UW Health seeks $350 million in bonds while reducing operating budget

September 17, 2018

UW Health, which is in the midst of a plan to trim $80 million from its annual budget of about $3 billion, plans to issue $350 million in bonds this year for building projects and refinancing.

Some $120 million in bonds is for an addition and renovations at SwedishAmerican in Rockford, Illinois, which became part of UW Health four years ago.

Another $21 million is for improvements at UW Hospital, such as replacing the roof, upgrading emergency generators and expanding the burn unit from seven beds to 11 beds.

Nearly $9 million is to buy land for an outpatient facility, at an undisclosed location.

Another $175 million is to refinance existing bonds to reduce interest expense, and $25 million is to consolidate a short-term loan into borrowing.

“We consider this ongoing effort to grow our financial viability our ‘new normal,’ and we are constantly seeking ways to improve,” Dr. Alan Kaplan, CEO of UW Health, said in a letter Sept. 4 to the Legislature’s joint finance committee.

UW Health can proceed if the committee takes no action within 30 days. The bonds don’t affect state finances, Kaplan said.

It’s the first time UW Health has gone to the bond market since 2013, when it issued $273 million in bonds, spokeswoman Lisa Brunette said.

The borrowing comes after UW Health announced its $80 million budget reduction plan last November. Some $60 million has been implemented, partly through job reductions, Brunette said.

UW Health has the full-time equivalent of about 15,650 employees, down from 16,000 last November. The reductions have come through attrition and haven’t involved layoffs, Brunette said.

Other savings have come from decreased use of overtime and agency staffing, and reduced costs for pharmaceuticals and supplies, she said.

Some $15 million in additional revenue has been identified, which Brunette declined to specify. The $80 million goal should be realized by June, she said.

UW Health, which had an operating margin of 0.6 percent in fiscal 2017, had a preliminary margin of 4.1 percent in fiscal 2018, which ended in June. The organization needs to have margins of 3.5 percent to 4 percent, Kaplan said last year.

“We have been successful at finding efficiencies in our budget,” Brunette said. “We have to continue to invest in updates and invocations to remain competitive for the future.”

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