State of the School
Philip Pizzo, MD
Dean, Stanford University School of Medicine
2009: A Notable and Memorable Year
There can be no denying that 2009 has been a remarkable year, with major ups and downs in the economy, our national agenda, our image on the world stage and, closer to home, our very sense of personal and institutional security and well-being. I’m sure I don’t need to remind you that the economic meltdown that became so apparent in September 2008 has dominated much of our attention and agenda this year.
As 2009, the 50th Anniversary of the school’s move to the Stanford campus, draws to a close, I am reminded of the many successes of our students, staff and faculty despite the enormous challenges each has faced personally and professionally. That said, there is no denying that each of us has faced significant losses in personal savings and financial security. Nonetheless, for the most part, we have much to be thankful for.
I don’t deny that we anticipate a number of major challenges in the years ahead. However, as a school, we have weathered the storm as well or better than nearly all other medical schools and, at least for 2010 we don’t anticipate any major changes in our overall portfolio. Our success to date is a tribute to the diligent work of many leaders throughout the school – at the individual, division, department, center, and institute level.
Many hard decisions and choices were made, not always with popularity or even appreciation, but in the aggregate they have provided stability at a time of major loss and uncertainty. I am grateful to everyone but want to thank in particular the work of Marcia Cohen, Senior Associate Dean for Finance and Administration, for her diligence and leadership during a most challenging year.
Despite a major downturn in our endowment, gifts and support from foundations, the School’s consolidated financial statement at the end of the fiscal year ending August 31, 2009 showed a surplus of $34 million. While there was a loss in our central administrative units, nearly all of our clinical departments posted a positive margin – which, given the incredible events of 2009, is quite remarkable.
How did this happen? There is no denying that everyone sacrificed in some manner over this past year. Except for equity purposes or promotions, compensation for faculty and staff was held flat and, in some cases, voluntarily reduced. The school’s central administrative units reduced expenditure by nearly 15% and, unfortunately, had to layoff or reduce effort levels for 40 staff members due to programmatic changes or closures. While such cutbacks were proportionally lower in our departments, especially the clinical departments, they experienced a number of cost shifts and expenditures that required considerable sacrifice as well.
More specifically, the consolidated FY09 (September 1, 2008 – August 31, 2009) year revenues for the school totaled $1.115 billion. The major sources of revenues were: sponsored research (direct costs of $280 million and indirect cost recovery of $108 million), which were up 1 and 3% respectively compared to FY08; clinical income, $356 million (up 14% from FY08); and designated funds of $105 million (up 15%).
We are distinctive even among research-intensive peers in having slightly more income from sponsored research (34% of total revenues) than clinical income (32% of total revenues). I should hasten to add that while the faculty did extremely well in competing for ARRA (American Recovery and Reinvestment Act) funding (aka “stimulus funding”), the impact on the FY09 budget is minimal given the timing in the fiscal year of receipt of the funding from the NIH. Not surprisingly, expendable gifts were down 9% in FY09 compared to FY08 ($67 vs. $74 million).
Viewed from the perspective of financial stability, it should be noted that because of the work of our faculty, each of the clinical departments had a year-end clinical surplus – some of which will be used to pay incentive bonuses that are part of faculty compensation. Another measure of our financial integrity is the strength of our endowment and reserve balances (or expendable fund balances). As I have reported in past newsletters, the Stanford University endowment was significantly impacted by the 2009 fiscal crisis.
The School of Medicine endowment, which is invested with the University Merged Endowment Pool, experienced a loss of 26.4% or $601 million, resulting in an August 31, 2009 market value of $1.676 billion – which is still the second highest among US medical schools. Coupled with this are expendable reserves of $473.6 million ($318.2 of which is in departments and, to significant extent, in restricted faculty accounts). It should not be missed that this level of fiscal stability is superior to most any medical school and greater than many universities in the aggregate.
Based on these financial results, we believe that our FY10 budget gaps have been largely addressed, and we don’t anticipate (at this time) any new major expenses or revenue losses. That said, an important lesson of 2009 is how volatile the financial marketplace can be, underscoring the importance of fiscal prudence and financial cushions to weather stormy times (and we have had quite a tsunami this past year). Looking forward, we will benefit over the next year from our ARRA research awards of $87 million to date but, at the same time, we need to get ready for a likely downturn in NIH funding in FY11.
Despite the President’s clear commitment to science and technology, early forecasts is that the base NIH budget (that is, without the ARRA stimulus of $10.4 billion) will rise at 2% -- less than inflation. This will almost surely mean a return to the constrained research funding we all experienced in the post-NIH doubling era from 2003-2009. Anticipating and preparing for this will be an enormous challenge – although, given the overall excellence of our faculty and the fact that we are not carrying significant debt or underutilized research space, we are as well positioned as any school to meet it..
