Not Again!—The Monthly Financial Report; Are We in the Wrong


Leonard Zwelling

mid-July so the June numbers are out and like the unemployment figures in the
first year of the Obama Presidency, the news is not good. Once again we made less
than was budgeted for and spent more. And you thought only Congress could keep
going like this. Keep in mind that our own External Communications reported
that we are the fourth largest public hospital in total charges. Why are we in
the red for our operations?

problem facing MD Anderson and the one facing the US government is essentially
the same one. We spend more than we make. The difference is that the US
government can constrain interest rates, control the money supply and borrow
from China. MD Anderson cannot avail itself of any of these solutions and
that’s good for these maneuvers really are not a long-term fix for overspending
and underearning by governments or by cancer centers.

long-term solution to the Congressional fiscal dilemma was offered 25 years ago
by Jackie Mason when he said, “put ‘em on commission”. At MD Anderson we do
that only it’s reverse commission. We pay the executives more the worse they
perform financially. It’s a re-emergence of the Soviet system of wealth redistribution.
In the old Soviet system, the more they spent on weapons, the less they spent
on the people and the bigger the dachas. At MD Anderson the more we spend on
moon shots, the less we spend on the faculty and clinical infrastructure and
the bigger the mouse hospitals.

is MD Anderson really underearning?

really. We are making about 4 to 5% more than last year at this time. That’s a
pretty good year and a lot better one than most of you are about to have with
regard to increasing your incomes. So what’s the problem?

you dissect the numbers you have to be impressed with several aspects of the

we discount about 50% off our charges. This is no way to make a profit. Of
course, the charge numbers have no meaning as they are arbitrary and completely
divorced from the reality of the spendable cash we acquire or the reimbursement
that any payer is likely to make to us.

it’s not that we aren’t doing well. 
The hospital is once again at 101% occupancy and all the clinicians I
speak with tell me their clinics are packed. It appears that it is the budget
numbers that are the problem. They are too optimistic given the realities of
our capacity, the fact that our doctors would like to do more than just see
patient after patient, that these same doctors believe that quality cancer care
is not an assembly line endeavor and that insurance reimbursement is under
pressure due to market forces and health care reform. And that reimbursement is
not really quality-based, even though our care is. We also are no longer the
only kid on the block as cancer treatment programs have emerged in both the
non-profit and for-profit sectors and there is really no evidence that survival
is any better for the common malignancies at academic centers (although there
could be if we decided to track it and I bet we would be superior).

are definitely overspending, especially given the true revenue stream. I assume
that is mostly on salaries although there may be a huge chunk of change spent
on research, recruitment, IACS, platforms, couches, decorators and lunar
landings of all kinds.

this cannot go on forever and the sooner we address our financial failings, the
sooner we can get back to our main business. That business used to be caring for
sick people and discovering better ways to do so, but apparently has shifted
over the years. We used to make money at that.  Now we make money in other ways. In fact, we make so much
money in other ways, it offsets the operational loses we incur caring for the
ill. We really need to reconsider the business we are in.

here’s a small proposal to reorient the strategy of the MD Anderson so that we
can be more profitable.

Close the hospital. If we are losing money when we are 101% occupied, the more
people we see, the more money we will lose.

Close the clinics. Again, we seem to be falling below budget when every
clinician I speak with insists the clinics are full and my survey during a
recent walkabout confirm what the faculty tells me.

Stop doing any research that does not make money during the fiscal year in
which it is performed. Since that is likely to be all research, we can stop
doing that, too. We can close the labs and save a fortune in air conditioning
costs. We might consider renting the space to the oil and gas industry for if
they are going to generate water that ignites due to the effects of fracking
America, why not do it at a cancer center? That would make cancer history!

Open a brokerage as it seems that investing with UTIMCO is the one activity at
MD Anderson that is making money.

believe these four changes would greatly increase our profitability and end
these depressing financial reports. I am not at all sure what Mr. Morris or his
compatriots hope to gain by broadcasting a monthly email of bad news.

may not be able to make cancer history but we would be the first cancer center
with a NYSE bull as a mascot and a record-setting five-year survival rate among
its clientele. After all, those hedge fund managers are all young. Time to go
from IMRT to IRAs don’t you think?

Leonard Zwelling