Financial Managementof an Academic Unit
College of Human MedicineMichigan State University
November 9, 2006
Executive Director, University Physicians, Inc.Senior Associate Dean, Administration and Finance
University of Colorado School of Medicine
Lilly Marks
© Lilly Marks 2006
2
Financial Management of an Academic UnitSession Outline
1. Financial Analysis• Breakeven analysis• Marginal cost• Marginal utility• Diminishing returns• Leveraging
2. Issues, Implications & Trends• Review of School of Medicine & departmental
funding patterns: issues, implications, trends
3. Trouble Traps
3
BREAKEVEN ANALYSIS
The process of determining
the volume at which a
program becomes financially
self-sufficient.
4
Breakeven Analysis
1. Fixed Costs (FC) Costs that are incurred regardless of volume or
activity (e.g., capital equipment, salaries, rent).
2. Variable Costs (VC)
Costs that fluctuate in direct proportion with
volume (e.g., materials and supplies, temporary
help).
5
Breakeven Analysis
3. Price (P)
4. Contribution Margin (CM)
The difference between the price of a product or
service and the variable cost. That difference
represents the amount available to cover or defray
fixed cost (and hopefully provide a profit).
5. Capacity (C)
The maximum volume of production or service your
fixed resources can accommodate.
6
BREAKEVEN POINT
Fixed costs divided by the contribution margin per unit = volume necessary for breakeven
Fixed cost Contrib. Margin
(price - variable cost)
= B.E. volume
7
Breakeven Analysis
Example: You run a lab that has the capacity (equipment and staff) to run 20,000 tests per year. You currently process 10,000 tests.
Loss/test: ($1)Total loss: $10,000 ($1 x
10,000)
Capacity:Volume:
Price/test:Fixed costs:
Variable costs:Contribution margin:
Cost/test:Price/test:
$9 ($7 fixed + $2 variable) $8
10,000$8 (maximum market will bear)$70,000 ($7/test = fc ÷ v)$20,000 ($2/test)$6/test
20,000
8
Suppose you are offered a contract to Suppose you are offered a contract to
run an additional 5,000 tests per year run an additional 5,000 tests per year
at $8 per test.at $8 per test.
Can you afford to run more tests per Can you afford to run more tests per
year given your current loss of $1 per year given your current loss of $1 per
test? test?
10
If you lose a little on every test, can you make it up on volume?
Answer: Yes. (Unused capacity allows you to
increase volume without increasing fixed
cost).
How many tests would you have to run to break even?
Answer: 11,666 (Fixed cost $70,000 ÷ contribution
margin $6).
FCCM BE 70,000
$6== 11,666 TestsFormula:
11
Every test over breakeven point of 11,666,
up to 20,000 test capacity, increases your
profit by $6.
• At 15,000 tests, profit = $20,000 • At 20,000 tests, profit = $50,000 • You can lose a little on every test and
make it up on volume if you have
sufficient excess capacity.
12
MARGINAL COSTS
The additional costs incurred as a
result of providing one more unit of
service (e.g., one more lab test).
13
Represents the incremental value of each
incremental unit of investment.
Marginal Utility
Diminishing Returns
Represents the point at which each incremental
unit of investment generates a smaller rate of
return.
14
Marginal Utility & Diminishing Returns
Value of Investment
Valu
e o
f R
etu
rn
8M
6M
4M
2M
X
Example: - Fee coders cost $50K in salary & benefits but can process an average of $2M in clinical charges/year. - Your dept. currently processes $6M in charges/year.
X = pt of diminishing returns
$50K $50K $50K $50K $50K $50K
Where is the point of diminishing returns?
16
Leverage
1. Financial Leverage: The degree to which an entity
obtains its cash resources from borrowing or from
external sources rather than from equity. (The
greater the ratio of debt to equity, the more
leveraged.)
2. Operating Leverage: The degree to which entity is
committed to high levels of fixed cost. (The greater the
percentage of fixed costs in your budget, the more
leveraged.)
17
Leverage continued….
3. The more financially leveraged an organization is, the greater the potential rewards during good times, the greater the risk in downtimes.
4. The greater the fluctuation in revenue, the greater the risk for organizations with high degree of financial and operating leverage.
5. Medical schools typically have a high degree of both financial leverage and operating leverage. In recent years they have also experienced greater fluctuation in revenue.
