The Budget

By

Leonard Zwelling

                 
The Employee Notes on Monday June 24 had an interesting entry that included a
video plus text about the current financial position of MD Anderson. As the
vast majority of our revenue emanates from the clinical care rendered by the
faculty and staff, the revenue from this care was the focus of the numbers and
of the presentation by CFO Dwain Morris.

                 
My take on this was the following. We spend too much for the amount of money we
take in.

                 
One can sift through all of the numbers but in the end it comes down to the
fact that what we do clinically is not able to sustain what we spend on
everything, including giving the care, but also research, education and
prevention, critical activities that generate slim if any margins.

                 
Included with the FY13 post-mortem on the budget to date was a description of
what the budget is and why we have one. Presumably this is getting everyone
ready for the annual charade called the “budget process” in which all of the
units attempt to project their income and expenses for the next fiscal year
after which the Executive Committee hands down the actual budget. This has been
going on for all of my 29 years here.

                 
I call it a charade because as the units hustle to create their individual
budgets, the truth is that MD Anderson has always been one pot of money and
rather than pit one unit against another, as has been the case in recent years,
we might be better off pulling together in one direction with the understanding
that we will all swim together or drown together.

                 
One phrase caught my eye in the text of the Employee Notes. ”Because without
setting goals, we don’t grow in a thoughtful and strategic manner—we won’t be
able to improve our patient care services and support our research activities”.
This makes perfect sense. In fact, one could argue that uncontrolled growth
(very ironic at a cancer center) is exactly what has occurred. If we are really
so far behind budget and only being kept upright by our investments, then
whatever strategy we are following is not working. So what exactly is that
strategy and how will we know if we are improving patient care and supporting
research?

                 
What I am sure of is that the marked shortfall in operational margin described
by Mr. Morris indicates that we are either not following our plan, we are
following the plan and our plan is not working, or in reality we don’t have a
plan.

       

          
So, given all of that, how about a clear articulation of the strategy? How
about identifying the leading indicators of whether we are on track or not? How
about identifying how we get from this budget shortfall to profitability?

         It’s
terrific that we have had such a transparent presentation of the problem by Mr.
Morris and to put this up on the internal web is highly commendable. Now will
someone please tell us what we are going to do in the short-, middle- and
long-term to correct a situation that does not look promising at all given the
current performance of the New York Stock Exchange when investment earnings
appear to be our current activity of highest yield.                 

         And
is anybody else concerned that we seem to be doing better as a brokerage house
than as a cancer care facility when it comes to profits, oops, margin?

                 
Mr. Morris deserves our respect and gratitude for being so forthcoming about
the current state of the finances. What is less clear is how we move in a
constructive fashion to fix the problem. Either we have to bring in more money,
spend less, or do both. Who decides, how and then how to get from planning to
implementation is largely an issue for the leadership.

        

         
Now that the problem has been well-described, on the way to doing all of this
basic science and drug development that we have been promised and on which we
are spending, can someone in power explain to us all in the next edition of
Employee Notes, the direction we will take to correct the problems with the
budget?

         We
cannot get to the moon without the necessary fuel.

Leonard Zwelling