WASHINGTON, DC—The US economic downturn has harmed cancer centers just as it has many people, businesses, and organizations, including cancer centers, but cancer center administrators here at the Association of American Cancer Institutes (AACI)/Cancer Center Administrators Forum (CRAF) Annual Meeting said they are finding creative ways of coping, and some are even taking advantage of unexpected opportunities to renovate and expand.
State monies have traditionally been a solid source of funding for cancer centers, since states’ funding helps to ease the burden of cancer in their communities. When cash-strapped states cut their funding due to budget shortfalls, they delivered a stiff wallop to cancer centers, said Theodore J. Yank, MHA, Associate Director for Administration at the Dan L. Duncan Cancer Center of Baylor College of Medicine, who moderated a session on coping in a challenging economy.
Mr. Yank noted that 48 of 50 states have experienced budget shortfalls; that state budget shortfalls are likely to persist for the next two years; and that high unemployment rates and sharp dips in cancer center endowments have also adversely affected cancer center operations.
According to an AACI poll last year of its members, of 30 centers that indicated how much state funding they received, 22 received less than $5 million in the most recent budget cycle, and seven of those received less than $1 million.
Van Cherington, PhD, Director of Science Administration at the Wistar Institute and Associate Director for Shared Facilities at the Wistar Cancer Center, said that sharing facilities has allowed for marked efficiencies: “We did things we should have been doing anyway.”
Shared facilities at Wistar, he said, include those for laboratory animals, bioinformatics, flow cytometry, genomics, histotechnology, microscopy, mouse genetics, protein expression and libraries, proteomics, and molecular screening.
In addition, Wistar uses a system of centralized oversight and planning that has allowed for firmer analyses of costs for services, a necessity when money is tight, he noted.
Central oversight leads to less autonomous decision-making and the sharing of staff and cross-training of staff rather than hiring new staff. Wistar embarked on extensive recent renovations in eight of 10 facilities to accommodate new technologies and personnel and to improve the efficiency of its operations, he explained.
University of Michigan & Pfizer: $108 Million for Property Valued at $1 Billion
Economic hard times can be viewed as an opportunity, and that is just what the University of Michigan (UM) and its Comprehensive Cancer Center decided to do, said Cancer Center CEO Marcy B. Waldinger, MHSA.
Looking at the facts alone, the outlook for center funding was bleak, she conceded. Michigan has the highest unemployment rate in the nation, 9.6%; has experienced automotive industry bailouts required to stabilize mounting losses due to the auto industry's steep decline in sales; and is experiencing a decline in population, especially residents with good health insurance.
But in Ann Arbor, UM has a large and strong research base; unemployment is only 6%—the lowest in the state; Google, a strong company, recently moved to town; and the university has a strong high-tech reputation and a strong health system. So when Pfizer decided to close its 177-acre research and development facility in northeast Ann Arbor, it was natural that UM should look to acquire the site adjacent to the UM North Campus.
When the Pfizer facility closed, “it was quite devastating and it cast a pall,” Ms. Waldinger said. The closure represented a loss of 2,100 jobs from the city's largest employer; a loss of $13 million in property taxes (thus potentially harming the public school system property taxes help fund); the loss of one of the largest charitable givers in the city; and another blow to a state already shrouded in a fog of bad news.
No other serious buyers for the Pfizer property emerged. So, “we seized an unparalleled opportunity at a bargain price,” said Ms. Waldinger. UM purchased the Pfizer property for $108 million, a sale consummated in June. The sales price was considered to be a bargain-basement deal because the value of the Pfizer land and buildings was estimated at $1 billion.
New North Campus Research Complex
The new UM site, renamed the North Campus Research Complex, offers special opportunities for the Comprehensive Cancer Center, Ms. Waldinger said.
Specifically, the center hopes to create a translational oncology campus there to stimulate discovery and spin off new businesses; to “co-localize” multiple cancer collaborators for synergistic results; to enhance Phase I trial capabilities; and to co-localize administrative responsibilities to achieve economies of scale.
Currently, the cancer center seeks donor funds to renovate the Pfizer Phase I space for cancer patients. “We're very pleased about this,” Ms. Waldinger said. “We are a leader in ‘lean’ thinking, projects, and facilities, and part of that process is continuous improvement.”
Another speaker, Brian C. Springer, MHA, Executive Director of Research and Business Administration at the Siteman Cancer Center of Barnes-Jewish Hospital at Washington University School of Medicine, noted that a plunging endowment there is forcing economies. “The Washington University endowment is down 30%. We're cobbling together resources.”
Mr. Springer said that tough times have led to enhanced collaboration at Siteman and a reduced “silo tendency,” which has led to less autonomous decision-making, emphasizing cooperation and fostering strategic investments.
“We've cut salaries, but we've made them up in other ways,” he said. “Working together, with everyone contributing what they can, a greater good—or at least survival—is achieved.”
Fred Hutchinson Cancer Research Center
“Over the past year, our fund-raising really went in the tank,” said Randall C. Main, MBA, Vice President and Chief Financial Officer of Fred Hutchinson Cancer Research Center. “We're hemorrhaging badly.”
Mr. Main said that to cope in this challenging environment, the center has been cutting administrative costs (grant writing, bid and proposal writing, and research administration); cutting the fund-raising sales force; shifting some center-funded research and faculty salaries to grants; cutting center-funded research; increasing shared resource rates and eliminating under-performing resources; leasing rather than buying equipment to preserve cash; and outsourcing functions like food service and child care.
“The prospect of cutting research commitments is politically very unpleasant,” he said. “The administrative costs by far bore the brunt of the cuts that we had to make.” In informing cancer center faculty of belt-tightening, he said, “We explained to them that insolvency was inevitable if we didn't make these changes; they get it.”