18
Leveraging Example
On 1/1/2005 you purchase a home for $100,000.
On 1/1/2006 you sell the home for $120,000.
Scenario 1:
You purchase a home with $100,000 cash.
Scenario 2:
You put $10,000 cash down and obtain a $90,000
mortgage at 10% interest.
19
Example 1
110%
(11k ÷ 10k)
20%
(20k ÷ 100k)
$ 11,000
$ 9,000
$ 90,000
$ 20,000
--
--
$110,000 $ 20,000
$ 10,000 $100,000
$120,000 $120,000
Return on investment (ROI)
Net return
Loan interest
Loan repayment
Sale proceeds
Initial Investment
Sale price
Scenario 2Scenario 1
When leveraged, rewards are far greater on the upside.More complete & sophisticated ROI analysis must also include calculation of opportunity costs (i.e., the cost [or forgone income] of investing your funds in one option vs. another.)
20
(-190%)
(19k ÷ 10k)
(-10%)
(10k ÷ 100k)
Return on investment (ROI)
($19,000)Net return
Loan interest $9,000
$90,000
($10,000)
--
--Loan repayment
$80,000Sale proceeds
$10,000 $100,000Initial Investment
$90,000 $90,000Sale price
Scenario 2Scenario 1
Example 2
($10,000)
21
Understanding the risks, rewards and
nuances of leveraging is critical to
understanding the financing of academic
medicine.
Medical schools have built and financed
their missions on leveraged capital.
22
University of Colorado School of MedicineComparison of Medical School Funding
FY 2003-04
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Public Private Colorado Top 20 Research
Per
cent
age
of T
otal
Rev
enue
State and Local Appropriations Tuition and FeesGifts and Endowment Grants & Contracts (Federal & Nonfederal)
Clinical Revenue (Hospital & FPP) Other
All Schools Have Witnessed Prodigious Growth Fueled by Medical Service Income
$0 B
$10 B
$20 B
$30 B
$40 B
$50 B
$60 B
$70 B
1965 1975 1985 1995 2005
Source: LCME I-A, Annual Financial Questionnaire
Medical Service
Federal Research and Other Grants/Contracts
Other Income
State & Local Approp.
Tuition and Fees
24
University of Colorado School of MedicineTrend in Sources of Revenue
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
25
Only “hard” $ (w/endowment) in SOM budget.
Now < 10% of average SOM budget.
$ have remained flat when adjusted for general inflation.
Underpins core educational mission of School & basic administrative and infrastructure costs.
Institutional & State Appropriations – Tuition Revenue:
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
26
Institutional & State Appropriation Issues:
1. Many states have developed budget deficits & reduced state support to SOM.2. Allocation of funds to departments and programs = often illogical, political,
historical; Usually designated as teaching $ but distribution not faithfully based on teaching.
3. Faculty under increasing pressure to cover salaries via research and clinical activities and believe they can’t afford teaching and administrative commitments, which aren’t adequately compensated.
4. Inadequate as cross-subsidy for any other missions or gaps in funding.5. Limits and implications of using tuition as a revenue strategy.6. Financial underpinning for academic entitlements (tenure, guaranteed
appointments & salaried).
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns o
f D
ollars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
27
Grant Revenue: Includes federal and non-federal, basic and clinical research.
5-Fold increase nationally over two decades.
Schools have geared up for and benefited from doubling of NIH
Budget (1998-2003)
Indirect costs = major revenue source for supporting facilities
and administrative infrastructure.
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
28
Grant Issues:
1. Although overall grant $ up, certain faculty are losing grants and salary support.
2. NIH $ = restricted (not fungible) so excess $ in one area can’t be shifted to cover deficit in another.
3. NIH 2006 salary cap at $183,500; Requires institutional cost share for faculty with higher salaries.
4. NIH growth has flattened making grant awards far more competitive.
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
Bill Coming Due on NIH Budget Run-up
• NIH funds record high 34,143 grants in 2002, up 34% from 1997 and 51% higher than 1993.
• $367,000 per grant in 2002 up 36% from 1998
• Nearly 50% of $2.4 billion budget increase in 2001 was already committed to previously awarded grants, which run nearly 4 years on average.
