Due to an unprecedented level of uncertainty due to the dual impacts of the global COVID-19 pandemic and the fiscal challenges at the University of Toledo Medical Center (UTMC), The University of Toledo received an update on the fiscal year 2020 budget and announced that it is moving forward to prepare for on-campus instruction in August with a temporary three-month budget for the start of fiscal year 2021.
University leaders shared details of the University’s response to the COVID-19 pandemic at the June 22 Board of Trustees meeting. The Rocket Restart plan developed by the institution’s pandemic planning teams aligns efforts to prepare for students’ safe return to campus with guidance from public health officials, as well as UToledo’s own health and safety experts. The fall semester has been adjusted to begin on Aug. 17 on the advice of experts in infectious disease and public health. Additional details including prevention principles, testing and contact tracing are also outlined in the plan.
“We all realize that campus will look different when everyone returns, but I am confident that the 2020-21 academic year will continue the positive momentum of the last several years,” UToledo President Sharon Gaber said. “We look forward to safely returning to campus to continue our operations and provide a high-quality education to our students.”
The Board was provided an update on the financial performance of the University and UTMC through May. As previously reported, and pre-COVID-19, UTMC’s budget shortfall was $12.68 million through the second quarter in December and $14.97 million through February. Factoring in the negative effects of the pandemic, as well as the CARES Act relief received by UTMC to alleviate some of the impact of COVID-19, UTMC’s deficit for fiscal year 2020 through May is more than $25.4 million. UToledo expects to once again call upon University of Toledo Medical Assurance Company, LLC (UTMAC) funding in the amount of $12.5 million to cover a portion of the hospital’s losses. Transfers from UTMAC, an insurance captive that covers UT Physicians, have been necessary in fiscal years 2015, 2018 and 2019 to address the hospital’s budget shortfalls which have totaled more than $14.5 million in the aggregate for those three fiscal years.
Also, it was reported that in addition to UTMC’s budget deficit, the University’s Auxiliary budget, which covers housing, dining and other operations, had a deficit of approximately $7.4 million through May 2020. More clarity is expected on the overall consolidated University budget shortfall for fiscal 2020 in July.
Facing budget shortfalls in both FY 2020 and FY 2021, the Board learned how University leaders have been working to address the deficit caused by the COVID-19 pandemic and other market forces, and how they have had to make difficult decisions regarding operational budget cuts across the institution. Among these cuts are a number of personnel reductions totaling approximately $20 million. University leaders are continuing their efforts to deliver a balanced budget as required by law, despite the shortfalls.
Due to the uncertainty of both future UTMC operations and the effects of COVID-19 University wide, the Board of Trustees chose to approve a $171.8 million three-month temporary operating budget at the meeting, in order to provide guidance for University operations from the start of the next fiscal year on July 1 through the end of September. The Board expects to consider a permanent budget for the complete fiscal year at the next regularly scheduled meeting of the Board on Sept. 21.
“We have been transparent about the need to address the deficits caused by UTMC operations, the COVID-19 pandemic and other market forces, but despite our efforts to date there continue to be numerous factors outside of our control that require clarity,” said Executive Vice President for Finance and Administration and CFO Matt Schroeder.
The temporary budget sets tuition for the year. The incoming class is the third cohort of new degree-seeking undergraduate students in the Tuition Guarantee, which will see a 4.1% increase that will remain unchanged for four years. Other adjustments include a 2% increase for continuing undergraduate students not part of the guarantee and a 2.5% increase for most graduate and professional programs, as well as differential tuition increases in selected graduate and professional programs. The housing and meal plans for the upcoming year were previously approved by the Board of Trustees.
The temporary budget assumes declines in enrollment and state support due to the pandemic and continued losses incurred by UTMC.
The Board was also provided an update on the ongoing request for proposals (RFP) process.
Through its advisors, UToledo is currently reviewing the submissions received from the RFP process for a potential transaction for UTMC. With the help of Kaufman Hall, a leading advisor for hospitals and health systems, the University sought a potential acquisition, lease, management agreement or other transaction. The RFP was issued April 16 and responses were due June 10.
While it is the University’s standard RFP process to not release details of the proposals until they have been evaluated, it was shared that UToledo’s advisors from Kauffman Hall engaged more than 40 health systems and other organizations across the country throughout the process.
“We have a responsibility to the University, our community and the state to explore all options for the future of UTMC. The Board has been working for more than two years exploring possible solutions for the hospital,” UToledo Board of Trustee Chair Mary Ellen Pisanelli said. “We are doing our due diligence and remain committed to addressing this issue recognizing that the hospital’s current state is placing an unsustainable financial strain on the University enterprise. We know that there are difficult decisions ahead, but I want to reassure the campus and community that we are continuing to evaluate all possible solutions and will not make a decision in haste. “
In an effort to continue to be transparent in regards to UTMC’s financial challenges and calls from members of the community questioning our fiscal realities, President Gaber asked that the Ohio Auditor of State review the finances of both UTMC and the College of Medicine and Life Sciences since the 2015 implementation of the College’s Academic Affiliation with ProMedica. Due to the immediate nature of the fiscal emergency facing the University’s community hospital, the most prudent option at this time was to engage with the Ohio Auditor of State to perform agreed upon procedures of the last five fiscal years as well as the current fiscal year through March 31, 2020 as prepared by CLA, our independent audit firm.
“We are pleased, however not surprised, that the procedures completed by the Office of the Ohio Auditor of State identified no material causes for concern,” said Schroeder. “The identification in the FY 2015 financial statements of a more appropriate way to present the dividend from the UTMAC to address UTMC shortfalls provided an opportunity to more clearly communicate that necessary financial support. The audit also reviewed and determined that all payments from ProMedica included on the College of Medicine and Life Sciences’ income statements accurately reflected actual payments received under the Academic Affiliation based on the cumulative number of resident transfers.”