It Won’t Be Enough: The Latest Austerity Is Likely To Fall Far Short

It Won’t Be Enough: The Latest Austerity Is Likely To Fall Far Short


Leonard Zwelling

         I see a new list of austerity measures is out. Along with curtailing new hiring and wine at dinner, the leadership of MD Anderson has taken Perrier out of the doctors’ lounge and encouraged all the clinicians to see more patients and order more tests. They haven’t said where the patients are coming from or if there are enough hours in the day to see them using EPIC.

         It won’t be enough.

         For many years I, along with some other souls, have begged the leadership of Anderson to stop building buildings that don’t generate revenue (labs and administrative structures) and stop hiring at all levels from clerks to vice presidents. Twenty thousand people is simply more than it should take to run a business the size of MD Anderson.

         The first financial crisis was in 1994 and 1995 when Hillary Care threatened to dry up the reimbursement rate at Anderson. A consultant to Dr. LeMaistre urged rapid austerity measures. The leaders got Governor Bush to lift the referral mandate, Hillary Care failed, and MD Anderson became addicted to money. What was once an institution with a niche market, product differentiation, high quality strategy became McDonald’s for cancer care and reaped the benefits. Super sized but not all that nourishing by 2016.

         In 2008-2009, the second warning shot was fired. The downturn on Wall Street and in the mortgage markets dried up the margin due to the loss of non-operating revenue. There was also a hurricane, but I doubt that really had much to do with the deficit. The clinicians, using Clinic Station, managed to pull the institution out of the red, but that won’t happen this time because it is not clear that the current clinicians, many of whom are junior faculty members who supplanted the more experienced departed and retired docs, can see patients any faster than they currently are using Epic. It is also unclear as to whether the satellite and affiliated MD Anderson centers haven’t cannibalized 1515 and there simply aren’t any more patients to see. The downturn in ordered lab tests and imaging suggests not only fewer patients, but briefer work-ups on those who still come.

         So now we are at crisis number three. There was a $40+ M shortfall in revenues compared with budget in September and the rumor is that October was worse. With the holidays coming and a usually slower time of the year arriving, I doubt November and December will be improvements.

         I already made a bunch of suggestions about how to fix this, but I doubt they will be followed and it probably isn’t enough anyway.

         I see a large layoff in MD Anderson’s future, probably right after Christmas. This one might include both classified staff and faculty, especially if research shows that the demand at the front door is down. The hospital simply has to shed its huge fixed cost of salaries and that may include some of the high ones, like those of providers. If the research into the causes of this problem yields insight that the patients simply are not there to be seen, the doctors and nurses become a cost that cannot be sustained.

         It is beyond sad that it has come to this. It is not beyond belief. It was expected and predicted by some of us for a long time. You simply cannot sustain a viable economic model with such a huge fixed cost burden without constant upgrades on the revenue side. That’s not a good bet in health care any longer where insurers and payers alike are looking to cut reimbursement to providers of all kinds.

         The successful medical systems will be the ones who can provide quality care for less and with less. The academic model of high prices to sustain education and research may become a thing of the past.

         And as for the absent Dr. DePinho’s contribution to revenue, where is that drug to cancer cure anyway?

         This miniscule attempt at cost containment by Mr. Fontaine, Dr. Buchholz and Dr. Dmitrovsky simply will not be enough. It’s a big problem. It will take bold solutions and not incrementalism. The sooner they get on with it, the better. Pain averted will simply lead to greater pain later.

1 thought on “It Won’t Be Enough: The Latest Austerity Is Likely To Fall Far Short”

  1. Every dept has to layoff 8%. Jan 9 is d-day. Who gets affected? Classified staff who more than likely live paycheck to paycheck not the ones making half million. . Who was suppose to be "looking at the books"? How did the CFO allow us to get to this point? Sad days ahead.

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