Administration– Dean's Office

The Dean's Newsletter:
February 22, 2005

Table of Contents

v The Matter of Funds Flow
v Evolving Issues Regarding Conflict of Interest
v NIH Public Access Policy
v More About New Graduate Housing
v Upcoming Sessions on the Respectful Place
v Celebration for Dr. Leonore Herzenberg
v Honors and Awards
 
v Dr. Sherry Wren
v Appointments and Promotions

The Matter of Funds Flow

I have previously described some of the challenges involved in the frequently contentious matter of funds flow between hospitals and schools of medicine, both here at Stanford and at other academic medical centers. (http://deansnewsletter.stanford.edu/archive/04_14_03.html#5 ). I have also described how we have attempted to deal with this issue. Most of the solutions, at least during my tenure, have been modifications and compromises, and they have often been short-lived. For that reason Martha Marsh, CEO of Stanford Hospital and Clinics, and I determined that it was in our mutual interest to overhaul the "matter of funds flow" more dramatically. We charged a small working group to help accomplish this in time for the FY06 fiscal year. The Funds Flow Working Group has included Dr. Norman Rizk, Senior Associate Dean for Clinical Affairs, Dr. Gerald Shefren, Vice President for Ambulatory Care), Michael Hindery, Senior Associate Dean for Finance and Administration, David Kiehn Vice President for Financial Operations, Marcia Cohen Assistant Dean for Fiscal Affairs, and Dr. Robert Jackler, Professor and Chair of Head & Neck Surgery.

The Funds Flow Working Group commenced in September 2004 and has spent an extraordinary number of hours testing concepts, options, models and proposals. The group has operated with wonderful collegiality and cooperation, and has now developed a model that is being intensively refined so that it can be optimized and so that its potential pitfalls can be understood. To benefit from additional input and perspectives, the original working group was augmented by four department chairs (Drs. Tom Krummel (Surgery), Al Lane (Dermatology), Bill Maloney (Orthopedics) and Ron Pearl (Anesthesiology)) in January 2005. The group has also had the opportunity to present their work-in-progress proposal for a new funds flow model to the Joint Planning Committee (a group of School and SHC senior leaders and mangers), the SHC Board of Directors Finance Committee, the Council of Clinical Chairs, and Department Finance Administrators of the clinical departments. While everyone who has participated recognizes that considerable work remains to be done, virtually all have praised what has been accomplished to date and have strongly endorsed the completion of this important project for FY06, which begins September 1, 2005.

The Funds Flow Work Group began with a bold goal -- "to reinvent the funds flow to better align SHC and the School of Medicine into a more integrated and functional relationship." In doing so, the group defined the components that comprise the current funds flow between SHC and SoM. In FY 04 these included:

  1. The Professional Services Agreement (or PSA), which includes collections from billings net of direct operating expenses and allocated "shared expenses."
  2. Other payments for services rendered. These included:
    1. Medical direction
    2. Essential services
    3. Program development
    4. Reimbursement for School of Medicine clinical staff for services provided to SHC
  3. Service incentives and support for clinical practice deficits
  4. "Grants"

Marcia Cohen developed the following schematic of the current funds flow schedule:

Current Funds Flow (chart)

This schematic illustrates why a dramatic change in the funds flow model is needed. In group practices that operate their own ancillaries (such as PAMF), the ancillary revenues, which may account for as much as 45% of the practice revenue, are a major component of the funds available for physician compensation. The structure of the Stanford faculty does not allow for the ancillary revenues to supplement the professional revenues. Without a major realignment, the professional revenue (or PSA) cannot support the practice expenses and compensation for clinicians that reflects that real market values. For these and other reasons, the current funds flow model does not incentivize the growth of clinical services. In fact it has almost the opposite effect. Departments attempt to make favorable arrangements with the hospital in order to make up for the deficits inherent in the current PSA. This has the consequence of creating tensions between departments, the School and hospital. Although the end-of-the-year grant has been a way to address some of these problems, it has inherent unpredictability and, at the end of the day, does not foster a more productivity based model or one that includes innovation and quality.

