February 25, 2000

Growth key to future: Jacobson

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Dr. Harry Jacobson delivered Monday's State of the Medical Center Address. (photo by Dana Johnson)

Growth key to future: Jacobson

This week's State of the Medical Center Address lifted the hood on the institution's inner workings and revealed that there is indeed a method to the madness.

And that method is a plan — a detailed and defined, yet flexible, blueprint to safely guide Vanderbilt University Medical Center through a rocky present and deliver it to a promising future.

It's a plan, however, that at first may seem slightly off-kilter because two of its primary elements appear to be in direct conflict with each other. Consider: Mounting financial pressures have spurred a concerted effort to drive down expenses across the medical center; yet at the same time, the institution is pushing ahead with ambitious plans to add 1.3 million square feet of new patient care and research space, at an approximate total cost of $318 million.

How can you do both at the same time? How can an institution undertake initiatives to cut costs — initiatives that include reducing its workforce — while simultaneously spending millions on new projects? And, more importantly, why would we do both at the same time?

The answer is simple — because it's necessary.

Because if we don't, measures will be required in the future that will make the cost-reduction efforts of today seem like a paper cut.

"If we don't do the right things, right now, we're in store for something far more drastic later on," said Dr. Harry R. Jacobson, vice chancellor for Health Affairs, at Monday's address in Langford Auditorium. "If we don't pursue the proper strategies now, Vanderbilt will not remain among the ranks of the nation's top academic medical centers.

"We don't want that. We're doing the things we're doing, the way we're doing them, to ensure the future of the medical center."

Across the country, academic medical centers such as VUMC are suffocating under the weight of dwindling reimbursement from both governmental and private insurers for the vital health care services they provide. Nationally, top-flight centers such as the University of Pennsylvania, the University of California at San Francisco, Stanford, Harvard and others are experiencing losses ranging from $50 million to $150 million. This fiscal year, VUMC will lose more than $20 million participating in the state's TennCare program.

Nationwide, academic medical centers are being forced to make tough decisions about how to address the challenges posed by today's rapidly evolving health care market. Painful though it was, the reduction-in-force at VUMC last month pales in comparison with measures recently taken at the University of Pennsylvania — there, 2,000 people were laid off.

The key to avoiding that type of scenario here is to manage costs and increase revenue now while at the same time creating new programs and the facilities to house them to take advantage of trends that will allow VUMC to thrive in the future, Jacobson said.

"If we fail to act quickly to reduce costs now, the pain and dislocations will be far more serious and will impact far more people. If, on the other hand, we act appropriately, manage our budgets and improve our financial position, we will flourish," Jacobson said.

Numerous initiatives are under way to address a wide variety of cost-related issues, including reducing waste and redundancy, lowering our average cost-per-case and cost-per-discharge figures, improving billing and collections, increasing reimbursement from managed care organizations and managing our TennCare and charity care.

TennCare is the state's five-year-old program that replaced Medicaid. It provides health coverage for 1.3 million Tennesseans and it is drastically under-funded. VUMC's losses from TennCare have topped $15 million each year since 1997 and this year are expected to top $20 million. According to some estimates, the state's program is under-funded by more than $230 million.

It is, in short, one of the most significant causes of the cost-reduction efforts VUMC is now involved in. To address the situation, the institution is pushing for an aggressive package of legislative reforms, including the creation of a disproportionate share pool and permanent support for medical education.

"If we are successful in our efforts, it can mean an additional $20 million to the medical center," Jacobson said. "If we're not successful, we will need to carefully evaluate our continued participation in TennCare."

Strategically planned and well-managed growth in VUMC's research and patient care missions is crucial to the future of the institution. The key is having enough space, an area in which VUMC is lacking, Jacobson said. To rectify this, VUMC is undertaking several building projects to meet anticipated needs and to take advantage of expected increases in outside sources of research funding.

These include construction of:

• New Vanderbilt Children's Hospital — The 206-bed, 564,000-square-foot hospital will be located on lot 42, across from the Dayani Center. Construction is expected to be complete by spring of 2003.

• Medical Research Building III — jointly developed with the university's College of Arts and Sciences, this 386,000-square-foot research facility will be located between the Learned Lab and Godchaux Hall. Site work has begun and construction is expected to be completed in spring of 2002. Total cost is estimated at $95 million, which VUMC's portion $60 million.

• Vivarium — this two-story addition to the top of Medical Center North's Werthan Building will create 35,000 square feet of space to house VUMC's growing animal-based research program. Construction on the $14 million project is expected to start this summer.

Vanderbilt-Ingram Cancer Center — construction on this 59,800-square-foot addition to the Frances Williams Preston Building (formerly known as MRB II) has already begun and should be completed by December. Total budget is $14 million.

• Bill Wilkerson Center — this 166,000-square-foot building is slated for the south end of Medical Center East. Construction is planned for early 2001, with a total budget of $29 million.

• Muskuloskeletal Institute — slated for the corner of 25th Avenue South and Garland Avenue, construction on this 96,000-square-foot building is expected to begin in early 2001. Total budget is estimated at $16 million.

VUMC is also aggressively pursuing opportunities in technology transfer, including involvement with two new companies — MXISystems, developers of new high-resolution monochromatic x-ray technology, and WebEBM, an internet-based venture with several other leading academic health centers that makes condition-specific patient care protocols available to a wide variety of markets.

Revenue derived from discoveries made by institution investigators is also on the rise. Royalties from patents awarded are expected to top $1.4 million, up from $1.1 million last year.

VUMC is also working to complete negotiations to link the medical center with Williamson County Medical Center. Sixty percent of Williamson County residents get their health care at Nashville hospitals, but only 4 percent currently get it at VUH.

VUMC officials are also deep into the process of recruiting new chairs for four School of Medicine departments — Pediatrics, Neurology, Cell Biology and Pharmacology — as well as the school's next dean.

Moving ahead and seeking new opportunities in all areas and phases of VUMC's three missions of research, education and patient care are vital to the institution's success, especially when times are challenging. But this ability would not be present were it not for the people involved, Jacobson said.

"This medical center remains one of the best in the nation. As a teaching institution we are in the top 15; as a research institution we are in the top 25; of the 6,000 hospitals in the country we are in the very highest category, according to all surveys that matter; and the people of Middle Tennessee have rated us the best hospital for quality and reputation.

"This doesn't happen because the leadership makes it happen. It doesn't happen just because we have deep traditions and because we want it to. The reputation we have id driven by the hard work, dedication and intelligence of the people who work here and by their commitment to being the best we can be," Jacobson said.