Chapter 10: Growth Initiatives: Capital Campaigns, Global Oncology

Chapter 10: Growth Initiatives: Capital Campaigns, Global Oncology

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Dr. Leach begins this segment by explaining that funds from the Capital Campaigns are all factored into the Economic Forecasting Model. He briefly mentions his role in keeping the Board of Visitors aware of what his office is doing to develop the institution. He then moves to the Global Oncology initiative, which was started because of data that indicated that the institution was paid more for patients who came from out of state. He then talks about the international sister institutions and MD Anderson Banner. He explains that the goal is not necessarily to bring these institutions to the level of care offered at MD Anderson, but to raise the level of care as high as it can go. In addition, quality of care at these other institutions is the primary considering; spreading the MD Anderson brand and increasing name recognition is a secondary consideration.

Identifier

LeachL_02_20121127_ C10

Publication Date

11-27-2012

City

Houston, Texas

Topics Covered

The University of Texas MD Anderson Cancer Center - Building the Institution; The Administrator; Contributions; Overview; Institutional Processes; Professional Practice; The Professional at Work; Fiscal Realities in Healthcare; Philanthropy, Fundraising, Donations, Volunteers; Beyond the Institution; Institutional Mission and Values; MD Anderson Culture

Transcript

Tacey Ann Rosolowski, PhD:

Can you tell me about—because obviously when you came in, there was a huge capital campaign that was in progress, and then there were a number of capital campaigns that were initiated under John Mendelsohn. And I’m curious about how the Office of Business Affairs and you were involved with all of that. I know that you go and speak with the Board of Visitors every year, probably more than once a year, and bring them information. So could you tell me about your role with capital campaigns and with the Board of Visitors?

Leon Leach, MBA, PhD :

Yeah, well John as the president made the final decisions, but what we would do would be economic modeling, and the forecasting model was factoring that in. If we raised “x” million— First of all, the way the accounting works with gifts is when development says, “Oh, we raised 200 million last year.” Well, they might not have gotten 200 million in cash—what they got was the commitment for 200 million dollars. The cash on that may take ten years to come in or longer. It could be an estate gift that will only pay when there’s an estate. So you’ve got to kind of figure out what the cash flow is going to likely be from these promises that are out there. And our cash flow—we have an amazingly good record of people honoring their promises. So what we would do is just come model it out as to if we raise this in a certain amount of time, we would do that in conjunction with people in development and what their thoughts were. It would all come together as far as the sources and uses—where we’re getting the money from and how we’re using it. It would all come together in the Economic Forecasting Model, which then the executive team—that would be John and the three EVTs—would bless, and that’s what we would strive to achieve. That’s what we would manage to that. So if we came up short on the philanthropy, we would have to do something somewhere else to recognize that we don’t have that money to spend. If we came up over, well that was good news. Maybe next year or the coming year, we could spend a little bit more aggressively in some other area. The main thing I did with the Board of Visitors, or that I do with the Board of Visitors, is just keep them aware of our financial position. The presentations I make to them are largely the same as what I would make to our faculty leadership. It’s more, here’s how we’re doing it, and just keeping them apprised of it. And through that lens, they can see how important their role is in helping us with philanthropy.

Tacey Ann Rosolowski, PhD:

And I suppose you provide some hard numbers which, of course, help them very much in their promoting and communicating what the needs of the institution are. Leon Leach, MBA, PhD Absolutely.

Tacey Ann Rosolowski, PhD:

Is there a back and forth between the Board of Visitors? I know that Dr. Mendelsohn said that he had some very useful conversations with the business leaders who were on the Board of Visitors, who obviously brought expertise he didn’t have. Do you find that you have conversations with them as well?

Leon Leach, MBA, PhD :

Absolutely, we’ve got formal committees of the Board of Visitors—one is MD Anderson as a business—that help us in certain areas. The thing is, it’s a Board of Visitors; it’s not a fiduciary board. The governing board is the Board of Regents. That’s who we have formal presentations to, and they approve or disapprove our budget. The Board of Visitors doesn’t have that power, but you have brilliant businessmen and businesswomen on that board that can really help us in different aspects of running MD Anderson as a business. So we will use that resource. It’s like free consulting, if you will.

Tacey Ann Rosolowski, PhD:

What are some instances in which you have found that resource to be very, very helpful? Leon Leach, MBA, PhD What were some issues?

Tacey Ann Rosolowski, PhD:

What are some instances? Leon Leach, MBA, PhD Well, I found them to be very helpful back in 2008 and 2009 when we had to make certain difficult changes, because they understood why we had to do this and were confirming, “Yeah, you need to do this because things don’t look good.” They’re an excellent sounding board. They’re very innovative. They’re very much for MD Anderson, and they’re very supportive. And we do work closely with them more as an advisory team, and we would be idiots not to. There is so much wonderful experience there. Now, we may not always do what they suggest because there may be other extenuating circumstances that we have to consider, because ultimately we’re the ones responsible, and we’re responsible to the Board of Regents, so we have to follow their directions and their lead. But the Board of Visitors has been very helpful in helping us think through and thinking through with us different business challenges that we’re facing and what the options are and what the next steps might be.

Tacey Ann Rosolowski, PhD:

Another—well I have a little brain jam right now because I really wanted to ask you about the Moon Shots obviously. But before we get to the now and the future, I kind of wanted to ask you about strategic planning in the past because I know that another set of projects that you undertook to help secure MD Anderson financially were the remote locations, MD Anderson España, and all of the pieces of global oncology. So I wonder if you could tell me about that a bit, what the rationale was and what you brought to that.

Leon Leach, MBA, PhD :

Well, again it’s a team sport. Nobody has a monopoly on good ideas. But in just studying their data, it was pretty clear that there was a relationship between how well we were paid and the distance the patients came.

Tacey Ann Rosolowski, PhD:

What do you mean—more the farther they came?

Leon Leach, MBA, PhD :

Yeah, we would get paid more for people who came from further away, and there’s a whole bunch of reasons for that. Typically Medicaid doesn’t travel for services, so they’re here, so that’s going to be lower paying. Medicare is lower paying. Managed care companies pay better. If you have large volumes of—like—the Texas Blue Cross Blue Shield, they’re our biggest provider of managed care patients, and they drive the sharpest contracts, but if you have somebody in the Pacific Northwest who we don’t have a contract with, they will call you up and try to do what we call a one of, and we will do a contract for that patient. Well, they don’t have quite the same bargaining power as Texas Blue Cross Blue Shield because they’re delivering an occasional patient where Texas Blue Cross Blue Shield is delivering tons of patients. So we do better on a per-patient basis with those that are from out of state. We were cognizant of that, and we tried to attract more of that business. I don’t know what the numbers are today. I looked at them a few years ago, and then we had over 600 one ofs, and I imagine the number is closer to 1000 now. These are folks who are coming here for a specific cancer trial or whatever. Oftentimes they’ve used the computer to find us, or it’s been their daughter or son or someone who is more up on how MD Anderson ranks in healthcare who would say, “Oh, you’ve got to go to MD Anderson.” In those situations, the managed care companies will generally pay more because they don’t have the ability to demand less. So going to regional networks, I think that’s been a very positive thing. Internationally we’ve— I think our international centers and our sister institutions, that’s worked well. That’s been largely research and educational based. It hasn’t been a whole lot about patient care, and it hasn’t been financially driven. MD Anderson España is producing nicely now. They went through their ups and downs as they—and even now with the economy what it is in Spain, we’re doing okay. The owners of that center—actually they’re doing okay, too. It’s the hospital chain that we partner with there, and they’re doing okay also, but it’s tougher times because you’ve got a lot more unemployed in Spain now. But overall, it’s been a very worthwhile strategy—with the Banner relationship. These are things that help bring out quality of care—our level and excellence of care—into communities that may not have that level of excellence.

Tacey Ann Rosolowski, PhD:

I know that Dr. Mendelsohn said that there were some real challenges when MD Anderson first started working with MD Anderson España and that there were some bumps with raising the level of care. What is your philosophy about that? He told me what his philosophy is about coming into a new environment and raising the level of care, but how do you see that relationship? If MD Anderson goes to a region where they’re not capable really of delivering the level of care that one would find in Houston, what’s that?

Leon Leach, MBA, PhD :

Well, I think the goal here is to raise the bar, and if we can’t raise the bar, then why would we want to be there? We certainly don’t want to dilute the value of what we do. If it’s not going to be appreciated or if it’s not going to be implemented, we don’t have any reason to be there. So to me, while it may not be easy and it may be a challenge, will you ever get them to the status of 1515 Holcombe? Probably not. That’s not really the goal. The goal is to raise the level of the bar to improve the services and give access to, when things that are really difficult, 1515 Holcombe Boulevard. If folks were to look at what we do internationally and think that we’re somehow going to recreate what we do here in Madrid—no. But we can certainly move the bar up, and we can certainly give them access to what we do here. And I think that’s occurred, but I think John was right. It was a rough road getting there. But it has occurred—and that’s the only reason in my mind for us to be doing this. We had four rules that I made up at the time. I can’t recite them now, but John probably could because he would remember them. And one of them, the fourth rule, was we’re going to make a profit off of it. We’re going to make money off of this. But the first rule was to deliver quality of care—improve the quality of care. It’s all predicated upon that, but again we can’t be a charitable institution for the rest of the world. We have to be able to cover our costs and return some profit to MD Anderson for doing this. Profit is not the right word—we use the word operating margin. It has to be a positive operating margin because profit in a nonprofit organization is shunned. But we need to do this on a basis that increases our net surplus.

Tacey Ann Rosolowski, PhD:

And to what extent do you feel those regional centers and international sister institutions have worked strategically to brand MD Anderson and to create name recognition? How has that all worked?

Leon Leach, MBA, PhD :

Well, that’s secondary to delivering quality care also. In my mind, there is more importance in delivering quality of care. If you do that, then yes, your brand value goes up. People perceive that they would rather go to MD Anderson España than the local alternative. So I think that has had a positive impact, but it’s a positive impact because of the quality of care.

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Chapter 10: Growth Initiatives: Capital Campaigns, Global Oncology

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