April 19, 2012

"Rounds" from the Vice Chancellor: How Much is $50 Million?

Last month, I pledged to communicate with you in a more personal way about the many amazing things I see and experience throughout the Medical Center, and about challenges we face related to our nation’s rising debt and federal health care reimbursement challenges.

So this week I’d like to puzzle over $50 million. This is the amount we intend to reduce our spending next year in order to counter the headwinds we know are coming — and we are even now beginning to experience — in how much we are paid for taking care of patients and for performing ground-breaking research.

What do those headwinds look like? The Budget Control Act was signed into law by President Obama on Aug. 2, 2011, as a means to avoid the U.S. debt-ceiling crisis. The bill directly specified $900 billion in cuts, and when Congress failed to produce additional deficit reductions of $1.2 trillion by the end of 2011, the bill directs this amount must be “sequestered” through across-the-board cuts beginning Jan. 1, 2013.

These mandatory cuts will apply to several programs that support our key missions of health care, research and education — such as Medicare, the National Institutes of Health and federal scholarship programs.

Many of us find these large numbers hard to fathom. What does $50 million in cost reductions really mean? And how much money is this, really? Well, $50 million represents enough money to buy a painting of Elvis by artist Andy Warhol. And I am told it is slightly more than basketball star LeBron James will earn this year.

I think $50 million sounds like a lot of money. If we were mysteriously handed $50 million, what could we do at VUMC? Astonishing things. For example, we could create an endowment nearly large enough to fund every medical or nursing student who comes here with financial need for years to come.

But viewed from another perspective, the Medical Center’s expenses in the next academic year will be $3.1 billion. So from that perch, $50 million in cost reductions seem more manageable – it’s less than 2 percent of our total expenses. Surely we can save that much!

The fact is, saving this much money is serious business and is very hard work — for all of us. The reason? We are spending nearly every dollar we take in for mission-critical activities across health care, research and education. As a not-for-profit, there is very little “wiggle room” or “slush” in our annual budgets. Put simply, our budgets are tight.

And our costs are staggering and ever increasing. A major cost each year is maintaining our space — things as commonplace as painting walls, fixing plumbing and putting down new tile or carpeting. Consider that we have 10,000,000 square feet of space in VUMC. Think about how much you spend maintaining your own home — and multiply by a big number.
And then we pay salaries to more than 21,000 people. Keeping our compensation competitive in the marketplace for all faculty and staff is a top priority; recruiting and retaining the very best is fundamental to our success.

And this year, we will provide more than $400 million in uncompensated care to the citizens of Middle Tennessee. While this surely affects our ability to accomplish many things we would like to do, our commitment to provide these services for the people of Tennessee and, increasingly, the entire nation — including our neighbors and our own colleagues — is steadfast.

I was in the Monroe Carell Jr. Children’s Hospital at Vanderbilt rounding on a recent afternoon when our pediatric patients were visited by NASCAR team owner Joe Gibbs and several of his drivers. They were wearing what I heard one child with cancer call “such cool racecar outfits.” Watching this brought home to me once again the special role Vanderbilt plays, and indeed the Medical Center plays, throughout the region with its vast array of specialized services — the many kinds of world class care available here but nowhere else in the region. So saying “we’re not open” to those in need just is not an option. It’s not in our DNA.

The fact is, $50 million, whether large or small, is a figure vital to our future. As we wrestle this cost savings to the ground, we need to support one another in making the difficult choices. In doing so, we will secure not only our own future, but also the hopes of millions of people struggling with disease throughout our region and across the globe. They are depending on us.

Jeff Balser, M.D., Ph.D.
Vice Chancellor for Health Affairs
Dean, Vanderbilt University School of Medicine