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Amid financial challenges, Roswell Park seeks new business model

As prestige goes, the number of cities with a comprehensive cancer center is not much greater than the number with a National Football League team.

The federal government has designated only 41 such centers in the nation – including Buffalo's Roswell Park Cancer Institute.

But the price of keeping a comprehensive cancer center can seem NFL-like, given the pressures to recruit top researchers and provide them with state-of-the-art laboratories and other facilities.

This presents the same fundamental question about Roswell Park that the community has faced for years about the Buffalo Bills: Can we afford it?

“I don't think we can afford not to have Roswell,” said Assemblywoman Crystal Peoples-Stokes, D-Buffalo.

But Roswell Park has reached a critical crossroads.

The institute has attracted more research grants, recruited top-flight scientists and increased revenue – all contributing to the growing Buffalo Niagara Medical Campus. Among other signs of progress, the institute in April broke ground for a $42.5 million Clinical Sciences Center.

Yet financial uncertainty remains a gnawing worry.

The cancer center, operating on a yearly $623 million budget, has prepared for a cut of as much as 10 percent in National Cancer Institute funding, or about $6 million, because of the automatic federal budget reductions known as sequestration.

Even more significantly, Albany officials last year threatened to eliminate the state's annual subsidy of about $103 million – a clear message for the cancer center to reduce its reliance on public money.

And the state Comptroller's Office last week scuttled a contract with the consultant hired by Roswell Park to identify cost savings.

All this comes as Roswell Park seeks to renew its core NCI grant, which confers comprehensive cancer center status.

The designation is not in immediate jeopardy. But Roswell Park officials worry that a quick and large drop in funding could destabilize the institute and make it harder to attract scientists and research funds.

Roswell Park can expect continued state support, but not as much as now, said Dr. Nirav R. Shah, the state's health commissioner.

“We're looking for real improvement in self-sufficiency, not in ultimate independence,” Shah said, adding, “It's not a 'Good luck, goodbye, you're on your own.' ”

Stakes are high

Founded in 1898 as the nation's first cancer hospital, Roswell Park entered the 1990s in a period of decline under state ownership.

The state built a new, 133-bed hospital and in 1999 converted Roswell Park into a public-benefit corporation, a shift that allowed flexibility in budgeting and pursuing new ways of doing business. But the construction saddled the hospital with debt while it still paid higher labor costs than other hospitals.

Dr. David Hohn, the former Roswell Park chief executive who took over in 1997, steered the institute after a similar debate over financial support back then.

“It's déjà vu all over again,” Hohn said. “The institute can do a number of things to become a little more efficient or increase clinical revenue. But people have to realize that there is no easy way to replace the state support.”

Gov. Andrew M. Cuomo initially proposed making Roswell Park “operationally independent” from the state after this year, a proposal that was met with widespread concern locally. In a compromise, the state agreed to keep funding Roswell Park but required it to develop a self-sufficiency model, due Jan. 1.

Officials see expiration of the state's HEAL NY program, which provided grants for health reform initiatives, as a driving force for self-sufficiency. The program accounts for $25 million of Roswell Park's annual state funding, and state officials have warned the institute not to expect money from another source to fill that void.

In the cancer business, the stakes are high.

Consider Ohio State University's recruitment in 1997 of Dr. Michael A. Caligiuri, a noted leukemia specialist at Roswell Park. The university also lured away his 14-member laboratory staff from Buffalo, as well as Dr. Clara D. Bloomfield, then the head of the Division of Medicine. The offer came during a similar period of financial uncertainty.

Caligiuri, a Buffalo native who now directs Ohio State's Comprehensive Cancer Center and serves as a member of Roswell Park's External Advisory Board, said Roswell Park is well-respected nationally and considered to be on the ascent.

“You can't just pull away support,” he said. “If you jeopardize your NCI designation, it jeopardizes your institution's membership in an exclusive club of cancer centers that do innovative trials of new therapies.”

Looking beyond WNY

Navigant Consulting Group was hired at a cost of $1.1 million, including expenses, to work with Roswell Park to map a plan for the institute's options.

Preliminary findings have been shared with Shah; Dr. Donald L. Trump, Roswell Park's president and CEO; Candace S. Johnson, the institute's deputy director; and Roswell Park board members. The report has not been made public.

Several of the recommendations shared with The Buffalo News fall into one of two categories: Look within for efficiencies, such as reducing personnel costs and wait times for services; and look beyond the region for new patients.

Trump said the Chicago consultant identified $21 million in possible yearly savings through operating and structural changes. Some of the savings require negotiated changes to union contracts, so achieving them will not be automatic, said Michael Joseph, chairman of Roswell Park's board.

Labor costs are more expensive than at other cancer centers, Roswell Park officials say, because about 90 percent of its 3,323 workers belong to public employee unions.

“We were part of the Department of Health. We were clearly a state entity. With that came some extra benefits, but it also came with great burdens,” said Hugh M. Russ III, a lawyer and member of Roswell Park's board.

For example, comparable facilities pay overtime at 1½ times the regular rate of pay, said Vicki Garcia, Roswell Park's vice president of human resources management. The institute's union employees earn a rate of 1.55 times regular pay – a difference that adds up to an extra $110,000 annually. And employees have 12 paid holidays a year.

Contracts with the unions are negotiated by the governor's Office of Employee Relations.

