction in the severance
accrual, related to the benefits fraud. The majority of these one-time adjustments positively
impact salaries and employee benefits. Excluding these one-time adjustments, the hospital is in an
ongoing deficit position of $5.0M for current year operations.

The YTD expense variance of $2.8M includes the above accounting adjustments. Excluding this,
salaries and benefits are reporting a negative variance of $3.1M combined with Medical and
surgical supplies reporting negative variance of $3.5M are due to unbudgeted executive sponsored
expenses and tertiary care delivery for procedures such as Mitral Clip, TAVI, complex endoscopy,
etc. Current pressures contributing to the variances are additional staffing due to acute beds in
excess of original bed map (Specialized Complex Care program), higher nurse to bed ratios,
increased staffing needs due to a larger footprint in the Emergency Department and constant care
(observers) within inpatient units. Other supplies and expenses are $2.1M unfavourable to budget
primarily due to unbudgeted insurance, professional fees (integration related), bad debts and
minor equipment purchases.

The positive YTD revenue of $2.7M is mostly comprised of favourable patient revenues of $2.3M
(inpatient accommodation, self-pay/out of country, etc), $2.6M in sales and other revenue (CCO
Drugs, retail pharmacy, etc) offset by an unfavourable government revenues of $2.2M (Provincial
Priority Programs and QBP volume funding behind $2.8M). The volume funded procedures not
being delivered do not have off-setting savings as the operating rooms, ICUs, wards and other
clinical services are being utilized for other non-volume funded care. During base funding
environments (prior to Health System Funding Reform’s introduction of QBPs) hospital’s attention
to case mix was not a major driver of funding. Based on the new environment, discussions have
occurred at St. Michael’s operational committees regarding case mix (both QBP and Provincial
Priority Programs) and subsequent impact to funding. While some procedures are non-elective
and therefore, beyond management’s control, there are some areas where performance could be
improved.

Examples include:

 Beyond Management Control - Ruptured Neuro-Aneurysm:
o With the spread of non-ruptured neuro-aneurysm coiling occurring at periphery GTA
and other major centres around Ontario, fewer non-ruptured cases progress/present

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