UConn Health in Farmington will receive an extra $40 million in state aid under Gov. Ned Lamont’s proposed budget, about half of what the public hospital’s leadership requested last fall to get them through a projected deficit topping $114 million as the coronavirus exacerbated its fiscal woes.
“The UConn Health Center is in desperate need of additional state support,” Lamont’s budget said. “As the top-flight medical center faces growing costs that outpace its clinical revenue growth, the state budget must ensure that John Dempsey Hospital can continue to carry out its academic, clinical, and research missions.”
Overall, the budget recommends about $174 million go to the public teaching hospital in 2021-2022, and about $134 million in 2022-2023. The additional $40 million in operating support for the coming fiscal year aims to “stabilize the health center’s budget while the state and UCHC continue to determine a path forward for a public-private partnership.”
UConn Health leaders said in a statement Thursday they are “extraordinarily grateful to the Governor and the state for its support of Connecticut’s only public academic medical center.”
They explained the hospital receives 23% of its $1.2 billion annual budget from the state “to support its public mission of education, research, and caring for the citizens of Connecticut, particularly the underserved,” and before the pandemic, they were projecting to end the 2019-2020 fiscal period ahead of budget.
Last fall, UConn Health announced a request for nearly $77 million in state aid to the university’s board of trustees. Jeff Geoghegan, UConn Health’s chief financial officer, said the organization was projecting a $114.9 million deficit for 2020-2021, with about $61.1 million in losses related to COVID-19 and $53.8 million arising from unfunded pension costs — a persistent problem that has plagued the health center. The hospital lost tens of millions early on in the pandemic as as elective surgeries were canceled and many patients postponed medical treatment.
The organization shared plans to cut the projected deficit by $56.9 million through federal funding, deferring capital projects, furloughs and other efforts, leaving a remaining budget gap of about $58 million. UConn Health also asked the state for help in mitigating coronavirus-related losses of $18.9 million from the previous fiscal year.
The Farmington-based health center has struggled with financial sustainability for decades. In a December letter to the board of trustees, Geoghegan and UConn Health CEO Andrew Agwunobi called the rise in costs for fringe benefits, including the unfunded pensions, “unsustainable.” Even before the pandemic, Geoghegan said the university could not afford raises negotiated by the state with union members and increasing health care and retirement costs.
“We just don’t have the revenue to pay those dollars anymore so the state has to pay it. It either comes from patients or tuition dollars or from other sources, and we just can’t raise it to the extent to cover these costs. So yes, the state needs to pick up more and more of it,” he said early last year.
Legislators on both sides of the aisle shared concerns about the center’s financial sustainability.
Senate Republican leader Kevin Kelly of Stratford said he’d rather see the additional state funds being put towards UConn go to efforts to make health care more affordable for Connecticut’s middle class families.
“It demonstrates quite clearly that the UConn Health Center is a very, very expensive proposition, and the problem that I see, is that it starts to crowd out necessary and what I believe to be core functions of government,” he said.
“Here you’ve got $40 million that could bring at least 10% of premium relief to everyone who purchases insurance in the state of Connecticut,” Kelly said. “Instead we’re putting that $40 million into one facility run by the University of Connecticut.”
State Rep. Gregg Haddad, D-Mansfield, however, called UConn Health “a state treasure.”
“It is our only public hospital in the state ... and I don’t think that an unbiased view of their finances would lead anyone to believe that the money that we spend there isn’t well deserved by the system to do the job that we ask them to do,” he said.
Given that UConn Health had initially requested $77 million, Haddad shared concerns that the $40 million may not be enough, “but obviously we need to dig very deep into their finances to understand exactly where they stand.”
Regarding the unfunded pension costs, Haddad said he found it “unconscionable” to expect patients to have to pay “a premium price because the state failed to pay into its own pension system, but that is exactly what is happening.”
When asked about the hospital at a news conference Thursday afternoon, Lamont said “it’s a beautiful facility,” but “it’s a little small to be totally economic.”
“It’s got some very heavy legacy costs, which makes it not that competitive, so we’re taking a look at UConn Health,” he said.
Melissa McCaw, secretary of the state Office of Policy and Management, said the extra $40 million should be enough, noting “UConn usually starts with a higher number but they’re great at doing some mitigation to drive down cost.”
Amanda Blanco can be reached at firstname.lastname@example.org.