Accordingly, the Work Group concurred that a new funds flow model should:

Based on these guiding principles, a new funds flow methodology has been developed that utilizes an RVU payment-based methodology and that better codifies the responsibility for allocated expenses, particularly in the ambulatory clinics. In the new model, SHC would operate the inpatient and outpatient facilities, manage the revenue cycle, and pay the School (and hence faculty) for the professional services being delivered. In this methodology, payment would be based on US private practice compensation by specialty and clinical service according to the RVU schedule from the MGMA (define) database. Although academic practice RVUs are available, the Working Group concluded that they were too confounded and that the private practice RVUs better reflected a compensation level that reflects fair market value.

In the new methodology, the RVU payments would replace the previous PSA model and would also include all expenses, including benefits, departmental overhead, graduate medical education and the Dean's tax. In this new methodology, the payments for defined clinical services (e.g., medical direction, program development, essential service) would still exist but would almost certainly be less. An appropriate gain-sharing methodology will be developed. And, importantly, a grant for education and training would appropriately recognize these as important missions for the medical center.

Using the same graphic format shown above for the current model, the new funds flow model would be as follows:

Planned

There are a number of perceived benefits to the new RVU based methodology, including especially the fact that this payment schedule is based more on clinical productivity than ad hoc negotiated "special deals" between clinical chairs, faculty and hospital leaders. Further, it better aligns the incentives of the hospital and faculty physicians, provides better financial predictability and stability, and improves the prospect for outpatient practices to achieve financial viability. Importantly, because this methodology helps to standardize funds flow, it will help facilitate the success of service lines, centers and the Institutes, including programs between and among different departments. In addition, this new funds flow model provides funding for clinical administrative overhead and also allocates support for teaching and education missions.

While there has been considerable interest and enthusiasm for this new model from the Working Group and the various faculty and hospital groups that have heard about it, it must be noted that a similar model is not currently being used in an academic medical center, although similar methodologies are employed in other practice settings. Moreover, there are many details to be worked out and a number of issues that require further study, including legal review and assurance of compliance with all applicable laws and regulations. That said, the goal is to refine the fundamental components of the model by the end of April so that it can be employed in the budget planning for FY06. To accomplish this goal, however, and to resolve the understandable uncertainties that still exist, a 2-3 year transition plan will be configured. This plan will avoid major immediate dislocations and permit appropriate accommodations while guarding against "special deals" that would render the new model suspect or useless.

Overall, I am very encouraged by the progress to date but I am also cognizant of the work that remains to be done in the weeks ahead. I must again thank the Working Group, including its expanded membership, for the tremendous work they have done, and, equally, for the very cooperative manner in which they have worked to assure the integrity and well being of both SHC and the School of Medicine. Indeed, the proposed funds flow model signals a major change by paying faculty for productivity and by simplifying what has been a confusing and often contentious process. Among the most important consequences of the new funds flow model is that it will permit us to achieve more fully our integrated clinical plan with SHC while limiting the wasted time and effort that has so confounded the matter of funds flow. I truly believe we now have hope for the future.

| Back to Contents |

Evolving Issues Regarding Conflict of Interest

I have had several recent communications with you about Conflict of Interest matters (http://deansnewsletter.stanford.edu/archive/01_24_05.html and http://deansnewsletter.stanford.edu/archive/02_07_05.html#6 ). In that same time period, news articles have continued to appear. These have mostly been about the specific problems that emerged at NIH and the resultant one-year ban on the ability of NIH employees to perform any compensated consulting with industry. However, several more recent articles and editorials (e.g., LA Times, Washington Post) have promulgated the view that similar limitations should apply to NIH funded investigators at academic medical centers. As recently as Saturday February 12th, NIH Director Elias Zerhouni was cited as pondering the merits of a "summit" to examine this matter more fully.

There are of course very significant differences between NIH employees, who are truly carrying out their work as public servants, and faculty or investigators, who are doing research at medical schools, universities or research institutes. Of course they share in common the fact that, irrespective of the place of work or method of compensation, the rules and regulations surrounding the management of potential conflicts of interest must be closely adhered to, fully reported, and, where necessary, managed. The Stanford policies regarding conflict of interest can be found at http://med.stanford.edu/coi/.

