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November 12, 2008

UConn Health Center Fiscal Year 2009 Budget

Colleagues and Friends,

No doubt, the wave of cutbacks at sister institutions in the region and our weakened economy have led you to have concerns regarding the Health Center. It won't surprise you to know that I have spent nearly every day of my almost three months here working on financial issues. Much of that work culminated with our October 27 Board of Directors meeting where specific directives were given to insure improvement in our finances.

The original FY09 budget, adopted by the Health Centerís Board of Directors and the UConn Board of Trustees projected an $11.5 million deficit. The University has been unwavering in its commitment to reduce the deficit as much as possible in the course of the year. Given both the volatility in the healthcare market and certain structural challenges coupled with the fact that there are 9 months left in the fiscal year, variances from these projections are probable. In addition, looking at the adopted budget, it is clear that two major reimbursement assumptions have not borne out to date. Based upon these variances, the Health Centerís Board of Directors directed management to prepare an updated budget, which projects a $16.8 million deficit. Very appropriately, the Board and President Hogan have directed us to close the fiscal year with a deficit of no more than, and preferably less than, $11.5 million, and charged management to institute all available actions to achieve that objective. This mandate requires us to make difficult programmatic changes and modifications, which, on the advice of our financial/administrative team, are outlined below:

1) We will continue to implement recommendations made by Pricewaterhouse Coopers to help increase revenue in the hospital and the faculty practice. While many of these changes have been challenging, the results are encouraging.

2) We will suspend all managerial salary increases in this fiscal year. If we achieve the desired financial results, we will try to budget for a full year of increases in FY 10.

3) FY09 salary increases for clinical and basic science faculty will be effective March 1 this year.

4) Going forward, I will approve faculty recruitments on a case by case basis only after having individual discussions with the Chairs and Dean MacNeil.

5) We will no longer be able to subsidize the Creative Child Center, and rates will be raised on January 1st to cover the cost of providing the service.

6) We will be making further programmatic changes in JDH in an effort to make the hospital self sustaining.

I fully recognize that these changes and decisions will directly impact many of you. However, if we are to achieve the potential that we all know this Health Center has we must establish a firm foundation on which to build. There are no quick fixes; efforts to further enhance revenues and reduce costs will proceed and remain the subject of considerable attention throughout all levels of our organization.

In coming to this institution, I knew the work would be challenging and this has certainly proved to be true. However, more than ever I believe that by working together we will be successful.

I will keep you informed over the next few weeks as these changes are implemented.

Cato T. Laurencin, M.D., Ph.D.
Vice President for Health Affairs
Dean, School of Medicine
Albert and Wilda Van Dusen Chair in Academic Medicine
Distinguished Professor of Orthopaedic Surgery,
Chemical, Materials and Biomolecular Engineering