School of Medicine: Financial Stabilization Plan

The following was issued January 17, as a part of a series of messages from Dr. William M. Kelley, to the medical faculty. Click here for the piece on Strategic Planning issued on December 9 as referred to in the document below.

All of you who came through these difficult past months were kept well aware of the Health System's need to cut its expenses significantly on the health-services side. Through periodic messages, Dr. Robert D. Martin, COO of the Health System, and I have kept you abreast of the financial developments. One unfortunate consequence of our financial challenges that we also face, which we have reviewed with you in the past, is having to reduce substantially the financial support that UPHS allocates to the School of Medicine. We are well aware that this change will have a significant impact on the school's operations, which is why we welcome the input of Arthur Andersen, the international professional services firm, which the University has retained to help us with this effort. The consultants will report to an executive committee consisting of Provost Robert L. Barchi, myself, and several other senior administrative and financial officials of the University and the School of Medicine. The Andersen consultants will also work closely with a consultation committee formed of a select group of the School's department chairs, senior faculty, and senior administrators.

One thing we should never lose sight of is the tremendous success our School of Medicine has experienced over the past decade. Demonstrating the highest rate of growth in grant funding from the National Institutes of Health, the School of Medicine has risen to second in the nation in research funding and training. Our academic reputation has never been higher, as measured by the non-scientific survey published annually in U.S. News & World Report--Penn Med ranked third. Critical to this success, however, has been the substantial support the School has received from the Health System in several forms, including the Academic Development Fund.

But now that support has to be cut back. Our task, then, is to develop a strategy that addresses the reality of decreased support from the health-services component of UPHS without compromising the School's excellence. It is likely that we will need to shape an interim funding strategy to help us through the transition period--perhaps three years. At the same time, we must develop a longer-term strategy to identify alternative sources of external support and to make the management of our School more cost-effective. Part of that initiative is to increase the amount of faculty salary support from grants. Both for the near future and for the extended term, a respected consulting firm like Arthur Andersen should prove invaluable.

Already, we have encouraging signs that our efforts on the health-services side are beginning to pay off. Although the struggle is by no means over, we are quite confident that if we stay the course and intensify our efforts, we will emerge stronger than ever. I am confident that the same kind of effort--as demanding and painful as it may be--is needed for the School of Medicine. And we have not been standing still. Some of the strategic imperatives we have recently taken to enhance the School's management are: an improved grants management system; enhanced compliance efforts; and reorganization of information systems, administration, and finances. A research pilot should yield valuable lessons that can be applied to the overall management of research grants. As I mentioned in my letter of December 9, 1999, to department chairs and directors of centers and institutes, we intend to keep our commitments made during recruitment and honor all commitments for funding from the Academic Development Fund.

Yet it will be necessary to defer all but the most essential expenditures related to those commitments as enumerated in that communication. Dick Tannen and Mike Black have been working with many of you in implementing these first actions, and they will continue to oversee our efforts. The two Arthur Andersen consultants handling the assignment in the School of Medicine are James H. Roth and Timothy J. Fournier. Roth, who is the partner-in-charge of Arthur Andersen's Higher Education Consulting Practice, specializes in assisting educational institutions and health-care organizations in the areas of operational efficiency, strategic planning, research administration, compliance issues related to federally funded programs, and systems implementation. For ease of communication, they have asked that their e-mail addresses be shared:

I know I can count on your cooperation. Please be generous with your time and expertise, because your insights and recommendations will be extremely valuable as we develop our financial stabilization plan during these difficult times.

Almanac, Vol. 46, No. 18, January 25, 2000