Message Archive
February 25, 2009
Special Message to the Health Center Community
"I have learned throughout my life that what really
matters is not whether we have problems, but how we go through
them."
--Rosa Parks To Members of the University of Connecticut
Health Center Family: As I now come to the six month point in
my time here with you, two things are clearly evident to me: we
have a tremendous number of challenges facing us, and we have a
tremendous community of people here to take these challenges
head on. I believe we can eventually emerge from these
challenges and obstacles better, stronger, and more powerful. I
also believe these next months ahead will be difficult for
ourselves, our state, and our nation. I am personally honored
and humbled to lead you at this time. I see your commitment
every day. In a 24-hour period this week, I attended our Health
Center's PAWS award event, which recognizes our own for the
quiet excellence performed every day. I had an opportunity to
pay my respects for a fallen colleague at a packed memorial
event in the Food Court. I reflected on our community's ability
to affirm an individual’s worth and importance. At our medical
and dental student research day I was invigorated to see what
makes us special: our sense of inquiry, our pursuit of higher
knowledge and our commitment to preparing the future.
As we continue on this journey, please know that your thoughts
are important. The blog has been a great way to communicate with
me and I encourage members of the community to continue the
dialogue. I want you to know that I am grateful for your
optimism, your encouragement, and your sense of deep commitment.
These traits will be all the more important during the months to
come. As you know, my goal for the Health Center is that we
move toward achieving top tier status. In many ways, we already
have a top tier community. This community deserves a modern, top
tier hospital. We have followed the CASE report process and have
forged a partnership with Hartford Hospital to create a
University Hospital on two campuses. Obtaining our dream of a
new hospital will not be easy… but I believe it can happen. I
need to underscore again that this process will not be easy. All
great tasks require vision, perseverance and toil—but I believe
it can and should occur. The realization of the partnership will
see UConn having one of the largest University Hospitals in the
country, with new modern state of the art facilities. While we
are hopeful about this future, we must face head-on the economic
realities of our Health Center, and the economic realities of
our nation, if not our world. Whether our children will later
call this the second depression or an extended economic downturn
is unclear. What is clear is that we are living it now, and must
find ways to not only survive, but flourish. In the longer
term, we must find ways to expand our clinical enterprise and
this starts with each and every one of us at the Health Center
telling the story to others about what makes this academic
community special, and why their clinical care should be here.
We will increase our public service announcements about the
Health Center, and use our print media to get the word out. I
welcome your suggestions and thoughts on how we can do this
better. In the short term, we must take appropriate steps to
insure our viability and vitality. Again, no one pretends that
this will be easy. Fiscal year 2008-2009’s budget began with a
projected $11.5 million deficit. On my arrival it became quickly
clear that our projected deficit could be as high as $30 million
unless certain changes were made. To be clear, the clinical
enterprise has certain structural issues that make it difficult
to be profitable. These include inadequate hospital bed capacity
for a number of revenue generating service lines, a
disproportionate number of under-reimbursed clinical programs,
many of which constitute our public mission, and state fringe
benefit costs which are borne by John Dempsey Hospital. The
fringe benefit differential (the difference between JDH fringe costs and the average fringe cost of all
hospitals in the state) accounts for nearly $13 million in
added, unsupported state expense for JDH. The
State in 08-09 is paying a portion ($3.6 million) of that
differential. Starting in the summer of 2008, the Health Center
implemented numerous cost controls including certain limitations
on state supported travel, certain restrictions on new hiring
and refilling vacant positions, and certain restrictions on food
service, and overtime and compensation time controls. These
efforts were followed by the implementation of recommendations
from PricewaterhouseCoopers (PwC) regarding revenue enhancement
and
productivity improvements. The PwC cost improvement initiatives
have already produced year-to-date savings totaling $7.7
million. Unfortunately, these efforts do not address the
underlying
structural problem which is fueling our deficits. Our deficit
continues to outstrip our cost reduction and improvement efforts
by ever increasing margins. In the short term, we must do
everything we can to decrease our level of deficit. At the same
time, we must insure our future by moving toward and achieving a
sustainable break-even run rate, which means operating at
break-even on a monthly basis, month after month. This challenge
forces us, once again, to make some painful decisions. Current
projections require us to implement an immediate cost reduction
and improvement plan in excess of $10 million. The cost
reduction and improvement plan includes:
- Revenue Enhancements
- Nearly 50 percent of the FY09 planned improvements will
come from $7.5 million in expected revenue enhancements
achieved through the PwC recommendations resulting from
supply chain improvements, improved collections, managed
care contracting and charge capture improvements.
