University Times

UPMC encompasses 20 hospitals, two surgery centers, 43 cancer centers and 18 long-term care facilities. As of the midpoint of the current fiscal year, the medical center had almost $7.5 billion in assets and was projecting about $7 billion in annual revenue, Levine noted.

Its 20 hospitals comprise more that 4,200 licensed beds, with a patient population that includes 55 percent of all the patients in Allegheny County and nearly a third of the patients in the 29 counties in the western half of the state.

“We have five international sites and more than 400 physician offices outside of Oakland. UPMC has about 45,000 employees, admits about 170,000 patients in hospitals each year, and 1.2 million people have insurance provided by the UPMC Health Plan,” Levine said.

UPMC’s operating revenue is up 57 percent since 2005, with a yearly growth rate of about 12 percent, and the revenue for this fiscal year is consistent with that trend, he added. UPMC’s primary source of revenue is patient fees, but the medical center increasingly is diversifying its investments, including establishing UPMC-managed clinical entities internationally where the financial constraints may be fewer than those in place in the United States, he noted.

Even in light of the current economic downturn, “UPMC’s financial picture remains strong; its investment portfolio remains strong. The balance sheet has been impacted, but the overall picture is strong,” Levine maintained. “It’s strong because UPMC has been proactive to a significant extent in reducing its expenses. They’ve had to reduce their employee roster, and they’re cutting expenses in other ways, which have been documented [in the local media]. But, at the end of the first six months of this fiscal year, there was more than $100 million in operating income, and the investment portfolio is about $2.5 billion.”

In their symbiotic relationship, an economically healthy UPMC bodes well for Pitt. The two entities last year signed a 10-year contract extension, which requires UPMC annually to provide Pitt with targeted funding, Levine noted, an agreement that includes an incremental increase matching inflation.

“As UPMC revenue has gone up from fiscal year ’01 to fiscal year ’07, so has the academic support from the medical center for the medical school and the other Schools of the Health Sciences gone up. In fiscal ’07, UPMC transferred $135 million to the medical school, a combination of money that went to my office and to the clinical departments for their academic purposes, defined as teaching and research,” Levine said.

In addition to that $135 million, UPMC has contributed money to the construction of new laboratories and fully funded a number of endowed chairs in the medical school.

“They provided additional money to me when it comes to recruiting new chairs for the clinical departments. That money averages $50 million-$70 million a year. So it’s fair to say that altogether [in FY07] UPMC invested nearly $200 million in academic health sciences and, further, to say that that is by far the largest amount a medical center or hospital system transfers to teaching and research,” Levine said.

Pitt’s climb to No. 6 nationally in attracting NIH research dollars is due in large part to UPMC’s support, he said.

“Our NIH funding since 2001, when we were awarded $289 million, has increased to $457 million [in the latest figures]. Much of that increase is because we’ve been in a position to use the money we get from the medical center to leverage against federal funding,” which covers at best only 75 percent of the true cost of doing research, Levine said.

“The University has to cover the other 25 percent. Obviously, as part of that institutional commitment to 25 percent, we have other sources of revenue: state money, tuition money, philanthropic money, interest on the endowment and so forth. But in our case, much of that money comes from UPMC,” he said.

Levine added that preliminary numbers from NIH indicate that Pitt may rise to No. 5 nationally in NIH grant support.

UPMC does not do research and no grants go directly to UPMC, other than occasional non-science federal or state contracts, Levine noted.

“So why does UPMC transfer funds? UPMC does that because that money allows us to increase our research productivity, it allows us to transfer technology and it allows us to leverage external support. That in turn increases stature and visibility, in particular, the stature of the medical school. That visibility also brings in more patients, because people go to a hospital where they believe they will be offered treatment, particularly for serious disorders, that can’t be offered elsewhere,” Levine said.

“In this context it’s noteworthy to point out that what largely built our medical center in the first place was the investment in organ transplantation and, in particular, research in organ transplantation, which allowed this institution to become and remain the leading center in the world in organ transplantation,” he said.

That model likely will continue to strengthen both Pitt and UPMC as the University focuses on collaborative and fundable research areas, such as neurosurgery, where the development of the gamma knife here has transformed the way surgery is performed, and other advances in surgical treatments for pulmonary disease and other high-end medical subfields, Levine said.

