Return to Main Menu

Greenberg answers employees' questions Is anyone looking at how we use the indirect cost money that we receive with grants? About a year and a half ago we looked at all aspects of indirect costs, and we're beginning the process of re-negotiating the indirect costs rate with the federal government. Because of concerns expressed by investigators and business managers, one of the issues that arose from the discussion a year and a half ago was to try to provide, especially to those departments with large grant activity, some additional funds from their central pool of indirect costs to help with their expenses. I think the problem is allocation. About half of the money is retained to pay for core infrastructure supporting the research operation. Another half goes to the individual college from which the investigator originated. Then 5 percent from each of those two parts goes back to the department and/or the investigator. Then each college can actually return more. I think in the College of Medicine, where most of the activity is, returns another 5 percent. The question is whether that 15 percent is really sufficient to meet the needs. It may be something we have to look at again, especially as more operating expenses are disallowed out of direct expenses. I will be happy to have the issue re-examined. If we could negotiate our indirect cost rate up, it would give us a little more flexibility. The problem is, whether it’s done at the departmental level or the university level, we have to pay the operating expenses of the grants. We did a study last year about whether we were actually making or losing money on grants. Were we underwriting the costs of doing grants? The study showed that on federal grants, we were braking even. Where we were losing  money was on foundation grants, which pay either a very low indirect cost rate or none at all, and state grants. There are a number of state grants that we have, and they say, since they pay us appropriated money for our operations, the grants don’t come with any indirect costs. The overall picture of the study was that we came out braking even with grant activity. Federal funding represents about 60 percent of our total portfolio, and that could grow. I think it's good to have a balance in our portfolio for a variety of sources. At the same time, we should recognize that some payers provide us a better payer mix.  It’s certainly advantageous to the institution, department and investigator to have more resources available to help support the research infrastructure of the research enterprize. And there's no question that federal sources are our best payers. So from a purely financial point of view, one would want to emphasize that. While I’m hesitant to suggest in a forum such as this that we’re less enthusiastic about other funding sources, I will tell you we pay a price when we accept funding from other sources.  We may be forced to look carefully at our portfolio and find out if we are optimizing the funding sources that pay us the best return.  Is there a plan to close the Wickliffe House? If so, what will it be used for, and will there be alternative arrangements for some of the functions that it has occupied through the years? I know that there is a committee looking at both the Wickliffe House operation and the Guest House operation, which is next door to it, and where we accommodate overnight guests. The Wickliffe House for years has lost money. It doesn’t get enough use on the university side to cover the basic operating expenses, and we've been underwriting that for years. With all the pressing financial needs now, we are looking carefully at every penny we're spending and asking if it is absolutely necessary. The Wickliffe House is certainly one of those things that we look at and ask, is this absolutely essential to our educational, research, and clinical mission. It is definitely under scrutiny, but to my knowledge, there has been no change at the moment in it's financial operation. Mariott actually manages the Wickliffe House. There is just not enough volume of activity there. You would think that with as many employees here, people would use the service if they really wanted it. I think we're just not meeting what the market needs and wants. Originally, the Wickliffe House was donated as a faculty club house, but it just doesn’t work well with a campus like this.  Most people eat lunch on the run and don't hang around to have a sherry after work. However, many receptions from weddings at St. Luke's Chapel keep it afloat financially.  Certainly, we are looking at every piece of property we own. Just in President’s Council today, we discussed other pieces of land, like one out in Ladson, and whether it makes sense for us to retain this property anymore. In the spirit of looking at everything, the Wickliffe House is getting an examination, as is the Guest House. A conversation with a member of County Council suggested that they weren’t too happy with us about how conversations were going with Charleston Memorial Hospital. What is the current status? Interestingly, I have written about five letters asking to sit down and talk with them, and they have not responded back with any interest.  In reality, we’ve asked many times to discuss the situation with them. I actually met with the County Administrator and the Chairman of County Council, and Marion Woodbury also had a couple of meetings with them. We’re coming to a critical junction, and we've told them all along that July was a critical time.  After the last fiscal year, we had to reassess everything with respect to Charleston Memorial Hospital. Under the agreement that we are presently managing the hospital, they owe us about $6 million a year. Historically, we forgave them of the payments that they owed us. Why? We did it at a time when federal reimbursement levels were such that we made enough money to run the hospital without their assistance. To help the county, we agreed to forgive payments, but it started on a slippery slope and got down to nothing. It's been two years since we’ve received any payments. What's happened in the meantime is that federal reimbursement levels have dropped very dramatically. Last year alone, in Charleston Memorial Hospital we got $10 million less in disproportionate share payments, which is the main source of federal funding for it. That's on a $26 million budget, so we lost 40 percent of the operating budget in Charleston Memorial Hospital last year with very little warning of the reduction’s magnitude.  Although I haven't seen the final figures for the year, we’re expecting to lose from about $8 million to $8.5 million.  If we had the $10 million, we would be all right. That loss goes straight to the bottom line of our medical center, and is absorbed as an operating expense to our main teaching hospital. We told Charleston Memorial that we can’t continue to lose $8.5 million. We expected them to make good on their contractual obligations, which are payments twice a year, once on July 10 and again on Dec. 10.  They have not made their July payment. Out of their payment, we're supposed to make a payment for bonds that were used to renovate the hospital and McClellan/Banks Clinic. Those payments have historically been made in August, and they’re trying to get us to make those payments now, or at least let them know whether they’re going to be made or not. Their name is on the bonds. If the bonds get defaulted on, it would be the county's liability. At the moment, I have no intention of making that payment, because the contract says we pay out of money that they pass to us. They could use that as grounds to cancel the contract for us to manage the hospital, which opens the question of how they will continue to operate the hospital. Why are they mad at us? They want to sell the hospital. They want to get out of the hospital business badly. At the same time they wanted to sell it, they wanted to dictate how it was run. We couldn’t reduce any staffing and we had to guarantee the same levels of care indefinitely. With the financial realities, nobody would operate it under those circumstances. They've looked at other people potentially to purchase it, but they haven't had a quick buyer. We’re coming to a collision course soon, and I think it’ll be precipitated by this bond payment issue. They're mad at us, because we didn't follow through with what they felt was an agreement to purchase the hospital. We never signed an agreement to purchase it; we signed an amendment to an agreement. They subsequently came back with changes that they wanted to make, and at that point we said, this is off. We offered another way to purchase it, if they could help us finance it long term. Basically, all they’d have to do is take the bonds out, and we would be responsible. It would help us spread the cost out over time. I don’t know why that's not acceptable to them. It's the perfect solution. The offer has been on the table for three months without a response. In my opinion, they're not meeting their obligations under the contract. If we had the funding to run the hospital without their money, this wouldn’t be a crisis. We just don't have the money anymore.