Physician layoffs averted at Texas medical school

A turnaround plan helped the University of Texas-Houston Medical School cut a multimillion-dollar deficit in half and save 50 faculty jobs.

By Jay Greene, amednews staff. Sept. 25, 2000.

A worst-case scenario that would have sent 50 faculty members packing has not materialized at the University of Texas-Houston Medical School despite some warnings earlier this year that faculty layoffs might be necessary to deal with a $20 million budget deficit.

While 25 employees were laid off to help cut the deficit, faculty members who were facing layoffs still have their jobs.

"It looked [earlier this year] like we might have to reduce faculty, but we didn't have to do that" said L. Maximilian Buja, MD, dean of Houston Medical School.

Nationwide, teaching hospitals, medical schools and practice plans are struggling to break even. Since funding cutbacks were mandated by the Balanced Budget Act of 1997, teaching hospital margins are projected to be cut in half from 4% in 1998 to 1.6% by 2002, said the Assn. of American Medical Colleges.

Total margins for hospitals declined in 1999 to 2.7% from 4.3% in 1998, said the Medicare Payment Advisory Commission.

At the University of Texas-Houston, changes implemented this year by a new management team have begun to reverse losses that have totaled about $16 million over two years, Dr. Buja said.

Since March, the medical school's 650-member faculty practice plan has earned a profit, he said. The practice plan had projected a $20 million loss for its fiscal year 1999-2000, which ended Aug. 31. Instead, the plan lost only between $8 million and $9 million, he said.

For fiscal year 2000-2001, which began Sept. 1, Dr. Buja said the faculty plan projects a small profit. In fiscal 1998-1999, the plan lost about $6 million on revenue of about $70 million, he said.

Earlier this year, Dr. Buja asked all clinical departments to pare their budgets in unspecified predetermined amounts. If expense reduction plans didn't bear fruit, Dr. Buja said as many as 50 faculty members would have to be laid off to help balance the budget.

Under the restructuring plan, the faculty practice plan laid off 25 of 350 employees in the central billing and collecting department, saving an estimated $8 million in annual costs, Dr. Buja said.

Another 75 budgeted nonphysician positions were eliminated through attrition, he said.

"We have made improvements in billing and collections," Dr. Buja said. "We had expenditure reductions in departments, mostly cuts in nonfaculty positions in the billing department, and did some cost shifting."

Another change made by the practice plan in July was to take over several ambulatory care clinics previously operated by Memorial Hermann Hospital, Dr. Buja said.

"The faculty is responding very well and is seeing more patients," Dr. Buja said. "We expect this trend will continue and contribute to our turnaround." The clinic averages about 150,000 patient visits annually, he said.