I had the opportunity to review the NIH events and their potential impact on academic medical centers at the Council of Deans Board meeting on Thursday February 17th. There was common agreement among the deans that we all need to adhere to our institutional conflict of interest policies but that we also want to continue to promote appropriate interactions with industry as stimulated by the Bayh-Dole Act. In addition, we all recognized the importance of keeping our faculties fully informed about this important topic. Accordingly, upon my return to Stanford on February 18th, we had another discussion about conflict of interest at the Executive Committee meeting. At this meeting I underscored the need for school leaders to be informed and engaged in overseeing their faculty on conflict of interest matters. To further help educate and inform faculty, Dr. Harry Greenberg, Senior Associate Dean for Research, Graduate Education, and Postdoctoral Affairs, along with Ms. Barbara Flynn, Manager of the Conflict of Interest Review Program, Ann Arvin, Associate Dean for Research, and the School's Conflict of Interest Committee have prepared a very helpful fact sheet on this topic. This fact sheet as well as other points of interest will be available on the website (http://med.stanford.edu/coi/tips.html ). I am also taking the liberty of posting the fact sheet here. I strongly encourage you to read it carefully.

TIPS FOR MANAGING YOUR OUTSIDE PROFESSIONAL RELATIONSHIPS IN ORDER TO AVOID CONFLICTS OF COMMITMENT AND INTEREST

Again, I would strongly encourage you to review this fact sheet and if you have any questions please check with Barbara Flynn ( ) or Dr. Harry Greenberg ( ).

| Back to Contents |

NIH Public Access Policy

Over the past several years a number of leading scientists, including Dr. Pat Brown, Professor of Biochemistry, have advocated for a public library of science. Their position has been sound and well reasoned. On February 3, 2005 it was supported by an official directive from NIH Director Elias Zerhouni entitled "NIH Policy on Enhancing Public Access to Archived Publications Resulting from NIH-Funded Research." While this policy is voluntary I firmly believe that all members of our Stanford community and those in academic centers and universities across the country should actively embrace it. Below is an excerpt from Dr. Zerhouni's February 3rd letter to the biomedical research community. Please lend your support.

*******************************

This Policy applies to all research grant and career development award mechanisms, cooperative agreements, contracts, and institutional and individual Ruth L. Kirschstein National Research Service Awards, as well as NIH intramural research studies.

This Policy requests that beginning May 2, 2005, NIH-funded investigators submit to the NIH National Library of Medicine's PubMed Central (PMC) an electronic version of the author's final manuscript, upon acceptance for publication, resulting from research supported in part or in whole with direct costs from NIH. The author's final manuscript is defined as the final version accepted for journal publication, and includes all modifications from the publishing peer review process. These manuscripts will be preserved permanently in the PMC archive for use by the public, health service providers, educators, scientists, and NIH.

*******************************

Again, please review these important policies. I strongly recommend that they be embraced and followed by our Stanford community. In closing, I would like to thank Dr. Brown for his important leadership and advocacy on this very important issue.

| Back to Contents |

More About New Graduate Housing

On Monday evening, February 14th, Provost John Etchemendy held a town hall meeting to update faculty and other interested individuals about the proposed graduate student housing proximate to the School of Law and to provide a forum for discussion. Having informed you of the array of issues concerning this topic in the January 24th Dean's Newsletter (http://deansnewsletter.stanford.edu/archive/01_24_05.html#3), I attended this meeting as a resident of the neighborhood most immediately impacted by the project and as a faculty member and University official. In my opinion, the Provost did an excellent job in presenting (or more accurately re-presenting) the reasons for this project. He explained, again, why it is so essential to the Law School and to the University more broadly, in the areas of graduate housing, undergraduate housing and, importantly, the initiation and completion of the Science, Engineering and Medicine Campus facilities.