• Preliminary studies project that some institutes would need annual budget increases of 7% to 12% after 2003 to sustain existing programs and keep pace with inflation…
• …while post-doubling era NIH budgets expected to average 2% to 3% per year
"…only a miracle will prevent stagnation and slumps after 2003 in the number of grants infrastructure spending and clinical research…the bill is rapidly coming due" -Science
"…only a miracle will prevent stagnation and slumps after 2003 in the number of grants infrastructure spending and clinical research…the bill is rapidly coming due" -Science
Source: Science, Vol. 292, Issues 5524, 1992-1995, 15 June 2001 ©2004 University Health System Consortium Sizing The Vision draft 8-31-04
29
‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ’05 est. ’06 est.
NCI 32% 26% 27% 26% 27% 24% 20% 19%
NHLBI 36% 35% 36% 33% 34% 29% 27% 25%
NIDCR 24% 27% 34% 29% 27% 30% 25% 24%
NIDDK 33% 28% 29% 34% 33% 27% 24% 24%
NINDS 35% 37% 32% 29% 30% 25% 20% 17%
NIAID 34% 36% 38% 38% 35% 24% 22% 19%
NIGMS 39% 37% 37% 38% 38% 30% 25% 26%
NICHD 30% 29% 27% 28% 27% 17% 15% 17%
NEI 40% 42% 40% 34% 33% 30% 21% 22%
NIEHS 27% 29% 29% 29% 25% 19% 25% 29%
NIA 28% 26% 32% 28% 29% 21% 19% 20%
NIAMS 24% 27% 29% 23% 20% 20% 21% 21%
NIDCD 34% 40% 42% 39% 38% 35% 27% 29%
NIMH 27% 29% 31% 27% 27% 24% 21% 22%
NIDA 34% 38% 36% 31% 35% 27% 22% 23%
NIAAA 30% 31% 33% 32% 27% 29% 31% 29%
NINR 14% 32% 26% 26% 27% 21% 22% 20%
NHGRI 38% 43% 42% 34% 30% 23% 28% 37%
NIBIB N/A N/A N/A N/A 29% 17% 15% 15%
NCRR 34% 18% 29% 28% 28% 21% 23% 36%
NCCAM 57% 29% 27% 14% 14% 17% 15% 8%
FIC 39% 23% 30% 28% 19% 22% 18% 14%Source: NIH
The success rate indicates the percentage of reviewed research project grant applications that receive funding in a fiscal year. Success rates would continue a downward trend under the Bush budget, even at the biggest funders, such as the National Cancer Institute of Allergy and Infectious Diseases.
Article published in Federal Grants and Contracts Weekly, Vol. 29, No. 9, February 22, 2005.
RPG Success Rates by NIH Institute
30
NIH Funding HistoryFYs 1995-2007 [in billions]
Year Current $ %change Constant $ % change BRDPI
1995 $11,300 3.1% $11,300 -- 3.5%
1996 $11,928 5.6% $11,626 2.9% 2.6%
1997 $12,741 6.8% $12,088 4.0% 2.8%
1998 $13,648 7.1% $12,521 3.6% 3.4%
1999 $15,629 14.5% $13,905 11.1% 3.2%
2000 $17,821 14.0% $15,284 9.9% 3.7%
2001 $20,458 14.8% $16,978 11.1% 3.3%
2002 $23,296 13.9% $18,712 10.2% 3.2%
2003 $27,067 16.2% $20,998 12.2% 3.5%
2004 $27,888 3.0% $20,859 -0.7%3.7%
2005 $28,415 1.9% $20,472 -1.9%3.8%
2006 $28,349 -0.2% $19,728 -3.6%3.5%
2007 $28,350 0.0% $19,078 -3.3%3.4%
Source: NIHAAMC
DATA SERVICES
31
NIH Funding, FY 1995-2007[in billions]
AllSchools
AAMCDATA SERVICES
$0
$5
$10
$15
$20
$25
$30
1995 1997 1999 2001 2003 2005 2007
Current Constant (BRDPI)
[Decline in real Dollars of ~10%]
32
33
Grant Issues continued:5. Will investments in faculty recruitments, program development and
facilities construction yield expected returns?
