A University of Hawaii Board of Regents committee, warning UH-Manoa officials not to assume the state will bail out the financially struggling Cancer Center, is requesting a cost-benefit analysis to help gauge whether to keep the center open, scale back operations or shut it down.
A UH task group earlier this month completed a review of operations at the center and concluded the research facility’s business model is flawed and incomplete. It said the center is running over budget by approximately $9.5 million a year and will run out of reserves in about three years.
UH-Manoa Chancellor Robert Bley-Vroman formally presented the report Thursday to the regents’ Independent Audit Committee.
The center’s money troubles, according to UH officials, stem from a business plan that assumed UH’s share of the state cigarette tax would remain steady at nearly $20 million a year to fund operations — a plan the task group called unrealistic.
Under former Director Michele Carbone, the center pursued building a new, $100 million facility in Kakaako using that 2010 business plan. Construction of the facility, which opened in 2013, has saddled the center with an $8 million annual mortgage payment that it can’t afford.
Bley-Vroman told the regents that he is initiating plans to reorganize the Cancer Center as a so-called organized research unit within the John A. Burns School of Medicine. Currently, the center is a stand-alone operation with its own faculty and administration, but the campuses sit across from each other.
Bley-Vroman said the move would create efficiencies and reduce administrative costs by consolidating functions like security, human resources, finances and communications.
"It’s clear we need a business plan that lays out how we will be able to support the activities that were committed when UH and the state and our private partners and many of our benefactors made substantial investments and commitments to the center, its (National Cancer Institute) designation and improved cancer care in Hawaii," he said.
The center is among 68 National Cancer Institute-designated centers in the country, which gives UH and fellow members access to about 80 percent of the federal agency’s $4.8 billion annual budget for federal research.
Bley-Vroman said Dr. Jerris Hedges, JABSOM dean and interim director of the center, would lead the effort on a new business plan, with a goal of completing something by the end of March.
Some regents expressed skepticism about any state-funded solutions, such as tapping into the state’s tobacco master settlement agreement or seeking an expanded cigarette tax.
"I think we have a serious issue as to whether the state is committed to maintaining that cancer center, and if it’s not, I don’t see in the plan … where the revenues are going to come from to maintain this first-rate institution that we all want," regent Jeffrey Portnoy said. "If it’s going to be based at least in part on a belief that the taxpayers are going to subsidize it, I think we probably ought to rethink whether that is a political reality."
Several regents agreed with Audit Committee Chairman Benjamin Kudo’s recommendation that the university seek outside expertise on whether the research center can be turned around.
"I feel like we are running out of time and that we could benefit from independent eyes that would look even at the cost-benefit analysis of whether NCI designation is necessary," regent Coralie Matayoshi said. "The chancellor already said that you’re fully committed to (keeping the designation), but we don’t even know the cost benefit of that."
Kudo said handling a business plan internally could open up UH to criticism. "We have an inherent conflict of interest: We want to keep and preserve all of the institutions that we have," he said.
He said after the meeting that he wants the Manoa leadership to come back with a clear set of options.
"I want to make sure that they look at the entire range of options, because it’s going to take us a while to explore each option. And we need to understand what the pros and cons of each option are," Kudo told the Honolulu Star-Advertiser. "That includes all the way from keeping the center, having a center without NCI, having the center with NCI, making it a department within the medical school or terminating it. We have to look at everything. I want to make sure that we look at everything and we make the right decision for our state."
Portnoy said the situation reflects what he called a lack of foresight.
"It bothers me that we need to come to crises before we address issues like the Cancer Center," he said. "It’s not just the Cancer Center. … We have a wish list, and sometimes I think we fail to look beyond the immediate future as to whether we can maintain these things that we all want."
At the state Capitol, a Senate bill that proposes bailing out the center by converting its Kakaako mortgage from a revenue bond debt to state-backed general obligation bonds has yet to be scheduled for an initial hearing. On the House side a bill that would require UH to study selling off or leasing the center’s facility recently passed out of the Higher Education Committee.
Speaking with reporters earlier Thursday, Gov. David Ige said he is "personally interested in seeing that the Cancer Center can be sustainable."
