2007 State of the Institution Address

October 1, 2007

• Introduction
• Statistics
• Challenges & Solutions

Introduction

I am pleased to review with you the accomplishments and plans for the future that we share at M. D. Anderson. We are privileged to work at the nation’s number one cancer center with truly exceptional people, resources, and opportunities to achieve our mission.

As you know, we’ve been able to continue our steady and balanced growth in each of our four mission areas for more than a decade. Of course, this is measurable in numbers, and I’ll present updates of the charts we review together each year.

But, more importantly, our growth can be measured in the discoveries we are making that improve our knowledge about cancer, and lead us to new approaches in our research and the care we give to our patients; and in the progress we are making in being an employer of choice for everyone here, by practicing our values of caring, integrity and discovery and by embracing a culture that supports collegiality, teamwork and respect for each other.

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Statistics

First let’s look at the numbers.

We estimate that we served 83,500 patients in FY07; 28,800 of them were new patients.

We have about 16,000 employees (14,700 classified and administrative staff and 1,350 faculty).

Our operating revenue this past fiscal year was $2.5 billion.

In FY06, M. D. Anderson had $410 million in research expenditures, with $182 million of federal grants and contracts.

In FY07, philanthropy reached a record $173 million.

Our facilities total more than 9 million square feet.

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Challenges & Solutions

This unprecedented expansion of an academic institution that was already quite large has occurred as a result of the extraordinary commitment and skills of thousands of dedicated faculty, employees of all types, and volunteers. Here are a few of our recent accomplishments, which I will key to our strategic goals for 2005-2010:

• Our faculty has taken international leadership in advancing clinical practice and science in the field of cancer. We’ve chosen wisely in areas that we emphasize, both programmatically and as individuals. (Goals 1 & 2)
• Our administrators and managers are working closely with faculty, nurses, pharmacists and all employees to improve the efficiency and quality of care.
• 160 graduates of our Clinical Safety and Effectiveness Course have completed projects which are improving patient care and will save millions of dollars. (Goals 1 & 7)
• The services of our dedicated volunteers expand into new clinical facilities as rapidly as we can build them, helping our patients to navigate the mental and logistical challenges of dealing with cancer care. (Goal 1)
• We have articulated a vision of a cancer care cycle that includes a continuum involving prevention, early detection, treatment and survivorship, and are planning expansion of our prevention and survivorship programs both clinically and in research. (Goals 1 & 4)
• Surveys of our patients and our employees rate us highly. (Goals 1 & 5)
• Our approach to quantitative sciences is now formalized in a new division, with increased emphasis on bioinformatics, computational biology and computer sciences (in collaboration with local universities). (Goals 2 & 4)
• Our prevention mission is being enriched by growth of activities in the Department of Health Disparities Research and incorporation of lifestyle and behavioral modification programs into clinical sites. (Goal 4)
• We have been recognized as an employer of choice by AARP (ranked number 40 in the United States) and the Houston Business Journal. (Goal 5)
• Our faculty continue to bring honor to the institution by their election to leadership positions of subspecialty cancer organizations and their prominent roles with national committees and research symposia. (Goal 6)
• We are benefiting from increased recognition in national press coverage of cancer-related issues, and are scoring number 1 in national ratings more often than not. (Goal 6)
• Our relationships with sister cancer institutions around the world are expanding in programs and numbers, and the M. D. Anderson Center for Global Oncology is being launched this fall. (Goal 6)
• Our business leaders have developed an economic model that consistently predicts our revenues within 1% and allows us to troubleshoot income shortfalls in our individual operating units in real time. (Goal 7)
• Our Development Office has raised the bar steadily, year after year, in achieving increased philanthropic contributions and bringing new friends and supporters into our family. In FY07, philanthropy reached over $173 million, an all-time high. (Goal 7)
• During the past 11 years our facilities team has overseen construction of 5.5 million square feet of new buildings, which invariably meet expectations and cost projections. We have received awards recognizing the excellence of the Mays Clinic, our Emergency Center and our floodwall. (Goal 7)

In preparing for this presentation, I read again my state-of-the-institution address delivered a year ago in 2006. It presented a vision for a bold expansion of our clinical and research programs, based on a consensus reached at a series of faculty leadership retreats and expanded upon subsequently.

A copy of the draft research plan resulting from these retreats was circulated to all faculty in the spring of 2007, followed by an update on September 24. That plan provides the rationale and framework for the way we will work together in the future to achieve our mission. It is the subject of a Faculty Town Hall sponsored with the faculty senate, and additional presentations will seek input from all who work at M. D. Anderson. This diagram explains how our research will impact our expanded scope of clinical care delivery:

I am working closely with our new Provost, Dr. Ray DuBois, on the research plans, and with our Physician-in-Chief, Dr. Tom Burke, on the clinical plans, to move these plans forward. This exciting expansion does not mean that we can let up in our vigilant attention to managing our growth and focusing on the priorities we agree upon.

