The University of Hawaii at Manoa risks losing accreditation for its medical school and the federal research designation for its cancer center unless the university can plug a recurring $13 million budget hole to sustain both institutions, a business plan made public Friday warned.
The proposal, which seeks to lay out budget scenarios for consolidating operations of the John A. Burns School of Medicine and the financially troubled UH Cancer Center, says state funding for that gap is seen as the "most cost-effective" option to maintain community service and economic benefits.
"Without additional mission-based support for faculty salary coverage equal to $3.6 million for the (medical school) and $10.5 million for the Cancer Center in fiscal year 2017, the school will lose its medical school accreditation and the center will lose its National Cancer Institute designation," the report said.
The report cautions that sustaining future operations at both institutions could prove more expensive for UH and the state if the center were to lose its National Cancer Institute designation, which earmarks millions of dollars in federal grant research for UH.
The UH Cancer Center is one of 68 National Cancer Institute-designated centers in the country, which gives UH and fellow members access to most of the federal agency’s $4.8 billion annual budget for research.
Although forgoing the designation would require less state investment due to staff reductions, the report says it would "result in the loss of key research faculty (and) new federal dollars that stimulate the local economy and biotech business development, and most importantly, expansion of cancer clinical treatment trials presently available for those who live in Hawaii."
The economic impact of the medical school and Cancer Center is significant. The National Institutes of Health last fiscal year awarded more than $40 million for health research at JABSOM and the Cancer Center, representing 85 percent of total NIH funding to the state that year.
"These are new dollars for Hawaii’s economy and would not likely come to Hawaii were there not a (medical school) and (cancer center) that provided research infrastructure and a highly visible academic home," the report said.
Under a preferred business model that consolidates the campuses and keeps the Cancer Center’s NCI designation, the emerging "Kakaako Health Campus" would require an estimated $13 million to $13.5 million a year in additional support to cover core expenditures of roughly $45 million.
Those core expenditures include personnel costs for faculty, graduate assistants and academic and research support staff; materials, supplies and equipment; and new staff to maintain the NCI designation, including a new center director and seasoned researchers.
"It is imperative upon the campus and UH leadership to work with the state Legislature, teaching hospitals and local industry to close this remaining mission-based operations gap," the report said.
Under an alternative scenario where the Cancer Center loses its NCI designation, the additional funding still needed for core expenditures would drop to $9.4 million next year and $6.6 million the following year. The report estimates the Cancer Center would see a personnel decline of 30 percent to 50 percent, or a loss of 100 to 150 jobs due to layoffs and attrition, under that alternative.
UH-Manoa Chancellor Robert Bley-Vroman said he plans to have a group of experts outside of UH review the proposals and make recommendations.
"We really do have to consider all the options. It’s not as simple as a cheap option and an expensive option," Bley-Vroman said in a phone interview Friday. "We need to figure out a way to combine resources from (state) general funds coming to the Cancer Center and the medical school, plus some resources from clinical trials, plus a real increased emphasis on philanthropy, plus the efficiencies created as we put the two operations together, and finally, external grants."
The chancellor in February initiated plans to reorganize the Cancer Center as a research unit within the medical school. The center has been a stand-alone operation with its own faculty and administration, but the campuses sit across from each other.
Consolidating redundant expenses in Kakaako — including the mortgages for the two facilities, human resources, finance, communications, infrastructure and utilities — would cost an estimated $36 million a year on top of the core research and academic expenditures, the report said.
Earlier this year a UH task group completed a review of operations at the Cancer Center and concluded the research facility’s business model is flawed, prompting the consolidation plan and new business model. It said the center is running a deficit of approximately $9.5 million a year and burning through its reserve funds.
Under former Director Michele Carbone, the center pursued building a new, $100 million facility in Kakaako using that flawed business plan, which has saddled the center with an $8 million annual mortgage payment it can’t afford. (The report notes the new facility was needed because the original leased facility was too small to house operations, couldn’t be renovated and was "rapidly deteriorating.")
The Cancer Center’s old business plan assumed UH’s share of the state cigarette tax would remain steady at nearly $20 million a year to fund operations. But as fewer people smoke, the center’s share of the tax has dropped from $19.5 million in 2010 to $14 million last year, leaving fewer dollars for operations after the building payment.
The medical school, meanwhile, relies on a portion of the state’s tobacco master settlement agreement. Under a 1998 class-action settlement with the tobacco industry, Hawaii is one of more than 40 states that receive payments from an endowment.
But the medical school’s share of the state’s annual payment is scheduled to drop to 26 percent from 28 percent beginning June 30. JABSOM uses the funds — which are projected at $12.6 million this fiscal year — to cover the bond debt payments on its 10-year-old campus. The medical school’s tuition revenue will be used to fill that gap, the report said.