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
Investment in Research Facilities atU.S. Medical Schools
AllSchools
Slide developed by NIH from AAMC data – 2002 Survey of Research Facility Investments (99 of 125 AAMC Member Schools responding) AAMC
DATA SERVICES
3.2B
5.4B
9.5B
0
2
4
6
8
10
1990-1997 1998-2002 2003-2007 Projected
Do
llar
s (i
n b
illi
on
s)
34
35
Grant Issues continued:6. Clinical trials will become less flexible and large balances more suspect,
however, translational research will present new opportunities for programmatic growth.
7. Significant institutional cost of developing and maintaining research programs. (protected time, unfunded research, bridge funding, institutional cost sharing).
8. Bridge funding.
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
36
Other Revenue:
Affiliated hospital contracts (including VA 1/8’s and clinical administrative service contracts)
Gifts/endowments ICR income (may also be part of state appropriation at some institutions)
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
37
Other Revenue Issues:
1. Hospital margins declining, growing deficits; Future support
unclear and unstable.
2. Philanthropy subject to economy, income and estate tax
issues, all of which are currently changing.
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
38
Clinical Revenue:
1. Fastest growing, largest, most flexible revenue source in SOM budget.
2. Professional fees increased from 6% in 1961 to ~35%. Accounts for 50% of total budget when affiliated hospital and clinical service contracts included.
3. Represents major source of cross-subsidy for other SOM missions and programs.
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
39
Clinical Revenue Issues:
1. Reimbursement per unit of service and profit margins are declining driven
by changes in Medicare fee schedule and managed care competition.
2. 3rd Party payers are no longer willing to subsidize other missions via
reimbursement premiums.
3. Funding has become more volatile.
4. Market defines productivity differently than academics.
5. Increased malpractice costs have erased revenue gains.
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
40
Clinical Revenue Issues continued:
6. Growing number of uninsured and underinsured in FPP payor mix.
7. Emerging workforce shortages in some specialties.
8. FPP’s must develop new revenue streams to include technical revenue.
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
82-83 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
In M
illio
ns
of
Do
llars
State Appropriation Tuition & Fees Grants & Contracts Other Practice Plan
Faculty Practice Plan Revenues Used to Support Academic Programs
Med Student Educ $702 M
Research $816 M
GME $594 M
Other $244 M
$2.356 B
ClinicalPrograms
72%
AcademicPrograms
28%
Source: AAMC41
...But the Rate of Growth Is Now Beginning to SlowCURRENT $
All Schools
02468
101214161820
Percent Change in Annual Revenues
Source: LCME Part I-A Annual Financial Questionnaire
Copyright 2003 by the Association of American Medical Colleges. All Rights Reserved. AAMCDATA SERVICES
42
Percent Schools Reporting Negative Change in Revenue (Constant $) from FY04 to FY05
AllSchools
Source: LCME Part I-A Annual Financial Questionnaire Copyright 2003 by the Association of American Medical Colleges. All Rights Reserved.
AAMCDATA SERVICES
510
24
16
25
16
0
10
20
30
40
50
60
Total Revenues
FPP Revenues
HospitalSupport
Public
Private
Percent
43
46
Balancing the Missions
PRINCIPLE PRINCIPAL
• Schools/departments have leveraged budgets, program and
faculty growth on external sources of revenue (principal).
• External sources define productivity differently than
School/University.
• External sources unwilling to subsidize some fundamental
PRINCIPLES of academics with their PRINCIPAL.
48
Intersection of Funding Realities and SOM Policies
• Interconnectivity of missions requires interconnectivity of solutions. Changes may be required in:
• University/school policies• tenure• appointments and promotions• specialty tracks• compensation• assignable income• conflicts of interest and commitment
• School/Department practices:• investment and recruitment decisions• centralized/decentralized management and decision making
• Culture• entitlements• productivity• accountability
“At every crossroad on the
path that leads to the future,
tradition has placed 10,000
men & women to guard
the past.” - Author Unknown
48
52
Survey of Common Policies regardingDeficit Departments
1. Departments must use accumulated reserves to cover deficit.
2. Deficits subsidized by Dean's tax or School of Medicine reallocations.
3. Deficit subsidies treated as loan.
4. Deficits subsidized by FPP reserves or reallocations.
5. SOM/FPP receivership in cases of extreme or chronic fiscal mismanagement.
6. Faculty salary adjustment and/or layoffs.
7. No policy - case by case basis.
8. Finance Committee oversight.
9. Replacement of Chair.
10. Negotiate hospital subsidy.
11. Departments must budget 90-180 days cash on hand.
12. Mandate to reach break-even the following year.
53
54
•Greatest single expense in School of Medicine
budget (2/3-3/4 of budget).