As I write this newsletter (while returning from Washington DC and meetings with the Association of American Medical Colleges), the impact of healthcare reform stands as the big unknown. Needless to say, the scope of the proposed reform is a slim shadow of what might have been, and its overall impact is uncertain. Given the continued rise in healthcare costs it is inevitable that downward pressures on costs and expenditures are inevitable, and the only thing that seems certain at this time is that revenues for healthcare will decline. While this will surely be a challenge, it is also a necessity – but the size, scope and nature of the changing healthcare economy could have major impacts on academic medical centers.
Regardless of the external economic pressures, it is incumbent on Stanford to strive for excellence in the delivery of innovative, highest quality patient care with the lowest possible costs and excellent patient service. It is also imperative that we plan carefully for the further development and maturation of the shared integrated clinical services of the School of Medicine, Stanford Hospital & Clinics and the Lucile Packard Children’s Hospital. These services need to embrace not only the Medical Center but our community regionally and more broadly.
Given the obvious challenges of supporting our missions in education, research and patient care, I would be remiss in not highlighting at least a few of the accomplishments of our students, faculty and staff during this past year. We have continued to admit amazingly talented medical and graduate students and to be able to educate them in highly successful programs and with among the lowest overall debt burdens in the nation.
And in just a handful of months we will begin educating our students in the new Li Ka Shing Center for Learning and Knowledge (LKSC), which will offer unparalleled opportunities for innovative approaches for knowledge and skill acquisition. Not only will the LKSC be central to student education, it will also become the locus for pioneering continuing and life-long education for faculty and the community and for a paradigm shift in how medical education is conducted.
Also in 2009 we reached out to the community in a number of novel education and learning programs, most notably our Mini-Medical School, the first quarter of which (The Dynamics of Human Health) enrolled more students than any other course in the history of the Stanford’s Continuing Studies Program. I want to thank Kathy Gillam for her incredible help with this course and Dr. Sherry Wren for serving as the course co-director – along with the amazing faculty who taught these sessions. In case you are interested, they will be available on Stanford iTunes in early 2010.
In addition to the big boost from ARRA funding, among the most notable events of 2009 was President Obama’s affirmation of the importance of science and innovation – a statement that began the reversal of the anti-science sentiments that dominated the prior eight years. An enormous amount of advocacy work remains to be done in order for research funding to break away from the past decade’s peaks and valleys and arrive at a more predictable level of support that keeps pace with inflation. Still, we must be thankful for the ARRA boost, which came at a critical juncture for Stanford’s and our nation’s biomedical research enterprise.
Even more important from my perspective than the purely quantitative success of research awards is the nature of the awards our faculty continue to receive. Stanford boasts the highest number of NIH Pioneer awards of any university in the nation (four new ones were added in 2009) along with an amazing number of Innovation Awards, Challenge and Grand Opportunity Awards. In addition, Stanford has the largest number of awards and amount funding of any school in California from the California Institute for Regenerative Medicine (CIRM), including, most recently, three of the 14 major CIRM translational disease awards.
The number of distinguished research awards from foundations is equally remarkable, as is an incredible number of faculty awards and honors. What makes a university great is the quality of its faculty and here Stanford is exceptional. At the same time, we have been limited by economics in the recruitment of new basic science faculty – which has been a real source of disappointment and is something I hope we can begin reversing in 2010 and beyond.
One of my major goals over the past years has been to foster the development of our clinical programs to be as excellent as our efforts in research. Thanks to the recruitment of a number of excellent chairs, the combined efforts of faculty leaders across the school and important partnerships with SHC and LPCH, we have witnessed important successes – especially in national rankings on quality metrics – and some improvements in overall service (although much work remains in this arena).
The new programs sponsored by SHC at the North Campus in Redwood City along with the Sherman Avenue Imaging Center have been notable additions. So too is our increasing presence as an NCI Cancer Center – the three-year review for which occurred in mid-October. And our increasing success in clinical and translational research is being fostered by the CTSA, the SPARK program and important collaborations including the one with the Northern California Cancer Center. Further, the number of community- based programs is growing, and opportunities in global health are becoming more robust with the creation of the Office of Global Health this past year.
Despite the pressures of the past year, faculty support and development have been a focus of departments and the school, and progress is being demonstrated in enhancing diversity and leadership as well as the retention of women faculty. It is notable that in the most recent COACHE survey, Stanford faculty are clear (compared to peers) in their overall satisfaction at the School of Medicine (for more information, see the November 23 2009 Newsletter). That said, there are many aspects of faculty development and support that need improvement at the departmental as well as school-wide levels, and this must be a continuing emphasis for the future.
So, as we reach the end of 2009 it seems clear that despite the many challenges, we have done well as a community and as a school and medical center. This is directly proportional to the efforts of our staff, faculty and students, and it is important to pause and both celebrate and thank each of them. But we can’t pause too long since the next wave of opportunities and challenges loom before us. I am confident that we will find ways to succeed despite constraint and adversity as long as we function as a community that supports each other and our important missions. That is always a challenge in a time of constraint – but, in the end, it is what distinguishes leaders and institutions.
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