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Leaders communicate budget challenges

MUSC leaders addressed the Medical University Hospital and university’s budget situations at the Dec. 2 faculty town hall meeting in the Basic Sciences Building.
President Ray Greenberg began the presentation by recognizing some of the latest accomplishments and work conducted by MUSC faculty and staff. Next, he discussed the hospital’s financial situation. Greenberg said that upfront costs, new equipment, supplies and hiring of experienced clinical staff for Ashley River Tower (ART), combined with the rebasing of Medicaid’s reimbursement rates contributed to the hospital’s financial shortfall during the past fiscal year.
Within the past six months, efforts have squarely focused on addressing the financial challenges within the hospital. Greenberg praised Stuart Smith, vice president for operations and executive director of the MUSC medical center, and his leadership team for implementing a series of initiatives to reduce costs and to improve efficiency. Greenberg said that expense reduction goals involve more efficient staffing, reducing supply costs and other programmatic changes. The total amount of anticipated improve-ments through June 2009 should be sufficient for the hospital to end the current fiscal year with a positive margin. Already, the October financial statements indicated that the hospital was operating in the black.

Greenberg addressed several specific MUHA budget-related questions
Was ART too expensive?
By comparison to other recently completed and current hospital construction projects in the Charleston area, the cost per square foot for constructing ART is in the mid-range.

What is happening to patient volumes?
Although patient volumes remained relatively flat from June to October, renovations in the main hospital limited the capacity for growth. Since October, as bed capacity has increased, the volume of admissions has risen to record levels. Virtually all beds in ART are now open and with the relocation of oncology inpatient care there, the facility has been operating near capacity.

With staffing changes, will MUHA have too few nurses to deliver excellent care?
 MUSC has always retained comparatively high nursing staff-to-patients ratios compared to other hospitals in the state and elsewhere. For example, as reported by U. S. News and World Report, the ratio of nurses to patients at selected South Carolina hospitals is: MUSC (2.0), Roper (1.6), Greenville Hospital (1.6) and Palmetto Health/Richland (1.4). Even with changes in staffing levels, MUSC maintains a comparatively high level of staffing when compared with other teaching hospitals. A principal focus of staffing changes has been to reduce dependency on personnel from outside agency staff, who are more expensive than MUHA employed staff. Patient satisfaction levels have continued to trend upward, most recently about the 80th percentile nationally. In addition, Patrick Cawley, M.D., MUSC medical director, is leading an effort to assure that patient safety is maintained at historically high levels.

University budget status

Provost John Raymond related specifics of the state appropriation funding levels, which support the university’s budget. As a public institution of higher learning, MUSC receives state-appropriated dollars. In the first four months of FY2008, MUSC experienced an unprecedented $17 million decrease in state appropriations, posing significant operating challenges for the institution in meeting its missions. MUSC has not seen funding levels this low since the state’s economic downturn around the late 1990s, said Raymond.
In July, MUSC took an initial 2.68 percent cut ($2,600,977); in August, another 3 percent ($2,865,635) and in October, another 11.9 percent ($11,367,917) resulting in a 17.58 percent cut or $16, 834,529 in state funding. MUSC’s budget plan also anticipates a potential 5 percent further budget reduction based on recommendations from the state’s board of economic advisors.
The state’s three research institutions—Clemson, University of South Carolina (USC) and MUSC— have raised tuition in response to previous reductions in state appropriations. According to Raymond, MUSC sits at a disadvantage because of its smaller student body, which cannot realistically be expected to offset the magnitude of lost state funding by tuition increases; plus MUSC students do not receive lottery scholarships, placing a large burden on them and their families. Raymond spoke about differences in the state’s Mission Resource Requirements (MRR) funding model, a formula provided by the South Carolina Commission on Higher Education to the state to annually assess the fiscal needs of South Carolina’s public institutions. In 2008, MUSC received 52 percent of calculated need based on the MRR funding formula compared to higher percentages at peer institutions like Clemson (71 percent) and USC (67 percent).
“In dealing with the cuts in state funding, we were not starting from a level playing field, because MUSC historically has had a lower base of its needs met when compared with most other higher education institutions in the state,” Raymond said. “We cannot simply make up this difference with tuition, since we have a higher percentage of in-state students and a smaller student body.”
In breaking down the university’s allocation of October’s 11.9 percent budget cut, the reductions within individual units were based upon their respective contributions to total university expenditures. According to Raymond, university leaders considered several options for distributing budget reductions to administrative and academic units. Although units were encouraged to develop funding responses uniquely suited to their funding streams and core missions, the process was guided by a set of core principles, such as preserving university reserves (operating cash on hand), minimizing layoffs and avoiding disproportionate burdens on specific employee groups.
Leaders of the academic and administrative units (including the deans of all six MUSC colleges, the library system, and various support units) submitted plans that were consolidated into an overall budget reconciliation plan. The plan includes staff reductions through a universitywide hiring freeze, as well as a mandatory four-day furlough among 1,215 staff and faculty in the colleges of Nursing and Dental Medicine, the library, the Office of the Provost (student and research support areas), and the Vice President for Finance and Administration. The plan also mandates reductions in non-personnel expenses, including reductions in state-funded travel, holds on equipment purchases, and supplies, renovations and other services/leases. The plan will result in a more than $15 million reduction of expenses.
Faculty and staff have expressed concerns that the furloughs will be particularly difficult for individuals with limited financial resources. “All of us are sensitive to the struggles that many university employees will experience during this furlough period,” Raymond said. Nearly 300 individuals have volunteered to take additional voluntary unpaid furloughs to help to deal with the budget reductions. To assist individuals and families, the MUSC Foundation has created the Furlough Relief Fund to help support MUSC employees undergoing financial hardship because of loss of pay during the mandatory furloughs. Financial assistance will be dependent on the amount of money contributed to the fund. Tax deductible gifts can be made to the MUSC Foundation at
In conclusion, Raymond spoke about the current dilemma regarding planned construction and renovation projects. Institutional leadership reviewed 31 previously approved renovation projects, and decided to defer 22 of them in order to delay expenditures of about $9 million. The Drug Discovery and Bioengineering buildings are two high-profile projects that will be located at the heart of MUSC’s campus and are slated to begin construction in 2009 with a completion date set for 2011. Both projects have secured state grant money and federal construction awards that may be jeopardized if construction of both projects is delayed. In addition to providing new research space on campus, those projects also are slated to add two large auditoria and other classrooms, faculty offices, and a pre-clinical laboratory for the College of Pharmacy.
“For many of us, it’s difficult to see these new buildings going forward when our employees are facing real-life problems with job security and financial hardship,” Raymond said. “It is important to note that 95 percent of the funding for these two buildings was obtained from competitive federal grant mechanisms and state matching funds, which cannot be re-programmed for other uses, despite our severe financial challenges. We must weigh the very real concerns of our employees against the potential value that these buildings could bring to our campus for decades to come.”
After seeking guidance from faculty and academic leaders, the administration has recommended a four-to-six month pause to allow a reassessment, to seek broader input, and to rebid both projects as a single consolidated construction effort, in hopes of obtaining cost reductions.
The session ended with a question-and-answer period and appreciation to the faculty senate for hosting the event. A commitment was made to host a follow-up meeting after the new year.


Friday, Dec. 12, 2008

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