There is no doubt that the size and density of the proposed graduate housing project, as well as its location, have engendered concerns and some consternation by faculty residents, students and others. I felt that the Provost was quite balanced in his presentation. He offered clear evidence of how the University administration and building design group have listened to the previously expressed concerns and have significantly modified the project to address them. Indeed, additional modifications are still underway. At the same time the Provost made it clear that the space limitations of the University and the impact of the constraints of the General Use Permit (GUP) have made it essential to design buildings with a higher density (expressed as "floor to area ratio" or "FAR"). He also said that, whether this site is used for this project or a different one, it will be used in the future for a higher FAR project than exists presently.

Knowing that virtually every building project will have its detractors, especially when it is larger than desired by its surrounding community, I felt the Provost provided explanations that made all but a few feel more comfortable with the evolving plan and appreciative that their voices and concerns were being addressed. Even though the town hall meeting lasted well over two hours, I am sure that lingering concerns and dissatisfactions remain. However, I do believe that the University has made a valid and compelling case for why this project is so important. As both a resident and faculty member I support it and call on all others in our community to do so as well.

| Back to Contents |

Upcoming Sessions on the Respectful Workplace: Please Attend if You Haven't Already Participated

As many of you may recall, I have written about the Respectful Workplace Initiative on several other occasions.  I wholeheartedly support this effort and hope to see the culture at the school improve as we all strive to foster respectful interactions at work.  For the past few years, we have conducted briefings for all members of the faculty and staff.  Students and Postdoctoral scholars will receive briefings next.  The hope is to involve all members of the School community in an understanding of what are the elements of a respectful workplace and what are the resources available to all to ensure that the workplace is characterized by civility and decency.

I recently been informed that the staff briefings, in particular, have been occasions for fruitful discussion the nature of a respectful environment and suggestions for solving difficult work situations.  Some of the comments from the staff include providing a constructive and open environment for communication, encouraging discussion of problems in a non- blaming manner, apologizing when you boil over on a bad day, learning to listen and giving your coworkers and others the benefit of the doubt.  Almost every single session included the request that people use the words "please" and "thank you" and acknowledge work well done.  Sadly, many reported that oftentimes, everyone is so busy, people do not even greet each other in the morning or say good-bye at night.  I am told that many of the plans for addressing various scenarios given to the audience to work on in small groups were thoughtful and creative.  The presenters are planning to provide highlights of the sessions in a later Stanford Report story and online.  While I have only touched on several aspects of the training, I urge those of you who haven't yet attended to go the two make up sessions this week at Fairchild Auditorium (Tuesday, February 22nd at 3 pm and Wednesday, February 23rd at 1 pm) and participate in changing the culture of the Medical School.

| Back to Contents |

Celebration for Dr. Leonore Herzenberg

On February 11-12th, past and present faculty, students, staff, collaborators and friends gathered to celebrate the 70th birthday of Dr. Lenore Herzenberg and to honor her with a wonderful symposium on B-Cell Development, Function and Neoplasia. The Herzenberg Laboratory (or Lee and Len) has had a transforming effect on science and medicine through the development of novel and important technologies (most notably of course FACS) as well as many other innovations and scientific insights. It is hard to imagine how we would understand or have even approached such serious disorders as AIDS and cancer, or basic phenomena such as stem cell biology, among many other areas, without FACS! As scientists, mentors, advocates and leaders the Herzenberg Laboratory has been part of the fabric of the Stanford School of Medicine since 1959,when the school first moved to Palo Alto from San Francisco. Their collaborations and contributions are legendary, and this was certainly well evidenced by the international community who came to honor Lee and wish her a Happy Birthday -- and many more to come.

[Dr. Herzenberg's Profile: http://med.stanford.edu/profiles/dean/faculty/Leonore_Herzenberg/ ]

| Back to Contents |

Honors and Awards

| Back to Contents |

Appointments and Promotions

| Back to Contents |

A downloadable Microsoft Word version of the newsletter is available. If clicking on this following link does not initiate a download, right-click (Windows) or click-and-hold (Mac), then use the command most similar to "Download Link To Disk" or "Save This Link As" and save the Word file to your disk.

Microsoft Word version: DeanNews02-22-05.doc

| Back to Contents |

Stanford Medicine Resources:

Footer Links: