The University Record, June 25, 1996

U-M Health System, Medical School explain cutbacks, budget differences

Most of the 541 University of Michigan Health System employees slated to receive reduction-in-force (RIF) notification as part of the system's $60 million cost reduction plan have been contacted. The U-M Health System includes the seven hospit als; M-CARE, the U-M's HMO; a growing primary care network; the Clinical Delivery System; and Michigan Health Corp., a corporate arm that covers potential new businesses, acquisitions and joint ventures.

Under the plan, created by the Redesign Coordinating Group (RCG), fewer than 200 staff members will be laid off---in part because last October, the Health System enforced a hiring freeze on open positions. Staff will have the opportunity to fill about 200 positions currently open on the Medical Center campus and another 30 to 50 positions on the main campus. Another 150 positions are expected to open during the next three months due to anticipated turnover.

"We have worked hard to minimize the impact on our employees," says Lloyd Jacobs, associate dean for clinical affairs and head of the RCG. "We are committed to quality, and we believe that we can be a place where high quality care is delivered in a more frugal way. We want to be a place where the cost of health care is comparable to elsewhere in the United States and southeastern Michigan."

As a result of this cut, the Health System work force will be reduced by 13 percent---1,055 full time equivalent (FTE) positions---through RIFs, attrition and retirement. This reduction will cut $35 million­$40 million from the Health System's budget.

Patient care providers---nurses, allied health professionals and health care associates---will receive the smallest percentage cut, according to Jacobs, because the RCG wanted to underscore the system's commitment to quality health care.

Service and maintenance staff and safety and security staff will see the largest cutbacks. However, all cuts in safety and security staff will be made by eliminating positions that are currently unfilled and by reducing the total number of hours.

In addition to the staff reductions, 10 inpatient beds at the W.K. Kellogg Eye Center will be closed, a small psychiatric unit will be closed and an unspecified 32-bed unit also will be closed.

The Health System and the Medical School are dealing with the changing realities of health care and demand for quality care at prices for which health insurance companies will authorize payment. Medical School Dean Giles G. Bole says that reductions in staff in the U-M Health System will certainly have an effect on the Medical School, but the impact will not be direct. The School has no plans to lay off employees and the Medical School budget is separate from that of the U-M Health System, but the School also has been actively working to control its expenses.

William Elger, Medical School chief financial officer, says that over the past five years, the School has reduced its budget by 4 percent to 5 percent each year in order to invest in new educational and capital programs.

"Since the Medical School must generate 86 percent of its budget from external sources each year, we need to be particularly careful in controlling our expenses," he says. He also cited the reduction in funding for research projects from federal sources as a stress on other institutional resources.

Cost reduction at the School includes a freeze on hiring instructional faculty that was first implemented a year ago and continues as part of the process called the All Funds Budget System. Under the plan, each unit within the Medical School develops a budget for a two-year period. In order to fill tenure-track faculty positions, department heads must first get authorization.

"By going through this process, the departments are reviewing the efforts of their faculty in clinical, research and teaching areas, and this often results in the discovery of ways to better manage resources," says A. Lorris Betz, executive associate dean of the Medical School. The process will result in closing 70­80 open positions during the current year, Betz notes, which is a reduction of approximately 10 percent of the total tenured faculty positions at the School .

In addition to the freeze on filling instructional faculty positions, a freeze on staff hiring within the Medical School Administration was effective in July 1995. In May 1996, the freeze was extended to the entire School.

Medical Center Human Resources Department has set up programs to ease career transition for staff members. "We will make every effort to help these staff members find a job," says Laurita Thomas, director of Medical Center Human Resourc es. "For the most part employees will go directly to our Career Transition Center, and they will have the balance of their notice period, paid time, to seek other job opportunities."

Staff will have access to the Career Transition Center, which assists in placement, retraining and support services such as job skill workshops; provides external job postings, access to computers, fax machines and telephones; and other professional workshops.