Facing a budget deficit of $17 million and a paradigm shift in the way people are seeking medical care, the University of Texas Medical Branch launched a review of its operations that will result in the loss of some jobs at the county’s largest employer, officials said.

Ten employees already have been notified their positions have been eliminated, medical branch President David L. Callender said Friday. Among them are the chief health strategies officer and four program directors, according to a list provided by the medical branch.

Tensions have been high at the medical branch as more cuts loom. More positions likely will be cut in coming weeks as two consulting companies complete a review of the medical branch’s operations.

“What we’re trying to do because of an existing financial challenge — but more importantly what we predict will happen in our ability to generate revenue from all sources going forward — is think about out how we can operate more efficiently,” Callender said.

He could not say how many more people would be laid off, but Callender said cuts will not be nearly as deep as the medical branch has faced in past budget crises.

“This is different,” he said. “This is not just a current financial challenge where we need to do something radical like an across-the-board layoff.”

As of Friday, 13,230 people worked for the medical branch, which is the largest single employer in Galveston County.

The medical branch’s budget deficit can be attributed to lower-than-projected revenues for treatment provided to patients, Callender said.

Essentially, fewer people than expected sought care at medical branch hospitals and clinics, and those who did seek care didn’t generate enough insurance reimbursements to meet projections, Callender said.

The medical branch is not unique, he said. Similar issues contributed to the closure of the Bay Area Regional Medical Center in Webster last month and are affecting health care providers across the nation.

“This is a commonly understood trend in healthcare and with academic medical centers,” he said.

While there’s no danger of the medical branch closing, officials there are trying to change the way it manages care to erase deficits, Callender said. Part of that plan is to make the medical branch more efficient, he said.

The medical branch earlier this year hired two consultants — the Berkeley Research Group and Huron Consulting — to conduct reviews.

Callender first announced the review plans in May during a town hall meeting on campus. He’s recording weekly updates on the review process in an effort to keep the medical branch’s community informed about the review process, he said.

Other factors that contributed to the financial issues come down to state funding. The Texas Legislature has in recent years reduced its funding to higher education, while spreading its funding among more public medical schools.

Hurricane Harvey, which struck in late August, also caused a direct $10 million loss for the medical branch, Callender said. As people recover from the storm and repair their homes and businesses, they’re spending less on health care, he said.

During this fiscal year, which began in September 2017, the medical branch’s deficit has been as high as $30 million. As of Friday, it was facing a $17 million deficit, though it was shrinking, Callender said.

The medical branch operates on a budget of about $2 billion and aims to end budget years with about $2 million leftover expenses to roll into a capital fund, he said.

For years, it struggled to treat the state’s poor and uninsured at its hospital but in recent years was able to sustain a positive margin of income over expenses and found its way back into the black largely because executives put in place tighter cost controls and took on more paying patients, while treating fewer uninsured people.

Harvey did not cause nearly as much damage as Hurricane Ike in 2008. That storm caused nearly $1 billion in damage to the medical branch, put it about $140 million in the red and led to the layoffs of nearly 2,400 people.

Two years before that, amid another efficiency review, the medical branch fired about 700 people.

The current reviews are planned to be completed by July. The medical branch does not anticipate having to end any of its programs, nor does it plan to disrupt patient care in a significant way, he said.

“As we look at efficiency, we have to look at labor, we have to look at people and how we use people,” he said. “But we don’t have any specific elimination target in mind.”

John Wayne Ferguson: 409-683-5226; john.ferguson@galvnews.com or on Twitter @johnwferguson.


Senior Reporter

(8) comments

Rusty Schroeder

Everywhere you go in this county you will see another UTMB facility going up, the Victory Lakes Hospital never has quit adding. How is there a deficit with all the new growth? Seems like you would stop building more clinics and catch up with your finances, that's how any other business model operates. And isn't Mr. Callender the same man who gets a sizable bonus every year in the midst of cuts? There must be a lot of fat on the bone at UTMB from the top down, it will be interesting to hear from the working employee side, I bet they have answers.

Bill Cochrane

According to the www, Callender makes only $857,000 annually. IMHO not an issue. Now, the building expansion is another story.

Bill Broussard

It’s amazing hurricane Harvey is mentioned. I guess the reason people are spending less on health care is that their polishing the boats our president said were used to ride around in to watch the storm and enjoy the weather in preparation for the next enjoyable hurricane. Can never have enough fun

Wish the good Doctor would go lend a hand at the Port of Galveston for a year

Utmb has enlisted some excellent Doc’s in the last few years; folks like the current program is built on do not come cheap but are worth every penny

Rusty Schroeder

You think he is worth $857,000 ? What about his yearly bonus, how much is that? I think that salary is absolutely crazy, and a bonus on top of that?

George Croix

"a paradigm shift in the way people are seeking medical care"

Convenience and cost.
We are stuck for a while longer with the so-called ACA, so that part of the paradigm isn't going to shift a lot, so it will, for many, come down to convenience and out of pocket cost.
Even if UTMB prices are the same as an urgent care or storefront specialty care of some kind, the hours of operation that allow a patient to not miss work/pay but still seek care will be a factor for many.
There are more and more UTMB or similar large group operated facilities springing up like dandelions all over the place, so access is less an issue than in the past, but how often do their hours allow odd hour visits.
Maybe try change your hours, overlap a couple of shifts, and be open more when people are not working 'normal' hours....

Terry Moore

It's very hard to get an appointment in a reasonable amount of time with your primary doctor or in a speciality clinic like dermatology , pulmonary etc. at UTMB so people go elsewhere. In my opinion they justify salaries for the high end to keep capable people running UTMB. But they keep building and need employees to run the clinics and hospitals. So if they can't keep what they got now they need to stop. I understand the money comes from different funds. But if you are building hospitals with one fund and the salary pool is another wouldn't you make sure before you start that there would be no issues. They probably are counting on the revenues that they estimate to come in and don't. Or they are doing their normal housecleaning and using the budget as an excuse. Happened before.

Paul Steele

Time to cut the salaries on the top, wasted money spent on hiring two consultants company. Just what I have said cut the CEO'S salaries and bonuses. Also these is the other way around on how companies cut seniors in the workforce...hate it.

justin sanchez

for real tho!

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