VUMC launches hunt to cut costs by another $50M

Sequester slices into revenues, research funding; 'We have already begun to feel the impact'

After cutting almost $40 million from their budget over the past 18 months, the leaders of Vanderbilt University Medical Center have been told to find another $50 million in savings, starting immediately, because of the "draconian" spending cuts being made by a number of federal agencies.

In a letter to the VUMC community, Vice Chancellor for Health Affairs Jeff Balser on Wednesday said it hasn't taken much time at all to feel the effect of the cuts stemming from the so-called sequester, which will slice $85 billion out of the federal budget between now and the end of September. VUMC's large research and development operations are feeling the pinch more quickly, but Balser said the hospital complex is likely to see another rise in its uninsured care costs as government spending cuts lead to job cuts.

"We have already begun to feel the impact, as have major health care centers all across the nation," Balser wrote. 

VUMC's nearly $3 billion in revenues will be hit by $50 million in the coming months, Balser said, which means expenses must be lowered by a similar amount.

"In order to assure we are in the strongest position to withstand these challenges, we will immediately engage in these efforts," he said. "Our leaders will be working with you directly to identify expense reductions and immediately recognizable efficiency and revenue opportunities across all mission areas."

The $40 million in savings VUMC employees have squeezed out in the past year and a half have come "without a significant reduction in workforce," Balser added. And while layoffs didn't play a big role in the previous round of cost cuts, they could be more prevalent this spring: While stressing he wants job cuts to be considered only in extremis — and plans to lean on VU's culture in order to act as "a thoughtful and virtuous organization" — Balser has written about "resource sharing across operating units" or plans to "downscale programs" that aren't essential.

VUMC employs about 10,000 people, which is about half of the entire payroll of the Vanderbilt University ecosystem. A trade group for academic medical centers said last week that the sequester is putting at risk up to 50,000 jobs around the country at or directly tied to such facilities.

"In a time of uncertainty and spending reductions in science and health care, there are only a handful of institutions in the country as strong and capable of navigating stormy seas as Vanderbilt," Balser wrote. "So most of us have little long-term historical experience or context for significant and absolute reductions to our major revenue streams. Preserving the mission-critical activities we all believe are most important will require all of us to tighten our belts."

Click here to read Balser's letter in full.