“The point is the grants go to Pitt, but UPMC is marketing that,” he said.

On the School of Medicine side, Levine said belt-tightening and programmatic planning are serving the University well during the economic crisis.

The overall goal of the medical school is to trim its $1.5 billion budget by 5-10 percent, Levine said. During the last two fiscal years, the school actually has had small surpluses, which were put into a reserve fund or directed toward new programs. In the current economic climate that is unlikely to recur, he said.

“Obviously, we’re part of the national economy. Like everyone else we are reducing our spending, but we’re doing so in a way we won’t cause academic harm,” he said, citing cuts in travel budgets, complimentary meals such as graduation dinners, and other budget pruning of non-essentials.

“Although those things seem small, in an institution of this size it adds up to a considerable amount of money,” he said. “We’re able to protect our educational component, because, frankly, the students pay extravagant tuition to be educated so they deserve to get what they’re paying for. Therefore, I can’t lose faculty income, or supplies or anything else that has to do with that component.”

However, he noted, the educational component is not self-supporting. Students pay about $17 million in the aggregate for tuition, and in turn the medical school pays about $17 million to the faculty in compensation, but there are other expenses associated with the educational component that the school picks up.

Levine has stopped funding for some research projects and, as a result, a relatively small number — fewer than 50 scientists — have had their jobs eliminated, he said.

“We’re talking about research that is not good enough to be competitively funded,” he said. “We also have a number of physicians, not a large number, who have run out of external grant money, who find themselves between grants. They might have a long history of research support, but their grant has run out and they have to re-submit their proposal and it may take six-18 months to have that happen. In those cases, I’m not going to close a lab and put people out of work. So we fund that with bridge funding.”

Levine said he is hopeful that with the federal stimulus package including an additional $10.4 billion for NIH — a 30 percent increase in its appropriation — that Pitt researchers will benefit directly.

“There’s no guarantee we’ll get any of it. But we are very aggressively now applying for stimulus grants from NIH, and other sources,” Levine said. Pitt’s track record for attracting NIH research dollars might portend future success, he said.

“We also continue to support young tenure-track assistant professors. I have to support them for two or three years until they have enough data to get an NIH grant,” he said.

The fallout from the bad economy has had the effect of reducing the salaries of a small number of clinical faculty, Levine acknowledged.

“For our clinical faculty, their paychecks are aligned with metrics that determine their clinical productivity called RVUs (relative value units),” so clinicians’ salaries can fluctuate, he said. “This is true of every academic medical center in the country. We tie a person’s compensation to their revenue for seeing patients, their overhead for seeing patients, their research revenue, their educational credit units, that is, how they’re reimbursed for teaching. Everything has a metric.”

Pitt has seen some savings by combining programs in the Schools of the Health Sciences, Levine said. “For example, the Department of Pharmacology and the Drug Discovery Institute had separate administrative staff and overhead. By combining them we were able to save a little bit of money,” he said.

“Our departments are very interactive and collaborative, and we have one of the highest ratios of the kind of grant that reflects interdisciplinary research, as opposed to single-investigator research, of any university in the country. That’s also captured by a programmatic approach. To a large extent, areas like cancer, organ transplantation, structural biology, computational biology — things that we’re focusing heavily on — bring together a lot of departments, a lot of investigators and have a better chance for funding because of it,” Levine said.

“Our affiliation with UPMC not only gives us access to funds but to one of the largest patient populations in the world, increasingly connected by electronic health records, which is a major focus of health care reform in the Obama administration. We’re way ahead of the curve in that regard. Only 2 or 3 percent of all the hospitals in the country have an electronic health record, and only about 50 or 60 percent of doctors’ offices, and we are at almost 100 percent. So we are a model,” Levine said. “And because we encourage all of our patients to enroll in clinical trials, it’s a remarkable source for obtaining research data.”

Levine told BPC members he is less worried about the current financial straits than the situation two years from now when the federal stimulus money runs out. He added that while Pitt and UPMC are in relatively good economic shape, fiscal problems endemic to the U.S. health care system pose a greater concern in the long run.

“The United States is last of the 26 industrialized countries in lifespan length, and we have one of the highest infant mortality rates. Our health costs average $8,000 per capita per year versus about $4,000-$4,500 in all other countries. We spend a lot of money on health care and we have a pretty lousy result across the country,” he said.

