Georgetown University’s Newspaper of Record since 1920

The Hoya

Georgetown University’s Newspaper of Record since 1920

The Hoya

Georgetown University’s Newspaper of Record since 1920

The Hoya

Med Center Seeks Financial Recovery

After years of restructuring and a veritable revolving door of administrators, the bottom line remains the same – Georgetown University’s Medical Center has been operating in the red since 1995.

Though GUMC is home to award-winning researchers who have made groundbreaking strides in cures for heart disease, cervical cancer and Alzheimer’s disease, the Medical Center’s financial troubles continue to weigh heavily on faculty and staff.

In 2001, the Board of Directors instituted a restaging plan to reduce expenditures in an effort to eliminate the ballooning deficit that has dogged GUMC administration for over eight years by fiscal year 2007.

“The reason for that commitment is that our deficit has had a serious and compounding impact on the university,” Stuart Bondurant, executive vice president for health sciences, said in a public meeting earlier this month.

In total, the Medical Center has lost a cumulative $333 million since fiscal year 1995. This August, when Standard & Poor’s cited GUMC’s financial instability by downgrading the university’s credit rating one notch to a BBB+ rating – rare for a school of Georgetown’s caliber – it became clear that problems within the Medical Center had indeed bled over into the rest of the university.

Now, after instituting a round of layoffs this summer and announcing specific budgetary goals for various groups this year, GUMC administrators hope they have turned a corner in which Medical Center staff have only to concern themselves with conducting quality scientific research and teaching.

And yet, many faculty continue to express concern with the university’s recent moves. They complain that the cuts are adversely affecting not only their short-term capacity to procure funding, but also the overall atmosphere of the Medical Center in a way that jeopardizes its potential to become a world-class research facility.

Staff Hit With Layoffs

This year, the Medical Center laid off 65 staff and non-tenured faculty positions. The university had formed a committee of faculty and staff to analyze faculty data, including levels of research funding and teaching responsibilities, and made determinations on who should be let go based on that data.

Steven Ebert, an assistant professor in the department of pharmacology, was notified of his non-reappointment in a letter dated June 15 and signed by his departmental chair.

Ebert said he was “shocked” to learn that his position at the university would be eliminated after eight years of service, especially after receiving a performance evaluation dated June 7 that recommended his reappointment.

“There were no specific reasons indicated [in the termination letter] for why I was targeted for elimination,” he said.

He said he now believes that he was laid off because at the time of review, he did not have an active National Institute of Health grant, though he had numerous grants from other organizations.

Since being notified of his job termination, however, Ebert has been awarded an additional $850,000 for a new grant from the NIH that will provide continuous funding for an additional four years – a fact he immediately conveyed to then Executive Vice President Daniel Sedmak, who resigned his position in August to return to Columbus, Ohio, where his family lives.

According to Karen Gale, a professor in the department of pharmacology, laying off productive personnel who are funded through extramural grants from private foundations and governmental agencies adversely impacts research and does not end up reducing costs derived from the university.

“The personnel layoffs that have the most beneficial impact on cost reduction are those that reduce administrative overhead,” Gale said.

Amy DeMaria, executive director of the Medical Center’s Office of Communications, said that the round of layoffs included administrative cuts.

Anita Sidhu-Hough, assistant professor for pediatric and clinical services, claimed that these layoffs will not only refrain from impacting the quality of research, but also improve it because administrative chores can now be streamlined by those who do research.

“When there are too many people, then one loses accountability,” she said. “The layoffs will definitely be very effective in cutting costs.”

But Stanley Fricke, assistant professor in the department of neurology, said that the university cannot hope to reduce GUMC’s deficit by cutting the revenue that faculty bring in through grants.

“This goes in direct conflict with what has been preached to the faculty,” Fricke said. “If we’re downsized to zero, we still have bills, so the model is wrong.”

The Medical Center brought in a record-setting $130 million in sponsored research awards in fiscal year 2004, DeMaria said.