The Civil Service Employees Association, which represents 1,100 workers at Roswell Park, said contract provisions ensure the institute treats hard-working employees fairly.

The consultant also encourages Roswell Park to form partnerships with doctors' groups, the University at Buffalo and other institutions. Those in the medical community view a merger with UB as impractical because, for starters, it could not replace lost revenue from the state.

The consultant recommends gaining more revenue from treating patients. But doing so is not easy.

Roswell Park, while a regional resource for such complex care as bone marrow transplants, pediatric cancer and acute leukemia, competes with community oncologists for general cancer cases.

“Roswell is a center of research, training and high-end care,” said Dr. Robert Zielinski, an oncologist with the Buffalo Medical Group, a large physician practice. “The problem is, unless you are in an extraordinarily large market, it is probably impossible to do what a Roswell Park needs to do to support itself.”

Buffalo Medical Group estimates it handles about one-third of the general cancer diagnoses in the area.

Like other community oncologists, Zielinski sees the institute as a major community asset, but the cancer center also directly competes with local physicians.

Trump said the answer lies in forging ties with smaller hospitals across the state to bring in more complex cases, like current partnerships with Cayuga Medical Center in Ithaca and Olean General Hospital.

“There is a great possibility for growth outside of Western New York,” Trump said. “We're not looking to take every cancer patient. But we're confident we can do the high-end care.”

However, Roswell Park's second, no-bid contract with Navigant – to put in place the recommended changes – was rejected last week by the Comptroller's Office, which cited possible runaway costs and vague performance benchmarks.

Roswell Park officials defended the awarding of this contract, which would have paid Navigant as much as $5.7 million, but now will put it out to bid. The cancer center expects to hire a new consultant within three or four months, a time frame that makes it harder to meet the state's Jan. 1 deadline.

Significant grant

The examination of how Roswell Park should move forward comes as the institute applies for renewal of its core grant from the National Cancer Institute.

The 1,200-page application requests $24 million over five years. The institute needs the money, but the essential part of the core grant is the comprehensive cancer center status it confers.

A “cancer center” designation means the center meets NCI standards for either cancer prevention, medical services or research.

A “comprehensive cancer center” meets standards in all three categories.

“The core grant is the glue that holds us together, and the NCI designation is the imprimatur that says this place is exceptional,” Trump said.

The institute is going without a costly NCI site visit to renew a core grant under a new NCI policy for cancer centers in good standing. Trump and other officials say they have a good story to tell, one reflected in the core grant submission. They expect a decision in early 2014.

Among the accomplishments since 2008, when the last core grant was renewed:

• The institute recruited 137 physicians and researchers, about half of them for new faculty positions – not replacement hires.

• Total annual NCI funding, including the core grant and other grants, remained stable at about $50 million, while funding from all competitive grants increased 17 percent to $70.5 million.

• The institute invested big in cancer vaccine research, including a facility to make experimental vaccines.

• Roswell Park and Kaleida Health agreed to dedicate a floor of a new children's hospital to a combined pediatric hematology-oncology program.

Relying less on state

Overall, the $102.6 million that Roswell Park received from the state for the current fiscal year accounts for 16.5 percent of its operating budget. The hospital budgeted the same amount for next year.

In 1999, when Roswell Park's budget totaled $210 million, state aid accounted for 50 percent of its budget.

“It's a huge accomplishment to get where they are,” said Thomas R. Beecher Jr., former chairman of the downtown Medical Campus.

New York's two other comprehensive cancer centers – Herbert Irving Comprehensive Cancer Center at Columbia University in New York City and Memorial Sloan-Kettering – do not receive state operating aid. But few begrudge Roswell Park its funding.

“If it means that in one geographic area of the state, the state needs to be more involved to ensure quality care, I don't have a problem with that,” said State Sen. Liz Krueger, a Manhattan Democrat whose district includes Memorial Sloan-Kettering.

The other cancer centers in New York benefit from large endowments and royalties.

Memorial Sloan-Kettering, for example, collected $231 million in donations last year. Roswell Park raised $17.5 million.

Memorial Sloan-Kettering also took in $78 million in royalties last year. So far this year, Roswell Park has earned $336,441.

Roswell Park's royalties – money generated from licensed technology and patented innovations – peaked at $3.35 million in 2001, when the hospital still received royalties for the prostate specific antigen test. The hospital expects royalties to reach $1.1 million by 2015.

“It takes time for this, but you're most definitely correct – we need to do a better job,” said Johnson, Roswell Park's deputy director.

Lawmakers and business leaders point to Roswell Park's role as an anchor for the Medical Campus and place high expectations that research can be spun into startup companies.

“We can't undermine the strength of that institution, because it holds so much potential for future economic growth,” said Rep. Brian Higgins, D-Buffalo, who supports increased federal spending for cancer research.


Roswell Park Cancer Institute

Founded: 1898

One of 41 comprehensive cancer centers in the U.S.

Employment: 3,323 up from 1,918 in 1999, when it became a public-benefit corporation

Budget: $623 million in 2013

Patient revenue: $417 million, up from $158 million in 2004

State aid: $102.6 million, or 16.5 percent of its budget

Fundraising: $17.5 million

Royalty revenue: $336,441 down from $3.35 million in 2001

Patient admissions: 5,300 in 2012

Outpatient visits: 200,000

Source: Roswell Park Cancer Institute

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