- An estimated $700,000 in new revenue will be generated
through the institution of GME indirect cost payments coming
from the area hospitals beginning in April 2009.
- Expense Reductions
- Non-personnel expense reductions including over
$500,000 in savings on natural
gas purchases.
- Maintenance/cleaning cost reductions of $250,000.
- Workforce and Salary Expense Reductions
- $900,000 to be achieved through a variety of
personnel expense reductions which
include the following:
- Workforce reductions of approximately 25-30 filled
and vacant positions.
- A freeze on managerial and confidential employee salaries
through the elimination of merit increases.
- A freeze on faculty salary increases through the elimination
of the academic merit program for the 08-09 year in both the SOM
and SODM.
These actions are now being implemented and affected
employees are being noticed for workforce reductions in the
upcoming weeks per their contractual requirements. Each of these
reductions will have an impact on the Health Center but none is
more difficult or painful than the
necessity of workforce and salary changes. I want to thank
particularly the clinical and basic science department chairs
that I recently met with from the school of medicine.
Understanding the fiscal situation, it was the consensus of that
group that we freeze faculty salary increases as
detailed above. I also wish to thank Dean Monty MacNeil and the
dental school faculty for collectively supporting a freeze on
their faculty salaries as detailed above. Even with this
effort we are projecting that we will end the current fiscal
year with an $18 million deficit. Moreover, based on the
Governor’s proposed budget we would anticipate a 09-10 loss
approaching $21 million. The Governor’s proposed budget reduces
the general fund
appropriation from the budgeted FY 2010 level of $117.8 million
to $110.7 million and does not include a continuation of the
$3.6 million we received this fiscal year as partial support of
the fringe differential. Nor does that budget include the
requested deficiency appropriation to cover
the projected 08-09 $18 million deficit. Further, the Governor
has proposed actions which will effectively freeze UConn 21st
Century capital project funding for 09-10. As we go through the
capital budget process this is likely to negatively impact our
ability to commence planning on new projects and will result in
reduced capital funding availability for everything from
information technology projects to deferred maintenance. We
must therefore immediately begin developing a second round of
more aggressive cost reductions that will result in a break-even
run rate in 09-10. The current and projected level of financial
losses simply can no longer be sustained. We will continue to
pursue at the legislature
a deficiency appropriation for 08-09 (estimated to be $18
million) and the fringe benefit differential. However, it is
clear to everyone in the state that Connecticut’s economic
crisis is real and growing. The Governor and the legislature are
being confronted with very difficult and
potentially draconian actions in the face of the mounting state
deficit. Hence it is all the more incumbent that we take
aggressive action if we are to weather the next 12 to 24 months.
I have asked John Biancamano, our new chief financial officer,
to take the lead in the identification of a second round of cost
reductions or revenue opportunities which will
aggressively address the projected shortfall for 09-10. The next
series of reductions will be all the more difficult coming off
the heels of the 09-10 improvements. We have fewer alternatives
for further expense reduction and will of necessity need to
consider potential program curtailment in an effort to move
toward a break-even run rate. In my months here at the Health
Center, I have experienced first-hand the dedication,
commitment, and camaraderie that characterizes the Health
Center. I thank every member of the Health Center family for
their support of the Health Center. I ask for your continued
support and understanding as we work over the next several weeks
to implement the 08-09 cost reductions and improvements and as
we begin to develop plans for further reductions. We will strive
to continue the Health Center’s tradition of compassion and
caring even as we face an ever-growing number of difficult
choices. I offer to each of you my promise to do all that I can
to provide the leadership that champions the Health Center’s
excellence both in Connecticut and throughout the nation. I do
believe we will eventually emerge from our local and global
crisis better and
stronger. The words of Dr. Martin Luther King from August 16,
1967, express my thoughts best: “And I must confess, my
friends, that the road ahead will not always be smooth. There
will still be rocky places of frustration and meandering points
of bewilderment. There will be inevitable setbacks here and
there. And there will be those moments when the buoyancy of hope
will be transformed into the fatigue of despair. Our dreams will
sometimes be shattered and our ethereal hopes blasted... But
difficult and painful as it is, we must walk on in the days
ahead with an audacious faith in the future.” Thank you. Cato T. Laurencin, M.D., Ph.D.
Vice President for Health Affairs
Dean, School of Medicine |
