Update: Economic Recovery Plan
The following is a communication from Marschall Runge, M.D., Ph.D., CEO of Michigan Medicine and dean of the U-M Medical School
Yesterday, U-M President Mark Schlissel wrote a note to all in our community expressing gratitude for the remarkable agility and continued performance of all those who are part of the University of Michigan. At the same time, he shared the fact that the COVID-19 pandemic has not only had a dramatic impact from a clinical perspective, but also from a financial perspective. He then outlined a comprehensive action plan based on four guiding principles:
- Deliver the mission of the University of Michigan.
- Value, protect and support our people.
- Preserve long-term excellence.
- Communicate effectively and thoughtfully with our community.
Last week, we shared that, after losing $45 million in March, we expect losses in April to be between $60-$70 million. In the forecast for this fiscal year, ending June 30, we are projecting a loss at the health system ranging from $130-$230 million. At the medical school, we are projecting an $80-$100 million negative variance by the end of this fiscal year.
In alignment with President Schlissel’s plan, we are moving forward with the following actions to reduce the impact of the pandemic this year and work toward a stronger, sustainable 2021.
Michigan Medicine Economic Recovery Plan
Non-essential expense reduction
We are placing restrictions on expense categories classified as non-essential spending. All non-essential expenditures — for example travel, conferences, use of consultants — are to be suspended and new financial commitments are to be avoided until further notice.
- Travel and expenses: Consistent with previous communication, the restriction for professional travel and associated expenses remains in effect throughout Michigan Medicine.
- Hosting events and expenses: At this time, all hosting of events and expenses associated with hosting will be restricted. This includes food and beverage at meetings, events, etc.
- Professional development expenses: While Michigan Medicine continues to support career and professional development, expenditures associated with professional development are restricted until further notice.
- Consulting expenses: Use of consultants will be restricted with exceptions being critical support of patient care. A Corporate Officer approval is required for all existing vendor and consulting agreements before a continuation of work is authorized.
The moratorium placed upon these expense categories will greatly contribute to our ability to maintain care- and research-focused initiatives without disruption by increasing our financial stability in the weeks ahead.
Capital project review and reprioritizing
A centralized review of all existing and proposed capital projects will be conducted to reprioritize and determine cost savings potential and provide a new schedule for completion. While the delay of certain capital projects will impact Michigan Medicine’s strategic goals, successfully responding to our current expense savings challenge in a committed, humanistic way will enable us to stabilize our finances to support our future goals and objectives.
All hiring is frozen with the exception of designated patient care staff and faculty in roles considered critical. We will honor outstanding offers extended to staff or faculty. We will also use redeployment to fill vacant positions where possible.
There will be no merit or base salary increases in the upcoming budget for the fiscal year, with the exception of those related to faculty and staff promotions that have already been approved and adjustments prescribed by collective bargaining agreements.
Executive compensation reduction
As noted in President Schlissel’s message, in my role as one of the University’s Executive Officers, I will voluntarily be taking a 5 percent reduction in my monthly salary from May through December 2020. In addition, I will participate in the Michigan Medicine executive compensation reduction plan which is currently being developed.
Additional actions to support expense reduction
Additional approaches described in President Schlissel’s message, such as the voluntary Furlough Program, will be available to Michigan Medicine employees. The FAQs accompanying President Schlissel’s message describe, in detail, all approaches that will be taken by the university, most of which will be also be implemented by Michigan Medicine. In the coming week, we will provide additional details about actions that will be taken to support expense reduction.
None of these decisions were reached easily, and we would not be implementing these approaches if we did not feel they are absolutely essential to the ongoing needs of Michigan Medicine at this unprecedented time.
Leaders will be reviewing areas of noncritical expense in departments and discontinuing or postponing those activities. These include:
- Reviewing purchase requests for supplies, equipment and services and pause all those that they can between now and the end of the fiscal year.
- Deferring or eliminating scheduled expenses without compromising essential deliverables by conferring with departmental leadership.
- Identifying non-value added tasks that can improve department efficiencies.
Please click here for FAQs that provide more details.
Michigan Medicine is in the process of evaluating the positive financial impact of the action plans currently being implemented and will be determining if further actions are needed. We are committed to communicating frequently and will provide additional FAQs early next week.
We are grateful for your contributions to these plans and all that you are doing to ensure the sustainability of our missions of research, education and patient care.