There are many examples of recent successes, areas in which we have strengthened programs that were not until now achieving the desired impact. A few of these include: our Phase I clinical trials, which have tested over a dozen new anticancer agents from pharmaceutical companies for first time in a human being; leadership courses for faculty and administrators, which have improved leadership skills and reduced conflict; expansion of our pediatrics program to a Children’s Cancer Hospital, which has recruited nearly a dozen new faculty; our plans for a new clinical approach to survivorship, which will roll out with pilot programs this year; the myMDAnderson websites, which are improving communications with many of our patients and over 2,000 referring physicians (and these numbers are growing); and the decision to quadruple the number of students enrolled in our undergraduate School of Health Sciences to fill a huge personnel need.

And, having redesigned and upgraded the architecture of our information systems, FY08 is the year we will begin to see major successes in our IT resources, including order entry and tracking and moving patients through the clinical enterprise more efficiently

At M. D. Anderson we are challenged every day to achieve the very best outcomes in the clinical care we provide to our patients and in our research and training programs. Beyond this, there are five specific challenges we face, which require our attention and ingenuity in order to implement solutions.

These five important issues that challenge M. D. Anderson today – issues that demand our vigilance and creativity – are the theme for the remainder of my remarks. They are:

Challenges

1. Managing growth in clinical activities.
2. Threats to reimbursements for patient care.
3. Funding for research.
4. Competition for hard-to-fill positions.
5. Need for selectivity and focus.

I look to everyone to help in addressing these challenges, but I’ll begin by also offering some of the solutions that we already are implementing or plan to implement. Again, I will key these to our Strategic Goals.

Challenge 1: Managing growth in clinical activities. Our steady increase in clinical activity at a rate of 5-6% or more each year is expanding our ability to serve patients, but is placing strains on our clinical operations that need to be addressed.

Solutions:

1. The opening of the Mays Clinic expanded our ambulatory care space by 78%. It houses three multidisciplinary care centers, ambulatory surgery units, and huge increases in diagnostic imaging and radiotherapy facilities. Centers in our Clark and LeMaistre facilities are being remodeled and expanded as quickly as possible. (Goal 1)

2. Before the end of 2007 we will begin the construction of eight additional inpatient floors on top of the existing Alkek Hospital. Along with renovation of existing space in the Alkek and Lutheran hospitals, this will increase our beds by 60% and expand our operating rooms and clinical support units. The first four floors will open in 2012. When all is said and done, we anticipate having about 860 inpatient beds. (Goals 1 & 7)

3. A 300,000-square-foot building devoted primarily to Pathology and Laboratory Medicine and the Pharmacy will handle the explosive increase in diagnostic tests and services and the growth in demands on our pharmacy. Several potential sites are under consideration. We aim to open this facility within four years, and it will also house our expanding School of Health Sciences. (Goals 1,3 & 7)

4. We are creating a Survivorship Program which will provide more appropriate, complete and convenient services to patients who have responded well to therapy, and will ease the overcrowded clinics that need to accommodate ever increasing numbers of patients under active treatment. (Goals 1 & 4)

5. We also are planning increased emphasis on cancer prevention, with expanded clinical services in personalized risk assessment, genetic testing, counseling in behavior and lifestyle modification (e.g., smoking, diet and exercise), and sophisticated cancer screening that includes both evaluation of markers and new imaging methodologies. (Goals 1 & 4)

6. We are creating ambulatory clinical satellites in greater Houston and beyond, where radiation treatments are given to patients by employees of M. D. Anderson. Additional units are anticipated at a rate of up to 2-3 each year, and we will begin to add chemotherapy and linked surgical services to some of these units. (Goals 1 & 6)

7. Plans were proposed in 2006 to expand collaborative arrangements with community oncologists, enabling them to partner with us in providing care and long term follow up for patients they refer to M. D. Anderson. These arrangements will protect limited clinic space and personnel at M. D. Anderson for provision of aspects of patient care that are best delivered by our physicians and nurses. (Goals 1 & 6)

8. We will add 125 rooms to the Rotary House to accommodate our growing number of patients and their families. This is targeted for completion in the summer of 2010. (Goals 1 & 7)

9. A new faculty office tower named for T. Boone Pickens will open in 2008 to accommodate the near-doubling in our clinical faculty over the past decade. (Goals 1 & 7)

10. A new garage due for completion next year will provide 2,500 additional parking spaces for faculty, staff and Rotary House patients. (Goals 1 & 7)

Challenge 2: Threats to reimbursement for patient care. Reimbursements from Medicare and Medicaid are continually under threat, and the challenge of providing free care to indigent Texans is always a potential drain on our resources. We must maintain a positive operating margin to support our mission and our growth. In the near future, all payors – governmental and private – will be scrutinizing the performance of health care providers and will base reimbursement, more and more, on outcomes and the efficiency and safety of patient care.

