Margin Improvement Task Force appointed to ensure ongoing financial health as UTMB plans for the future

Wednesday, Jan 21, 2015

Dr. David L. Callender, President

As you may have heard me and other leaders talk about in recent months, UTMB’s long-range budget plans include improving our margin—the money we have available to invest in our mission after all expenses are paid—by $100 million by Fiscal Year 2020. The target is based on budget projections that take into account our new buildings, anticipated changes in the health care industry, and expectations by University of Texas System, legislators and taxpayers that UTMB and all state institutions optimize efficiency and effectively manage resources.

The need to improve our margin is a normal result of strategic growth, and UTMB leadership has been planning for this across all mission areas for some time. But we were concerned that recent announcements of cutbacks at some major health systems and questions about how the falling price of oil might affect the Texas budget might create some anxiety among our employees. Facts are always more reassuring than rumor, so I wanted to provide some background on our margin improvement efforts—what they mean, what they don’t mean and how they will help us in the future.

UTMB has seen tremendous success over the past few years—remarkable recovery from major disaster; strategic growth in education, research and clinical programs; and five years of positive margins in a challenging economic and health care climate. All of our growth since 2008—increased enrollment, new clinics, new programs, new hospitals—has been undertaken to ensure the long-term vitality of our mission.

UTMB’s financial health is evident not only in our positive margins but also by the fact that, based on our positive performance, UT System recently assigned a “satisfactory” rating for UTMB’s financial condition—the first time we have received this highest-available rating since prior to Hurricane Ike. This demonstrates UT System’s confidence in our ability to plan, increase efficiency and effectively manage the resources entrusted to us.

But we must continue to transform UTMB to ensure future success in an ever-changing environment. I’ve appointed a task force of senior leaders from the Academic Enterprise, Health System and Institutional Support to proactively identify opportunities for improving our margin by $100 million. The group will be working on recommendations over the next few months and will continue to meet routinely to monitor implementation plans and measure how we’re doing in terms of achieving the expected margin improvements.

While $100 million seems like a large number, it’s just under 6 percent of our current $1.7 billion budget. Reaching the target will take some hard work, but it is very attainable for us over the course of the next five years. This is not just about cutting costs. It’s about making sustainable, incremental improvements to our business processes over time, to increase revenue and manage costs.

We are not considering layoffs in this process. Such cuts are not necessary and would not help UTMB transform. In fact, by being proactive and flexible in our planning, we aim to avoid the kind of reductions in force other organizations have announced.

I’ll be talking more about this topic at the Town Hall at noon, Friday, Jan. 30 in Levin Hall. If you have questions or ideas for increasing revenue or managing costs, please visit the Town Hall website to submit comments.

In the meantime, please be assured that UTMB is financially healthy and our mission is making an impact across our communities, state, nation and even the world. Working together, we will ensure that our institution remains strong well into the future.

Thank you.

Dr. David L. Callender