•A department or program facing serious financial
problems can’t solve them by trimming peripheral,
non-personnel expenses.
•Compensation plan that facilitates the mission and
strategic goals is critical
Cost of Labor
55
To rob from the rich and give to the poor =
may be acceptable application of academic
principle.
To rob from the rich and give to the
unproductive = may be unwise use of
financial principal.
57
To protect our historic missions & strategic goals, we must:
1. Determine whether we have excess capacity and full productivity
of our faculty, space and equipment. (If the answer is “yes” to
capacity and “no” to productivity, need to increase productivity to
maintain revenue levels.)
2. Regularly and thoroughly examine the outcomes, value and ROI
of programs being subsidized by clinical margins.
3. Explore which traditional university principles and entitlements are sustainable in the current funding scenario and which need modification.
58
To protect our historic missions & strategic goals,
we must:
4. Examine school and department policies and practices relative to compensation, appointments, promotions, incentives, assignable income, etc.
5. Become more sophisticated and disciplined in how we allocate and manage our resources.
6. Reinvest margins to stimulate new programs and capitalize on new opportunities.
60
Trouble Traps(i.e. The following will get you into trouble!)
1. Lack of budget discipline. Programs either don’t develop budgets,
don't make realistic projections and assumptions, or don’t regularly
monitor performance against budgets and ignore variances.
2. Confuse fund balances (carry-forward funds) with recurring revenue.
3. Make base building commitments on one-time funds.
4. Commingle resources and obligations of various programs. Don’t
appropriately allocate costs.
61
Trouble Trapscontinued
5. Don’t understand limitations of restricted vs. unrestricted (fungible) funds.
6. Don’t understand School’s finances and budget processes. There is no
“off the top fund”.
7. Don’t understand concept of cash flow. You may have adequate, even
substantial, revenues but they may not arrive on same schedule as
expenses.
8. Underestimate salary expense by forgetting to include fringe benefit
expense (20% - 25%).
62
Trouble Trapscontinued
9. Confuse Accounts Receivables with Cash.
10. Lack appropriate reserves.
11. ● Letters of offer often too vague about
resource commitments.
● Letters of offer often too explicit or generous
about protected time & entitlements & not
explicit enough about expectations &
accountabilities.
12. Don’t methodically & clearly record commitments &
encumber funds for those commitments.
64
13. Failure to adhere to fiscal policy or establish
appropriate system of internal controls.
14. Failure to establish productivity metrics and
expectations for allocation of resources leads to
culture of entitlement & lack of accountability.
Trouble Trapscontinued
15. Aversion to overhead and taxes leads to
inadequate infrastructure.
65
Trouble Trapscontinued
16. Balkanization of resources.
17. The power of “yes”.
18. Learning to distinguish between want and need.
19. Underutilizing a competent administrator or overvaluing an
incompetent administrator.
20. Finding appropriate balance between strategic and opportunistic
investments.
66
SOM and FPP Cultural Issues
1. Ostrich Mentality
2. Faculty resistance to oversight and overhead.
3. Perfect is often the enemy of good.
4. Risk averse.
5. Intellectual rigor applied to academic missions not equally applied to business decisions.
67
SOM and FPP Cultural Issuescontinued….
6. Know more about professional/specialty issues
nationally and internationally than about the
competition across the street.
7. Track team vs. football team mentality.
8. Doing God’s work: entitled to special status due to
inherent social value of the missions.
68
Final Thoughts
1. There are no generic solutions. Beware of groupthink.
2. Market forces will not recognize the inherent social value of the
academic mission. Behaviors and processes will have to
change to remain competitive.
3. While academic missions complicate clinical success, they are
all that differentiate us in the market.
4. Shrinking margins will force elimination of marginal missions.
69
Final Thoughtscontinued….
5. Leadership is an art. Good management is not. It’s
process and discipline.
6. Losing money is not the 4th mission of the SOM/FPP.
7. School of Medicine and FPP leaders must act as
trustees of the institution.
8. Recognize the difference between doing things right and
doing the right thing.