Solutions:

1. We are tracking metrics which demonstrate the quality and outcomes of patient care delivery at M. D. Anderson, and are continually aiming to improve our performance. (Goal 1)

2. The Clinical Operations Team, the Clinical Council, graduates of our Clinical Safety and Effectiveness Course and many others have completed numerous projects which are improving patient safety and efficiency of operations, and more are on the way. (Goal 1)

3. By aiding patients to sign up for federal benefits, and by more rigidly screening for eligibility, we trimmed over $40 million from the free care budget in 2006, ending a period of steadily increasing costs of this program. As part of our mission, we continue to provide over $150 million per year in free care for indigent patients from throughout the state of Texas. (Goals 1 & 7)

4. Our expanded International Patient Assessment Center is better equipping us to serve the special needs of patients from abroad. (Goal 6)

5. Business opportunities involving M. D. Anderson as an advisor, manager, or provider of clinical services are being expanded both in the United States and abroad. These arrangements are profitable. The net revenue from these activities during FY07 was approximately $24 million. (Goals 1, 6 & 7)

6. The provision of clinical services by our faculty, nurses and trainees at Lyndon Baines Johnson Hospital (at our cost) has been successful in enhancing cancer care there and in reducing financial losses we incur due to the free or poorly reimbursed care we provide here for indigent cancer patients in Harris County. (Goals 6 & 7)

7. Our marketing programs are undergoing an evaluation, due to be completed in FY08. This will identify areas in which expansion of referrals can be achieved and help us target sources of increased patient care revenues. (Goal 7)

8. The billing office has improved the timely submission of accurate and complete bills to our payors and has continued to improve collection and reimbursement. (Goal 7)

Challenge 3: Funding for research. The steady reduction in NCI funds to support cancer research over the past three years has resulted in reduced awarding of new grant proposals and competing grant renewals, and reductions in dollars provided for the yearly continuation of non-competing grants. Having said this, I am pleased to report that federal grant dollars for FY07 continue to rise, and we continue to hold 10 SPORE (Specialized Programs of Research Excellence) grants – the highest of any cancer center.

Solutions:

1. We are providing bridge funding for faculty whose new or continuation grant proposals achieve good scores but require resubmission. This has totaled $3.7 million during the past few years, derived from institutional funds. (Goals 2 & 7)

2. Philanthropic support for research continues to increase. During FY07 a gift of $50 million was received from T. Boone Pickens. This must be leveraged into a $500 million endowment, after which the interest each year ($20-25 million), will support future research at M. D. Anderson. (Goals 2 & 7)

Originally this was planned to require 25 years of accumulating the interest returns to reach $500 million. However, we are exploring plans to invest additional institutional funds, which may allow us to achieve the target and utilize the interest for research as soon as 10 years from now. (Goals 2 & 7)

3. Meanwhile, during the next 10 years, we anticipate another new source of yearly funds for research if the Cancer Prevention and Research Institute of Texas comes into existence after the November election. This will provide $300 million per year, statewide, to support peer-reviewed cancer research, new programs and recruitment. We are in a strong position to compete for these funds, and we will work with department chairs and center directors to produce outstanding proposals that support our current and new research strategies. (Goals 2 & 7)

4. The technology transfer and commercialization offices have increased our licensing agreements for intellectual property and inventions derived from the research activities of our faculty. Our income from licenses has passed $6 million per year, and should continue to increase as new products mature and are marketed. (Goals 2 & 7)

5. We are capturing increased funds from collaborations with pharmaceutical companies in joint preclinical research projects. Since inception two years ago, this initiative has brought in over $20 million for research projects carried out by our faculty. (Goals 2 & 7)

6. We are joining with many others to educate governmental officials and members of Congress on the many academic, clinical and economic benefits of steady growth in federal research funding, which – at a minimum – ought to exceed the cost of inflation. (Goals 2 & 7)

Challenge 4: Competition for hard-to-fill positions. This situation highlights a pending crisis in healthcare manpower. There are dire predictions of serious (over 20%) shortages of nurses, skilled technicians and oncology specialists over the next few decades – at a time when each of the institutions delivering care in the Texas Medical Center is planning expansion of services. In addition, our aspirations and plans in research require recruitment of additional accomplished, internationally acclaimed investigators to the faculty.

