Georgetown University’s Newspaper of Record since 1920

The Hoya

Georgetown University’s Newspaper of Record since 1920

The Hoya

Georgetown University’s Newspaper of Record since 1920

The Hoya

Medical Center Lays Off 65 Employees

A growing budget deficit at the Georgetown University Medical Center has forced the university to lay off 65 staff and non-tenured faculty positions.

Although the lay offs were completed over a long range of time, some research professors received notice of their layoffs mid-summer, and some staff members received notice right before the fall semester began.

“While regrettable, these reductions are necessary in order to reduce our deficit,” said Amy DeMaria, executive director of the Medical Center’s Office of Communications.

The Medical Center and Georgetown University Hospital accumulated debt throughout the 1990s – with the Medical Center deficit reaching a high of $83 million in 1999 – as the result of the decreased profitability of managed care. Ongoing losses prompted the university to approve the sale of the hospital to Bethesda, Md.,-based MedStar Health in 2000.

The recent layoffs come as part of the Restaging Plan approved by the university’s Board of Directors in 2001. The plan requires that the Medical School achieve a balanced budget by 2007.

“We’re holding everybody – all of us – accountable to bring the medical center into balance by fiscal year 2007,” University President John J. DeGioia said in an interview with campus press last Thursday.

Financial woes that have plagued the Medical Center since the rise of HMOs in the late 1980s and early 1990s continue to run up the debt, despite the sale of the hospital on July 1, 2000. Since fiscal year 1995, the Medical Center has lost a cumulative $333 million, DeGioia said in a speech to the Medical Center community on Aug. 30.

In the fall of 2003, it became clear that the Medical Center would not hit its financial targets for fiscal year 2004 and beyond, due to lower-than-expected revenues from fundraising and indirect cost recoveries from research, DeMaria said.

In December 2003, the Medical Center, with the support of the Board of Directors, agreed to reduce expenses – largely through layoffs – by $19.75 million over two years, including a reduction of $12.75 million in the current fiscal year.

But the elimination of 65 positions yielded a mere $7.9 million in savings.

“So far, we have achieved $7.9 million in reductions, which is $5 million short of where we’d hoped to be by now, and $12 million short of our overall $19.75 million cost reduction goal,” DeMaria said. “We are now entering a second phase of budget work, during which we will continue to work toward the financial targets that we have set.”

And DeGioia said he doesn’t expect to reach balance through additional layoffs.

“My conviction is that we won’t be able to achieve the balance through the kind of reduction we just did – that it won’t be achieved through an across-the-board metrics-based application. So we’re reframing the question right now. We’re rethinking how to address this balance,” he said.

According to DeMaria, there are no plans to eliminate any part of the Medical Center – they plan to “look closely at many different ways to reduce expenses and enhance revenue at the edical Center.”

While the Medical Center had forecast an $8 million operating deficit this fiscal year, that number had been revised to $19.9 million in December. The inability to eliminate expenses through layoffs has once again increased the deficit this year, to $25-29 million.

DeMaria also emphasized that despite financial difficulties, the edical Center brought more than $130 million of sponsored research to the university this year – the highest amount to date. Additionally, Georgetown’s School of Medicine moved up to 43rd in this year’s US News and World Report rankings.

The ongoing deficit at the Medical Center problems prompted Standard & Poor’s to downgrade the university’s credit rating last month. Despite being downgraded one notch to a BBB+ rating from the university’s previous A- rating, the outlook is “stable.”

The Medical Center continues to work to end these losses after the recent resignation of the school’s dean and executive vice president, Daniel Sedmak, who returned to Columbus, Ohio, where his family lives. Stuart Bondurant replaced Sedmak as interim executive vice president, a position he held in 2003 when Richard Gaintner, then the school’s dean, was ill.

DeGioia said he remains optimistic, despite the enormity of the economic challenge that faces the Medical Center.

“I’m very confident that the talents and abilities of my colleagues can ensure this,” he said. “It’s a little more challenging today than I thought it would have been a year ago, but I’m still very confident in our ability to finish that work.”

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