University of Missouri Health Care leaders set a goal of making $100 million in profits every year at meeting Tuesday afternoon, but cuts may need to be made to hit that mark.

The University of Missouri Board of Curators Health Affairs Committee held a meeting where MU Health leaders including CEO Johnathan Curtright and Mike Blair, MU Health chief financial officer, outlined a long-term plan for staying financially solvent. The plan included changing the way the health system charges patients and potentially making cuts of at least $25 million.

Last year MU Health revenue surpassed $1 billion for the first time. Operating income also hit a record of $104 million in fiscal year 2018.

Over the next 10 years, the health care system wants to sustain operating income at least $100 million per year, Blair said. With Mid-Missouri's population increasing slowly at 0.3 percent per year, Blair said the health care system must make changes to achieve long-term financial goals.

"It's not a very good picture," Blair said. "If you stick with status quo, and we don't implement different strategies than we have today, essentially you drop off the table."

Already MU Health has an operating margin of about 10 percent, about 4 percent better than similar health care systems, Blair said. By 2023 the implementation of changes from the plan will net the health care system about $65 million, Blair said. Ten years down the road the system could save $85 million from the plan's implementation.

But, the long-term plan will not take MU to its profit mark alone, Blair said. In order to maintain the profit margin MU Health wants, it will need to generate $60 million more than what it's generating right now, Blair said.

Chicago business services firm Kaufman Hall helped MU develop its long-term financial strategy. The firm studied similar health care systems around the country to help MU Health formulate the plan.

Cutting $25 million over the next 3-5 years to make the system more efficient should be possible, Blair said. He did not outline what cuts MU Health plans to make, but said the cuts will be about changing behavior and that everything will be up for discussion.

"It's not going to be easy, but we can get $25 million out of our system," Blair said.

MU Health also wants to try to switch from a services-provided billing model to a value-based billing model. Under value-based billing arrangements health care providers are encouraged to help patients improve their health by receiving as few services as possible. 

Stevan Whitt, MU Health chief medical officer, told the committee that value-based health care providers essentially take bets to hedge that they will spend less money as the populations they serve get healthier. Health insurance chief financial officers have been reluctant to do business with hospitals that provide value-based care, Whitt said.

Changing payments to a value-based system will mark an important change in MU's transformation, Blair said.

"It may not generate a single additional dollar coming in the door, but how we get paid is going to be different, so we have to transform to reflect how we believe we'll get paid in the future," Blair said.

The long-term plan was prepared with the University of Missouri School of Medicine about 18 months ago, Curtright said. Plans for cardiovascular, oncology and other disciplines were made as part of the plan, Curtright said.

Curators chastised Blair and Curtright for not communicating plans about the changes sooner or for making the health care system's long-term plan publicly available.

"To have appropriate governance, we have to have the institution involved in strategic plans to a much greater extent," said Curator Phillip Snowden.

At the meeting MU Health reported strong financial results through the first six months of fiscal year 2019. During the first and second quarters of fiscal year 2019 MU health recorded revenue of $526.1 million and is on track to surpass $1 billion in revenues again.

Patient visits increased by 2.9 percent over the same period last year because of increases driven by maternal, neonatal and neuroscience care, according to the financial report. Surgeries increased 2.5 percent from 13,051 in fiscal year 2018 to 13,379 during the first six months of fiscal year 2019.

Clinic visits also increased by 7.9 percent from 330,001 in the first six months of fiscal year 2018 to 355,986. Blair said new clinics in Ashland and Fulton drove this increase.

Operating income fell 23 percent from $51.6 million during the first six months of fiscal year 2018 to $39.5 million during the first six months of fiscal year 2019. Blair blamed bad investment returns, which are off by about $7 million from what the system expected it would get back on those investments.