Solutions for care delivery positions:

1. We continue to strive for competitive advantages in recruitment by maintaining our status as the number one cancer care provider and an employer of choice among healthcare institutions. (Goals 1 & 5)

2. By combining improved IT systems, improved design of job responsibilities, improved mentoring, and elimination of administrative and procedural impediments, the Clinical Operations Team is committed to improving our clinical operations and services, especially patient access. Our “front door” activities continue to be the most commented upon source of frustration for our employees and our patients. (Goals 1 & 5)

3. We are planning to quadruple the number of students in our School of Health Sciences, studying for bachelor’s degrees or certificates in preparation for careers in clinical technology. We recruit the majority of our graduates from this program to our workforce. (Goals 3 & 5)

4. Our formal training programs and academic programs for nurses are expanding rapidly. During the past three years 209 R.N.s have enrolled in our post-baccalaureate residency program, and 81% of graduates now accept jobs at M. D. Anderson. Other educational programs are equipping our nurses to increase their responsibilities and to advance their careers. (Goals 3 & 5)

5. To reduce turnover of new employees, we plan to expand the activities in Human Resources that support mentoring, career planning and serving the personal needs of employees at all levels. And we will continue to strive for a culture of living by our values, as we interact with each other in this very busy environment. (Goals 3 & 5)

6. To enhance our ability to be an employer of choice, our leadership training courses are being extended to middle managers, to disseminate widely a culture of communicating, delegating responsibility, collaborating, rewarding excellent performance, and working respectfully together. (Goals 3 & 5)

7. By providing new, modern and attractive facilities, we continue to create an attractive environment in which to work. (Goals 5 & 7)

Solutions for research positions:

1. We continue to invest substantial institutional funds in research infrastructure and shared resources such as biostatistics, clinical trials and veterinary services on all campuses. This amounted to over $13 million during FY07. The availability of these outstanding resources is especially attractive for recruiting at a time when grant support for research is shrinking. (Goal 2)

2. Our start-up packages for new recruits have expanded, drawing upon institutional revenues, income from our endowments and philanthropy, and funds provided by UT System and state initiatives. For the next 10 years we hope that substantial dollars for recruitment will be forthcoming from the new Cancer Prevention and Research Institute of Texas, and after 10 years from the matured Pickens Endowment. (Goals 2 & 7)

3. We are building additional modern and attractive laboratory facilities to support research activities and centers of excellence, as well as recruitment of new faculty. Within 3 years these will include South Campus Research Building III and IV on the South Campus, providing a total of over 500,000 gross square feet of new space for research. Leased research space will also become available to us soon in new facilities under construction at Rice and, possibly, facilities planned by Texas Children’s Hospital and Texas A&M. (Goals 2 & 7)

Challenge 5: Need for selectivity and focus on areas key to our mission. Reports from the recent Research Strategies Retreats, external advisors such as reviewers of programs and departments and the Washington Advisory Group, and internal reports from the Clinical Strategies Advisory Committee and Research Strategies Advisory Committee, and our committees that review laboratory and clinical research and educational programs all stress the need for M. D. Anderson to grow more selectively and focus upon mission-critical areas.

In our discussions at the retreats there was overwhelming agreement that prioritization of resource allocation has become essential, and that institutional resources should focus on supporting excellence. However, during the retreats, we had no success in identifying existing research activities that deserve either stabilization without further growth, decreased emphasis or elimination. Currently, as at most universities, these decisions are made primarily by external funding agencies and limits in institutional dollars. This is a real challenge – perhaps, ironically, our greatest challenge.

Solutions:

1. The draft report from the recent Research Strategies Retreats has been widely circulated and will be discussed at a number of forums and advisory councils. It will become the basis for planning a substantial portion of research growth during the next six years. Half of our philanthropy over the same time period will be used to support these programs. We need further input. Responses and suggestions continue to be welcomed. (Goals 2, 4 & 7)

2. The Laboratory Space Subcommittee of the Research Council is collecting data evaluating the productivity and quality of the laboratory research programs of each faculty investigator, on a three-year repeating cycle. This enables identification of faculty requiring mentoring, and – eventually – faculty whose laboratory space and institutional research support should be curtailed. (Goals 2, 4 & 7)

3. The Clinical Research Impact Committee, sponsored by the clinical division heads, has collected data on the productivity and quality of clinical research. This will enable focusing of resources where they are most needed and useful, and more rigorous prioritization of our clinical trials. (Goals 2, 4 & 7)