“We do not project that the reductions we made this year will have any significant impact on our fundraising levels for fiscal year 2005,” she said.

Scaring Off the Future of GUMC?

Gale expressed particular concern about the ability of the university to retain productive personnel and maintain a low turnover of employees, something she says is an important element of financial health in the wake of such layoffs.

She stressed that the future of the Medical Center lies with the junior faculty that will replace the current population of full professors, who as tenured faculty did not fall victim to the cuts.

Gale cited the “considerable time” invested by the senior faculty in recruiting these young individuals and the money invested in the start-up packages of the new recruits, a number she estimates to be around $500,000.

“If we hope to retain them, and successfully attract others in the future, it is imperative that they get a clear sense of being appreciated and supported by their colleagues and the leadership of the institution, and that they are not made to feel as if they are the targets for the next round of layoffs,” she said.

Ebert agreed, saying that the junior faculty was made uneasy by the overall environment created by the layoffs and that he could not imagine how they could consider Georgetown a good place to conduct their research.

According to Sidhu-Hough, the university needs to put more time and effort in attracting and retaining these productive faculty members.

“This is something the administration has not done in the past,” she said. “As a result, we have lost some of our best and most productive faculty, who have left GUMC for greener pastures, for better positions and for more attractive offers.”

History of Financial Troubles

Georgetown’s financial woes began in the late 1980s and early 1990s.

“The managed care revolution, reductions in federal reimbursement to teaching hospitals, the growth of suburban hospitals and the loss of population in the city all eroded the economic assumptions upon which our clinical business was based,” University President John J. DeGioia said in a edical Center open meeting on Aug. 30, 2004.

After President Tim Healy, S.J. oversaw the closure of Georgetown’s dental school in the early 1980s, President Leo J. O’Donovan, S.J. worked to save the Medical Center because he believed medical teaching and research to be an important aspect of Georgetown’s academic mission.

But as the deficit mounted in the mid-1990s, the Board of Directors decided to seek a partner that would assume responsibility for the volatile clinical industry. The university settled on MedStar Health, a Columbia, Md.-based non-profit chain, because it had a proved track record of managing health care centers.

The sale, which DeGioia called “the most important and complex transaction in the university’s history” was completed on July 1, 2000. MedStar Health became officially in charge of the clinical operations of the hospital, splitting it from the academic and research enterprises of the Medical Center.

In the wake of the restructuring, Medical Center CEO Kenneth Bloem’s administration designed a compensation plan in 1998 that would tie GUMC faculty members’ salaries to their ability to procure outside grants.

Eighteen faculty filed suit against the school, saying that the university’s plan threatened the economic security of tenure. The policy was ultimately suspended but Ebert said in the wake of this controversy, many well-funded researchers left Georgetown.

He claims, however, that GUMC leadership made investments and brought in new people so that there was a “rejuvenation” of the Medical Center in the following years.

“It came as a bit of a surprise to learn in the past year or so that we were still facing another year of deficits,” Ebert said.

This summer, the university was able to achieve $7.9 million in savings through the layoffs, though it had actually projected $12.75 million in savings. DeGioia, in a Sept. 2 interview, said that overall, the target for expense reductions is $19.75 million, so the Medical Center must find approximately $12 million in additional reductions.

“My conviction is that we won’t achieve the balance through the type of reduction we just did,” he said, referring to the layoffs. “That won’t be achieved through an across the board metrics based application. So we’re reframing the question right now.”

Changing Administrators

The Medical Center faced a sudden transition in leadership this August when Sedmak abruptly resigned from his position.

In a university broadcast e-mail, DeGioia wrote that Sedmak had decided his personal and professional interests would be better served by returning home to Columbus, Ohio.

“I understand the factors that led Dan to make this decision and appreciate his leadership at Georgetown in the past year,” DeGioia said of his acceptance of Sedmak’s resignation, which was effective immediately.

Sedmak was the third executive vice president at the Medical Center in the past two years. He was succeeded by current interim executive vice president Stuart Bondurant.

