Plan would turn facility into maker, not a loser, of revenue

LAST OF THREE PARTS

State officials contend that drastic changes must be made if the University of Hawaii Cancer Center is to survive, though they have yet to gain consensus on a single plan to lift the organization out of its financial hole.

Jerris Hedges, the center’s interim director, is pinning the organization’s financial hopes over the next two to five years on a plan that involves the sale of laboratory activities for commercial use, establishing spinoff companies to use the technology developed by researchers to monitor cancer risk, and other entrepreneurial ventures.

“We’re just now reaching a point where we have scientists with unique technology that can be used for the early detection of illness and monitoring of overall health status,” he said. “Instead of simply writing papers about this and letting someone else develop commercial products, we’re moving people into appreciating that they can either be part of a startup company or they can lease the intellectual property to someone else, but that would bring revenue into the center.”

The Cancer Center is facing a roughly $7 million operating deficit in 2016, down from more than $10 million in previous years as a result of consolidations, shared administrative services and a restriction in hiring under a reorganization with the UH John A. Burns School of Medicine. However, budget shortfalls are expected over the next few years, and the organization is looking to the Legislature for financial support.

“Reorganization could take another year. We don’t know,” Hedges said, citing university bureaucracy that could lengthen the process. “We’re doing what we can and saving what moneys we can. We just cannot fully implement the potential savings with the arrangement we have now.”

The Cancer Center is seeking to partner with large pharmaceutical companies on clinical trials and is working with businesses such as Nestle to study the metabolic profile of people who use their food products and to assess how those products are tolerated by different populations, Hedges said.

“Nestle sells food around the world, and sometimes there’s been issues raised whether their food products are compatible with genetic makeup, so we’re working with the international company around that concept — taking the idea of a byproduct to predict early onset of disease and health status of a person,” he said.

He also hopes to use the center’s laboratories to test new drugs on behalf of pharmaceutical companies.

“In some cases we’d be taking the concepts and making new companies that would either sell the product to a larger company or directly to consumers, or subcontract and work with large companies to help them with their research and development operations,” he said.

In addition, Hedges is pushing a new model for faculty compensation, with a goal for researchers to contribute 25 percent of their salaries from grants. Faculty unable to acquire grants would be expected to teach.

“We’re at a point where grants are so competitive these days that there has to be an alternative way for faculty to contribute,” he said. “No matter how good you are as an investigator, at some point in time your ability to get grants declines, so you have to have other ways you can contribute to the university, so teaching is one way. We’ve got to work with investigators to help them understand that they are, in a sense, running a business, and a business has expectations of covering costs.”

Some of the center’s researchers do not bring in grants and do not have an incentive to do so because their entire salaries are guaranteed as a result of collective bargaining. Hedges acknowledged that changing the mindset of faculty will likely be met with opposition.

Former Cancer Center Director Michele Carbone, who resigned in 2014 amid complaints about his management and growing fiscal concerns, said running the center like a business requires the ability to cut costs, which is not possible in the university system due to union agreements.

Carbone, who remains one of the center’s top revenue-generating researchers, said, “It’s very difficult to bring in money. It’s a very competitive system, and we do not have that incentive here.”

“If you have faculty that are successful and bring in grants, then you’re fine, but if you have faculty that are not successful and are not bringing in any grants, now that faculty costs you a lot of money,” he said.

Still, he stressed the center’s importance to Hawaii. “We’re not in the business to make money. We’re in the business to provide a critical service,” he said. “Hawaii, because it’s geographically isolated, needs the Cancer Center more than other states in the U.S. If you shut down this place, there is nothing. It’s very important … to have the best Cancer Center to be sure the people in Hawaii have access to the best possible opportunities if they get sick.”

The Cancer Center also has begun to increase philanthropy, which dropped significantly after the negative publicity surrounding Carbone’s tenure as director and deteriorating finances.

University and state officials have been grappling for some time with how to deal with the center, which has been running in the red and draining its reserves to stay afloat. A Board of Regents committee is evaluating Hedges’ business plan and other suggestions to determine the best path forward.

