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RBJ 75: A shared vision for the region's No. 1 employer

Rochester Business Journal
July 25, 2014

UR president Joel Seligman and URMC CEO Bradford Berk M.D. are guiding its growth

Much has changed at the University of Rochester in the nine years since it became the region’s largest employer.

In 2005, UR employed approximately 16,000 people. It now has more than 25,000 staffers. With 399 people added over the past year, the university is not only the Rochester region’s largest employer but also one of its fastest-growing.

The key growth driver at UR is its medical component. The University of Rochester Medical Center’s sprawling complex began adding extensive research facilities more than a decade ago. More recently, URMC has completed additions to the James P. Wilmot Cancer Center and Golisano Children’s Hospital.

Meanwhile, with a hotel, new retail buildings, and extensive street and infrastructure upgrades, the College Town development is remaking much of the Upper Mount Hope neighborhood.

In Rochester’s downtown, UR contemplates creating a smaller version of College Town on a now-vacant, 1.7-acre East Main Street parcel adjacent to its Eastman School of Music.

Shepherding the university through this expansion are President Joel Seligman and URMC CEO Bradford Berk M.D., whose organization generates three-quarters of the university’s cash flow, employs a similar percentage of its workers and is the region’s largest health care provider.

An attorney who prior to assuming the UR presidency led the Washington University School of Law, Seligman mentioned boosting UR’s national standing and building stronger relationships with local officials among his top goals when he arrived at UR in 2005.

A UR School of Medicine graduate and a cardiologist, Berk had worked at Harvard University, Emory University in Atlanta and the University of Washington in Seattle before returning to UR as chief of cardiology in 1998.

When Seligman selected him for the URMC CEO position in 2006, Berk was the medical center’s chief of medicine. His goals for URMC were similar to Seligman’s for the university as a whole—expanding its national presence and increasing research. And like Seligman, Berk made working with local officials a priority, taking a seat on the board of the Rochester Business Alliance Inc.

In a recent interview with RBJ reporters Will Astor and Nate Dougherty, Seligman and Berk spoke about UR’s role as the area’s top employer, its linked destiny with the region and how they see that destiny playing out. An edited transcript follows:

ROCHESTER BUSINESS JOURNAL: Since we last interviewed President Seligman for the RBJ 75 in 2008, the university’s role as the area’s largest employer has greatly expanded. How does that affect the institution?

JOEL SELIGMAN: Sure, and I’m glad you’re jointly interviewing Brad. I want to emphasize that when you focus on economic development in Rochester, the medical center is the linchpin of the university. It’s 83 percent of the cash flow. The largest construction project in our history, Golisano Children’s Hospital, is there. But what is sometimes less focused on is the multiplicity of construction projects and regional expansion the medical center has been involved with.

So when you ask how growth has affected us, let’s start by having Brad come in on the medical center and then I’ll focus on other dimensions.

BRADFORD BERK M.D.: In the medical center, the most obvious measure of growth is people. Back in 2000 we had 11,651 people. We now have 17,311 people. And over that time period we’ve doubled in total revenues.

And as you know, the medical center has expanded pretty significantly. It’s no longer just this building on Elmwood Avenue.

We have two nursing homes—the Highlands at Brighton and the Highlands at Pittsford. We have Visiting Nurse Service (of Rochester and Monroe County Inc.). We acquired the Pluta Cancer Center. We converted Lakeside Hospital to Strong West. We’ve affiliated with Thompson Health, which is now part of the university. We’ve changed our brand to UR Medicine. We now have about 113 sites throughout the region that we go to.

Highland (Hospital) has seen an extraordinary change in its composition. It used to be 70 percent full; it’s now 90 percent full. And we’ve moved a large number of programs to Highland. That has created many new jobs.

RBJ: To be clear, much of the transfer you’re talking about is from Strong Memorial Hospital. Strong’s occupancy is still in the 90s also?

BERK: It’s in the 100s.

RBJ: One hundred percent or more?

BERK: Yes. Part of the whole regional plan we have is to strengthen the hospitals in the region, so they don’t have to send us as many patients.

We also expanded. Up until recently when the (National Institutes of Health) went into sequestration, we expanded the research center by quite a bit. That grew from about $75 million back in December 2000 to a peak of about $160 million. Now we’re about in the $135 million range after the stimulus package ended. So we’ve seen quite substantial growth in our research portfolio.

RBJ: Are you able to offset that drop in government funding from private sources—pharmaceutical companies, for example?

BERK: We’ve created a number of endowed professorships, about 12 a year. Each one of those endowed professorships has been between $1.5 million and $2 million, and 5.5 percent of that is available. That helps support (research) salaries.

There’s been a shift in the sources of funding. The federal government now has CMMI, the Center for Medicare and Medicaid Innovation, and PCORI, which is the Patient-Centered Outcomes Research Institute.

Both of those are giving out billions of dollars a year in funds for innovative approaches to health care and achieving the triple aim: access, quality and cost.

(Finger Lakes Health Systems Agency), remember, got the largest CMMI grant, $27 million to help put EMRs (electronic medical records) down in the city.

(URMC has) been very successful in garnering PCORI and CMMI grants. We’ve also been quite successful with the Greater Rochester Health Foundation, which is also interested in implementation approaches. We’ve been awarded more than $1 million a year by (GRHF).

