
Chapter 19: A New Economic Climate Will Shape MD Anderson’s Fiscal Future
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Description
In this segment, Dr. Leach explains that the Affordable Care Act will drive systemic economic changes that will have a dramatic impact on MD Anderson’s finances. He anticipates that the sister institutions and regional care centers will help bring in patients and that it will be necessary to continue to seek out cost-saving measures. Dr. Leach also states that the Moon Shots will eventually generate technologies that the institution can commercialize: the Moon Shots have already created interest from donors and philanthropy has increased. He explains that unlike previous financial fluctuations, the current economic situation represents a “sea change” in which the country is now saying “We won’t pay so much for health care.” MD Anderson’s financial health is connected to the nation’s limited resources, and Dr. Leach explains that the institution must continue to be “a good steward” to be successful.
Dr. Leach explains that, with the new financial realities, MD Anderson will become more patient-centered. He then explains that that the MD Anderson mission to cure cancer will carry the institution through. He anticipates that the institution will become a leader in looking at patient outcomes, noting that the world already has confidence in MD Anderson and that “we have what it takes to thrive.”
Dr. Leach acknowledges that academic institutions are slow to change and speaks about anticipated faculty responses to the need to change. He then describes the shift in thinking that everyone at MD Anderson has to embrace in order for the institution to move forward. He explains the paradox of getting individuals to accept that “We’re number one and you want us to change.”
Identifier
LeachL_04_20130429_ C19
Publication Date
4-29-2013
City
Houston, Texas
Interview Session
Leon Leach, MBA, PhD , Oral History Interview, April 29, 2013
Topics Covered
The University of Texas MD Anderson Cancer Center - The Finances and Business of MD Anderson; Overview; The History of Health Care, Patient Care; Fiscal Realities in Healthcare; The Healthcare Industry; Politics and Cancer/Science/Care; Healing, Hope, and the Promise of Research; Philanthropy, Fundraising, Donations, Volunteers
Transcript
Tacey Ann Rosolowski, PhD:
Maybe this is a good time to ask you about the Affordable Care Act and how you foresee that having an impact on finances.
Leon Leach, MBA, PhD
Well I—the—I doubt very much that it’s going to get cheaper, and I doubt very much that people are going to be paying us more. There’s nobody out there talking about paying us more, yet the regulations—the regulatory compliance that we have to comply with gets expensive. New patients coming into the system can be a real plus because these folks oftentimes have been coming in through the wrong portal. They don’t have insurance, so they wait until they get sick and come to the emergency room which is incredibly expensive compared to going to the doctor’s office. It doesn’t impact cancer quite as much because then tend to come in through the doctor’s office. But from the standpoint of the act itself, I think there are some opportunities for savings, but also Medicare really doesn’t cover our costs. It pays about ninety cents on the dollar of our actual costs. So to the extent that we have more people that are covered but we don’t get our full cost, that becomes a challenge. There is a phenomenon known as cost shifting where basically you bill managed care more to make up for what the government is not willing to pay, and managed care figured that out a long time ago. And that’s the world that I came out of, and I knew that was true in 1997. I didn’t realize the extent to which that actually happened, and I think managed are companies are going to get more aggressive in wanting Medicare-like pricing. Well, that’s going to put more pressure on everybody. And it touches all aspects of MD Anderson, because we actually invest about $250 million a year in our own research. Well, if you’re not able to generate that money out of the clinical side, you’re not able to spend it. It’s not just on research. It’s on any capital items that we need. That’s the way that we pay for it, so it can’t—if you’re not allowed to build that capital up, it’s going to be a challenge to pay for those types of investments going forward.
So I think that it’s going to—first of all, I think it is real. Here in Texas we like to pretend that it’s not, but I can tell you it’s real, and it’s a matter of time. And it’s going to drive change, and it’s going to put a premium on being more efficient, and we’ve got to continue finding ways to do that if we’re going to remain competitive force.
Tacey Ann Rosolowski, PhD:
So what are some responses that you see coming to deal with that situation?