Even worse, studies show that 50 percent of all U.S. health care is not evidence-based, which can lead to poor or even counterproductive care, he added.

In addition to poor quality of care, the United States ranks very low in positive outcomes, equity of care, access to care and efficiency.

“Some would argue that we’re spending the right amount of money if it makes us a healthy society, but not if were 26th in the world. So efficiency is a big issue,” he said.

Some 18 percent of the U.S. GDP now is attributable to health care and that percentage is growing as the GDP is falling as a result of the economy, he said. That compares to 20 years ago, when health care represented 7-8 percent of GDP.

Regarding health care access, Levine said, “Nobody should go without reasonable health care in this country, not even undocumented migrants. They’re human beings and if they get infected with tuberculosis they’re going to infect the rest of us. It’s outrageous that there is a single person living that doesn’t have access to health care.

“I believe the current administration is going to address this in the next two years. In fact, I think we’re going to see revolutionary changes in health care probably starting about two years from now and, once it starts, advancing very quickly.

“Private health insurance companies are already making concessions, which is a sign of things to come,” he said, citing insurers that have reduced higher premiums for subscribers with higher risk of disease.

Other problems include the health care reimbursement system. “We generally reimburse physicians and hospitals for treating people when they’re sick rather than preventing illness in the first place,” Levine said. “In fact, most of the burden of health care costs is for preventable chronic diseases because we’re too fat, we drink too much alcohol, there’s too much anxiety, too much depression, we smoke too much — all of those are potentially preventable conditions.

“We hope NIH and NSF will increase their funding for support of prevention research. We know to say to people: Don’t eat too much, don’t smoke, but we still don’t know nearly as much as we need to know how to keep them from doing it. Yelling at them doesn’t work.”

Health care reform also must address medical student debt. “Almost 90 percent of our graduating medical students graduated with a mean debt of about $140,000. That’s true across the country,” Levine said. “The interest on that increases over the next four or five years through their training and residency. So we’re producing a generation of young physicians who incur about a quarter of a million dollars in debt to pay off by the time they’re just starting out.”

The ramification of that situation is that doctors-in-training are looking toward high-priced specialty areas like plastic surgery when what the country most needs are primary care physicians working in poor areas, he said.

“The ‘Levine proposal’ is that the federal government underwrite the cost of medical education in exchange for our graduates offering what the country needs for a few years after they graduate,” he said. “But it’s hard to get legislators to pay attention because they believe that all doctors become rich. That’s also one reason why we get so little money from the commonwealth; I think we’re second from the bottom in state support.”

The pharmaceutical industry in this country also needs reforming, Levine said.

“It costs about $1 billion to develop one drug. If you’re lucky it’s a good drug; if you’re unlucky, it’s Vioxx. What happens is that the entire global pharmaceutical industry develops one paradigm-shifting drug — the first antibiotic, the first cancer chemo-therapeutic agent, the first drug for schizophrenia — the whole industry develops one of those about once every seven years,” Levine said. “For the next six years all the other companies make a knock-off drug so they can compete: It becomes a blue instead of a purple pill; you take it once a day instead of twice,” or some other variation, he said. “And for a drug to work its way into the marketplace, companies have to spend a fortune in advertising,” expenses that are passed on to the health insurer and then the consumer, he added.

Fear of malpractice litigation has many physicians practicing defensive medicine, that is, ordering every test possible to cover their bases, Levine said. Tort reform therefore is necessary.

Further, the U.S. health care system must move faster toward allowing more nurses, physicians assistants, medical technologists and other health personnel a greater role in primary care, he said.

Finally, the health care system must expand its use of technology, Levine said. In addition to expanding use of electronic health records, which would ensure better treatment in remote sites, he said the industry should move toward personalized medicine.

“Personalized medicine is a cliché but it has substance. What we mean by that is treating people with respect to their personal physical attributes. It’s an expression that has come of age. For example, some of us absorb a given dose of a drug, others don’t. Some of us will have bad side effects, others won’t. A lot of people smoke two packs a day and never get lung cancer, but we know that secondhand smoke causes lung cancer in others,” Levine said.

“Pretty soon, certainly within the next decade, you’re going to go into your doctor’s office with a chip of DNA around your neck, and he or she will scan that and know how to treat you as a person.”

—Peter Hart