“We’re looking at just about everything — at the various proposals that have been presented, reports that have been submitted by various entities and consultants, and meeting with various constituencies,” said Jeff Portnoy, one of the regents reviewing the proposals. “We’re all cognizant of the importance of completing our task as quickly as we can, but at the same time we want to make sure that we have met with the various constituencies, evaluated a tremendous of amount of data and solicited comments from individuals we believe do have critical facts and opinions. We’re also cognizant of the fact that we have a budget request in the Legislature. If it’s going to work, people are going to have to buy in to whatever it is that is ultimately decided.”

External consultants are recommending that UH strongly consider turning the struggling Cancer Center into a semiautonomous business entity, co-owned and run with community hospital partners, to keep the research facility viable.

The consultants, Atlanta-based Warbird Consulting Partners and Chicago-based Navigant Consulting Inc., advise against some of the more extreme suggestions, including closing the center, selling it to an outside entity, merging with a mainland cancer center or abandoning its federal National Cancer Institute designation.

“At this particular juncture we know that they don’t even have a plan yet. This is (Hedges’) second attempt at a plan,” said Rep. Isaac Choy (D, Manoa-Punahou-Moiliili), a critic of the Cancer Center. “Actually, as I look at the plan, they are more ideas than a comprehensive business plan. What they need to do first is to get good leadership and come out with a plan that policymakers like us can review. They do not have that. I haven’t seen anything to give me hope.”

UH has selected four finalists for the director’s position at the Cancer Center. The university initiated a search for a permanent director in November, a year after Carbone, its former director, stepped down amid internal dissension and growing fiscal concerns. Lawmakers also are considering bills that would give the center a larger share of the cigarette tax as well as a new tax on e-cigarettes and a request for a $4 million appropriation.

“In my own personal view, I think that the Cancer Center is at a critical juncture,” Portnoy said. “It is extraordinarily important to the state, but it clearly has challenges and what we hope to be able to present to the regents is a path going forward that preserves the things we believe the Cancer Center brings to the state within the financial constraints that are prevalent. It’s been a subject of significant and appropriate concern for the last 18 to 24 months, and it’s time that various decision-makers … try to develop a common path.”

MEET THE FINALISTS

UH Cancer Center director

The University of Hawaii Cancer Center’s four finalists for the director’s position are scheduled to meet with state officials and community members over the next month.

UH initiated a search for a permanent director for the center in November, a year after Director Michele Carbone resigned.

The candidates are scheduled to participate in department discussions as well as meetings with senior administrators, faculty, staff, students and internal and external constituents. They also will make public presentations at the UH Cancer Center’s Sullivan Center.

John Cowell is associate center director for basic research at Georgia Regents University Cancer Center and a professor in the Department of Pathology, Biochemistry and Molecular Biology and Graduate Studies at Medical College of Georgia School of Medicine. Public presentation: March 29, 3-4:15 p.m.

Anthony Shields is associate center director for clinical sciences at the Karmanos Cancer Institute in Detroit and a professor of medicine and oncology at the Wayne State University School of Medicine. Public presentation: April 1, 3-4:15 p.m.

Edward Gelmann is deputy director of the Herbert Irving Comprehensive Cancer Center in New York and professor of medicine and pathology at Columbia University and New York Presbyterian Hospital. Public presentation: April 5, 3-4:15 p.m.

Randall Holcombe is chief medical officer of cancer at Mount Sinai Health System in New York and deputy director of the Tisch Cancer Institute. He also is director of Mount Sinai’s Ruttenberg Treatment Center and a professor in the Division of Hematology/Oncology at the Icahn School of Medicine at Mount Sinai. Public presentation: April 8, 3-4:15 p.m.

WHERE THE MONEY COMES FROM

Here is the breakdown of the University of Hawaii Cancer Center’s $46.3 million in funding as of June 30:

>> Federal grants/contracts: $22.6 million

>> Gifts, private grants/ contracts: $2.5 million

>> State general/university funds: $2.9 million

>> Cigarette tax funds: $14.8 million

>> Other extramural sources: $3.5 million

Source: UH Cancer Center