4. The Clinical Strategies Advisory Committee is carrying out reviews of the clinical and research activities of our Multidisciplinary Care Centers over a three-year cycle. Opportunities to provide resources that will enhance integrated clinical care and research have been identified, and will be acted upon. (Goals 2, 4, 7)

5. A top priority identified at the Research Strategies Retreats is strengthening of institutional support and infrastructure for clinical trials. This is already a major area of investment. As the sophistication and costs for clinical research continue to rise, we will need to combine creativity with selectivity and internal discipline to choose protocols for expanded support, and to turn down or close-out protocols which are less strategic. (Goals 2, 4 & 7)

6. The Research Strategy Retreats also agreed upon expansion of our prevention programs, to include both increased research on personalized risk assessment and increased delivery of related clinical services. And I have already touched on our plans for a survivorship program. (Goals 2, 4 & 7)

7. Reviews of our education programs by the Education Council and an education retreat have emphasized the need to continue to strengthen the quality of students and teaching in our Graduate School of Biomedical Sciences. (Goal 3)

8. The institution is committed to continued expansion of research in health disparities, increased provision of prevention services to diverse populations in the community, and recruitment of more minority patients into clinical trials. (Goal 4)

9. Extensive formal collaborations with local academic institutions (e.g., the Gulf Coast Consortia), leading cancer centers worldwide (e.g., our 18 Sister Institutions) and industry (e.g., collaborative research supported by pharmaceutical companies) are all leveraging areas of excellent research and clinical programs at M. D. Anderson.

Collaborations are especially important in areas such as computer science, informatics, physics and chemistry – in which our academic medical institution can not be expected to invest in depth. (Goals 6 & 7)

10. There is consensus on the critical need to speed up expansion of Clinic Station and development of our Electronic Medial Record as top priorities. Our Division of Information Services is piloting new data systems for clinical research (Research Station) and for tracking annotated tissue available for study (Tissue Station). These will be integrated with the clinical information on each patient in our evolving EMR. (Goals 1, 2, 4 and 7)

M. D. Anderson’s most important resource is our people. As we look back we are proud of our tremendous accomplishments in all four of our mission areas. And we are equally proud of the successes achieved by each individual who works at M. D. Anderson, striving to achieve his or her personal mission.

As we look forward, each of us is grateful to our 16,000 colleagues on the M. D. Anderson team, who work with a dedicated and collaborative spirit to serve our patients and to achieve our goals in patient care, research, education and cancer prevention. I have complete confidence in our ability to work collectively to address the many challenges we face, and to identify innovative ways to convert these challenges into opportunities for creating successful new approaches and programs.

I continue to welcome your suggestions and advice as we move forward, together, Making Cancer History® for each patient we serve and for mankind.

I want to thank all M. D. Anderson employees and volunteers for their contributions to our record of accomplishments, and their contributions to achieving our leadership position in the field of cancer. I also express deep appreciation for the strong support we receive from the Governor and Texas legislature, the Board of Regents and UT System, our Board of Visitors, and our many friends and volunteers.

And my special thanks to our executive leaders, Mr. Leach and Drs. Burke and DuBois, and until recently Dr. Kripke, who set an example of the tremendous collaborative spirit that has made possible our successes and achievements.

And most importantly, on behalf of each of us, I want to thank our patients who entrust their lives to our care. Every day, they inspire us to strive to do our best.

Now, let me end on a more personal note: As many of you may know, I’ve been involved in biomedical research for 50 years, beginning as an undergraduate student in the laboratory of Dr. James D. Watson, just a few years after the structure of DNA was reported. I have watched scientists unravel many of the mysteries of biology, create the new fields of molecular biology and molecular genetics, invent new technologies that enable us to explore and manipulate genes, and develop a deep understanding of the molecular basis of cancer.

Today researchers everywhere share a vision, which is achievable, that we can apply the new knowledge we’ve gained to greatly reduce deaths from cancer. The trend down began a decade ago and is gaining momentum. Ironically, half of the battle will require that people become accountable and change their lifestyle and habits, and our faculty in Cancer Prevention and Population Sciences can provide interventions and counseling to help them do this; new technologies and anti-cancer treatments developed by our faculty in laboratory research clinical trials can deal with the other half.

I feel privileged to be leading The University of Texas M. D. Anderson Cancer Center at this time – when we are positioned to continue to play a leading role, and I might say the leading role, in preventing and curing cancer. We are fully equipped to continue to pursue the vision so clearly stated by Dr. R. Lee Clark – “Make no little . . . plans”. This is my commitment.

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