Leon Leach, MBA, PhD
Well, I see many of the things that we just discussed as far as regional centers, more of a national presence. I think that will bring more patient flow, hopefully more managed care patient flow too that would still be covering its expenses and maybe even a little bit more so that we can continue to grow and continue to build. I think you’re going to see increased efficiencies. I think IS is an opportunity for that—changing to an off-the-shelf system. The clinical station did a lot of things that were designed specifically for MD Anderson. We won’t have those developmental costs. Money will get spent in a different fashion because it will get spent to buy and install the system, but over the long haul that would be more reasonable than what we’re doing now to try to save money.
I think there are opportunities in purchasing still where we have to get more agreement on certain items and drive better deals and perhaps not have quite the same latitude when it comes to choice. I think with the Moon Shots, there are apt to be technologies that come out of that that we can commercialize. Now this gets speculative, because I’m pretty sure there will be technologies that come out of that that we can commercialize. I don’t think anyone is going to a physician and saying this, that, and the other thing right now. You know, there are still discoveries to be discovered and taken advantage of as far as being able to accomplish them and get them into the commercial market—which you want to do, because that’s how you get it to the patient. That’s the link to the patient. So I think there are opportunities there.
We had an incredible amount of support on the donor side. Former President [Herbert Walker] Bush—H.W. Bush—was very dedicated to this institution and really helped us in many ways. And Dr. [Ronald A.] DePinho [MD] has made that a priority. There are a lot of people that have been willing to help out. So I think that helps too.
Tacey Ann Rosolowski, PhD:
Are you saying that there has been kind of a surge in donations and philanthropy as a result of the Moon Shots? Leon Leach, MBA, PhD Yes.
Tacey Ann Rosolowski, PhD:
Um, okay.
Leon Leach, MBA, PhD
There’s—I think it’s a strategy that people are embracing. There are still a lot of—again, there are a lot of questions to be answered and research to be done, and it’s not a—you know, you don’t put a man on the moon tomorrow. That type of thing.
Tacey Ann Rosolowski, PhD:
Right.
Leon Leach, MBA, PhD
But it has the potential to break through on these different types of cancers that we’re looking at in that regard. So I think there are several opportunities that we have to ease the pressure. It’s not going to relieve the pressure. I mean, the pressure is going to continue to be there. In 2008 and 2009 when we made some changes, that was more of a reaction to events at that point in time where today it’s more of a sea change. Basically you can look at the Affordable Care Act as the country telling healthcare that we’re not going to spend twenty cents out of every dollar to buy your product. You’ve got to come up with a way to do it more reasonably. And when you look at this nation versus any other nation out there—I mean the nations that have more developed economies spend somewhere in the twelve-percent range. We’re spending almost double that. We’re not quite at twenty, but we’re not far under twenty. Rounding it to twenty is very reasonable at this point. So that curve needs to be met, and I think everyone recognizes that. It will be, in my estimation, a challenge for MD Anderson to bend that curve, because there is so much we want to do in the way of discovering a cure for cancer. And we don’t have unlimited resources. We do have limitations on resources. And the country is in a similar situation—you know—the debt that we have and how much are we going to be allowed to finance innovative things and accommodate the tougher world to live in. So that needs to work its way out. Anderson is well positioned, but we have to be good stewards.
Tacey Ann Rosolowski, PhD:
What changes do you foresee coming to the institution culturally as a result of some of these larger responses to the financial situation realities?
Leon Leach, MBA, PhD
Well, I think that the world is going to want more of what I would call patient-centered care. And I think there is an argument to be made that a lot of what exists out there—and this is not just at MD Anderson, but it’s been more what I would call provider-centric. And I think that the world is—or the United States is looking to change that. And I think when that—just the way we go about our multidisciplinary care is very patient focused. It’s very patient oriented. So it’s not that we’re not doing things in that regard, but I think there is going to be more of a demand for that, more of a push for that. And I think those who are going to be successful will be providing that.
Tacey Ann Rosolowski, PhD:
Do you see that connected up with the movement to develop more personalized care?
Leon Leach, MBA, PhD
I think it’s all related. I think as we move to an era where you’re looking at the genomics of a person and making decisions based on scientific evidence and we move away from some of the treatments that are—you know, chemotherapy was based on mustard gas. And we’ve taken that to such a precise degree, but what’s the next wave? What’s the next wave? I think there’s going to be more of a focus on that next wave, because—being broadly described as personalized care. Now again, you’re getting to the edge of my knowledge, because that doctor thing is not an MD. (laughs) So I don’t want to get too clinical in my observations, because I’m not really equipped to do that.
Tacey Ann Rosolowski, PhD:
Uh-hunh (affirmative). Sure. But I’m just—you know, I’m just wondering because a lot of the shrinking of resources, the way that roles within the institution are going to have to change, the way that some processes are going to have to change. That will translate into cultural change within the institution, and I’m just trying to visualize what that might look like in say five years’ time and seven years’ time as the institution responds. How is it going to be different than it was ten years ago? Leon Leach, MBA, PhD Well, I think the commonality that hopefully will carry us through that period would be our mission and our core values. The mission again is to cure cancer. The mission isn’t really to do research. It’s to take the research that we do and cure cancer. We do have research-based clinical care. But that’s kind of the minimum. You know—you’ve got to have that, and you’ve got to be able to apply it and look at the outcomes and be a leader when looking at the outcomes. There will be more and more of that and more care as they find what are reasonable outcomes. I’m confident that we’re there for our faculty, and the world is confident in MD Anderson. You can see how highly thought of we are in the US News and World Report rankings—that we’ve got what it takes to be a survivor in, and more than a survivor, but to thrive. But it is going to be a different culture, and it is going to be more outcomes driven, more value driven, and more responsive to patients individually, patient’s needs. So we have got to change with the times. And oftentimes academic medical centers have been a bastion of tradition. So I think there is an inherent conflict with institutions that are thought of as a bastion of tradition. I think Anderson is unique though in that we also have been on the innovative edge of curing cancer. So there is an element of both, but I think it is going to shift more to how we interface with the patient and the patient’s experience in addition to our wonderful, quality-level, high-quality faculty that provide great care. That all needs to be part of the patient experience.
Tacey Ann Rosolowski, PhD:
Do you see that there’s going to be a different role for faculty in the institution as some of these changes come about? Leon Leach, MBA, PhD Well again, that’s not really something that a business guy would put a prime on, but I think that just looking at the forces at play, it’s almost inescapable. So I think it’s up to the faculty to kind of define how that works for them individually.
Tacey Ann Rosolowski, PhD:
I want to make sure that we covered everything that we needed to cover about the satellite centers. I don’t think we talked about how it was actually decided to start doing that. Wasn’t the first one in Bellaire in about 1997, 1998? I was talking to Dr. [James D.] Cox [MD] [Oral History Interview] recently—
Leon Leach, MBA, PhD
We had a rad-oc center in Bellaire, and I believe it was about that era, but it was—part of it was looking at the services that we rendered here and just, how big do you want to get in one spot and have our people to come in? Isn’t there a better—? Is there a better way to reach the patient? Then we went through our usual— On the business side, we went through our usual cleaning process, but it was more driven by executive committee and needs to get our services in the outlying areas. So there was a shift in thinking. And then maybe the most traditionalist position was along the lines of, well, MD Anderson care can only be delivered at 1515 Holcombe. Well, in today’s world we can deliver it in Madrid with telecommunications that we have, willing partners that are like-minded. So I think it’s just one of the examples of adapting to a changing environment, and I think that skill—the skill to minimally adapt to a changing environment is what’s going to be at a premium for MD Anderson going forward.
And when you get down to, what does that mean for the faculty? I think it’s going to be up to the faculty to more figure that out than somebody like me suggesting what they should be doing. But the tea leaves are pretty clear. You don’t have to be a chief business officer to pick up the paper and watch the news at night and see what’s happening in healthcare. So the worst possible thought we could carry into that is, we’re MD Anderson, we’re different, we don’t have to change. And part of it comes with being number one. You’re asking us to change, and we’re the number-one cancer center in the world? Why would we change? Well, the world’s changing, and if you want to remain that— It’s kind of like, why do you want me to expand out of the buggy whip business? (laughs)
Recommended Citation
Leach, Leon MBA, PhD and Rosolowski, Tacey A. PhD, "Chapter 19: A New Economic Climate Will Shape MD Anderson’s Fiscal Future" (2013). Interview Chapters. 1214.
https://openworks.mdanderson.org/mchv_interviewchapters/1214
Conditions Governing Access
Open