Robert Glazer, professor of pharmacology and oncology, said the circumstances surrounding Sedmak’s departure suggested that Sedmak did not quit his position. Glazer said he does not know the specific reasons, but suspects Sedmak left because of a combination of things, such as not meeting budget projections or “towing the party line.”

He also said that Sedmak was paid an “exorbitant salary and severance package for not having the qualifications of a dynamic and imaginative leader.”

“Under the present circumstances, the EVP office has become superfluous for managing a budget that is markedly smaller than in the past since the hospital was turned over to MedStar, and equivalent to a large department at some medical schools,” Glazer said. “We seem to have a flawed process for recruiting top leadership at GUMC in most cases.”

Gale said that she, like most faculty at GUMC, presumed that Sedmak was forced to resign given the sudden nature of his departure.

Gale also expressed her skepticism of Bondurant’s ability to effect change at the Medical Center as he is an only an interim EVP. Because he is in the “position of a babysitter, or substitute teacher,” the faculty cannot put much worth in the promises he makes, she said.

DeMaria was neither able to confirm nor deny that Sedmak had received a severance package. She insisted, however, that Sedmak made the move because his personal and professional interests would be best served by returning to Columbus, where he is pursuing other opportunities.

“Dr. Sedmak resigned in August for reasons related to the needs of his family and the demands of weekly commuting between Washington and Ohio,” she said. Sedmak had taught at Ohio State University in Columbus before he came to Georgetown.

Ebert found it “galling” that the university continued to hire senior administration officials that “have come and gone” along with high-paid consultants and lawyers to manage the problems of the Medical Center.

“[They appear] to serve no other function than to further drain our financial resources and cause much pain and suffering for individuals and their families who were cut from the payroll as result of their `recommendations,'” he said.

DeMaria said the university employed consultants to provide specific areas of expertise during the financial planning process.

“Among other things, outside experts helped us better understand the volatile economies of biomedical research and have provided help in comparing the Medical Center’s situation with that of other academic medical centers around the country,” she said.

Looking Ahead

Under the restaging plan of 2001, the university projected losses of $8 million for this year. According to DeGioia, that projection was first revised to $19.9 million after lags in revenue growth, and now the administration projects a $25-29 million deficit.

“From the Board’s perspective, this makes it look like the situation is getting worse, not better,” DeGioia said.

He also claimed in the September interview that he would be holding everyone employed at GUMC accountable for bringing the edical Center into balance by fiscal year 2007.

“I’m very confident that the talents and the abilities of my colleagues can ensure this,” DeGioia said. “It’s a little more challenging today than I thought it would have been a year ago, but I’m still very confident in our ability to finish that work.”

DeMaria said the GUMC administration is communicating with both faculty and staff about deficit reduction through a series of town hall meetings, broadcast e-mails and regularly scheduled open meetings held by Bondurant, DeGioia and Senior Vice President Spiros Dimolitsas.

Glazer, however, expressed frustration with these measures.

“Under the present circumstances, it is difficult to determine the financial state of GUMC and to know the magnitude of the `deficit’ since faculty have not been provided valid and adequate data of actual costs, a situation that has been promulgated by incomplete and arbitrary accounting,” he said.

Gale also said she was frustrated with the decision-making for budgetary and financial planning, attesting that the faculty was not privy to what the core missions, in terms of research and planning, that these plans sought to protect were.

“There is a pressing need for the leadership to reiterate the Medical Center mission, or indicate if it has changed, and to communicate what the vision is for the future of GUMC,” she said.

Bondurant, in an open meeting with members of Georgetown’s community this month, expressed optimism, saying that the Medical Center had an “exciting future.”

“[GUMC] is going to build on its traditions – the future is open to new ideas,” he said.

This future, however, may not include Ebert, who will seek to continue his efforts as a scientist, educator and student at another academic medical center.

“I still believe this institution has great potential and that people like me are part of the solution, not the problem,” he said.

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