There’s been a shift from a real strong focus on molecular biology and fundamental research to more translational research. And that’s been intentional. We built the Saunders (Research) Building to house our Clinical and Translational Science Institute, and we’ve expanded that very significantly.

As we become more involved in population health management, we’re creating data warehouses that have information we’ll be able to mine to do research. It’s really a linked strategy where the investment in clinical (information technology) to improve continuum of care and quality serves as a research asset for our faculty to look at—which protocols, which pathways, which procedures are the best way to go.

The example I always use, which is very simple, is: We have a very specialized group in foot and ankle. There are three doctors who just work on foot and ankle.

A podiatrist normally makes a custom orthotic for $300. (The foot and ankle group doctors) can actually quantitatively measure the way somebody steps. They can see how balanced the step is, how firm the step is.

They have a protocol where they gave everybody an off-the-shelf orthotic for $30 and waited four weeks to see if they improved. Ninety percent of the people improved with the off-the-shelf orthotic. Only 10 percent needed a custom orthotic.

All that data goes into our EMR, into the warehouse, and then we can use it to do clinical studies. So that’s been a big change in focus that has resulted in new synergies between the clinical mission and research mission.

It’s not that the basic science mission isn’t important. Things like genomics are critical.

Joel will probably talk about big data science because that’s the area we’re now recruiting in. All these data warehouses I’m talking about, they’re all big data. And so we need a whole new complement of researchers.

Our highest priority is biomedical informatics. We’re creating a large group to be able to do the analytics and the outcomes.

RBJ: That leads into a question concerning URMC as the area’s largest care provider and the cost of care it provides. You gave an example just now of how the availability of research can cut costs. But in general, as an academic medical center with a big research mission, does URMC have higher overhead costs? The IT infrastructure needed for big data has huge initial and ongoing maintenance costs, for example.

BERK: We are one of the most cost-effective health care delivery systems in the country. Back in February there was an article in the New England Journal of Medicine that showed among 366 metropolitan areas, Rochester had the lowest Medicare costs of anyplace in the country.

And since we’re the largest health care provider, we’re always among the least expensive health care providers in the academic universe. So we’ve already developed very cost-effective care. And going forward, we will be highly competitive on cost with any community hospital.

Our goal is, while maintaining our community hospital function, to really build on the specialists we’ve hired.

We’ve built two new facilities. Since Joel mentioned economic development, I’ll note that we employed quite a few construction workers to build the (James P. Wilmot) Cancer Center and now we’re building the (Golisano) Children’s Hospital.

Both of those will be destination sites for people from hundreds of miles around. Each of them will have unique capabilities that don’t exist anywhere else in Upstate New York.

The answer to your question is: It’s about (return on investment). If we invest in information technology and even more importantly in people to build unique programs, that’s really the path to success in health reform.

People go a long way to get the best cancer treatment. People go a long way to get their kids the best surgery, the best care they can. We’re going to represent that, and we’ll have the facilities and people to do that.

We’ve been recruiting a large number of faculty. Even though the NIH budget is down, we’ve kept growing the faculty. Just in this past year, we’ve recruited 15 new faculty.

SELIGMAN: Let me view this also from the perspective of the rest of the university.

There are two things that, if you measure the changes that have occurred in the university overall, are particularly evident. One is the change of concept, and the second is the change of scale.

On the change of concept, I’ll start by just complimenting the medical center. It is well-illustrated that the change from just owning hospitals to creating a hospital system, really a clinical care system, bridges beyond the hospitals themselves. This is something that has been evident throughout the entire university.

We’ve been focusing on universitywide projects. For example, College Town, which will be opening in October, will be a benefit not just for the university but for the community. The Institute for Data Science, which is our lead project in our October 2013 strategic plan, is something that links virtually every school and virtually every program at the university.

We’re convinced that what will be the great technique for separating the leading research universities from other institutes of higher education will be, among other things, capacity to master big data or data science. It’s absolutely consequential in applications for sponsored research, recruitment of faculty and, increasingly, recruitment of students.

It’s important not to think of it just as computer science but as something woven into a vast variety of applications. For example, our Simon Business School is developing new programs in what they call business analytics. Whether you’re focusing on consumer behavior, whether you’re focusing on sales of securities products, investment products, it’s a way that’s different in kind.

In terms of scale, we have grown over the last several years so that if you count full-time and part-time jobs, the overall university is up to a little over 25,000. If you count the indirect consequence of the university being here, it literally touches about 9 percent of the workforce, about 50,000 jobs.

What we’ve focused on going forward, working with Finger Lakes Economic Development Council, often working with Albany, is how we can on appropriate occasions link the academic mission to strengthening the broader economy.

When Brad describes having destination clinical care and research in pediatrics and cancer, that’s part of it. Other parts of it include a dramatic expansion of our School of Engineering & Applied Science, the Hajim School, which has occurred during the last six or seven years under the leadership of our senior vice president for research and dean of the Hajim School, Rob Clark.

We’ve seen a growth of something like 50 percent more students in the period, growth in terms of faculty, integration of computer science into that school, and we’ve seen engineering taking the lead in working with the other schools in developing our Institute for Data Science.

We’re on the verge of developing new strategic plans for a couple of schools, which had dean searches over the last year. One of them, (the) Eastman (School of Music), is worth noting.

Eastman in rankings of graduate music programs is consistently ranked No. 1 in the country. It’s clearly one of the leading schools of music, period. It’s at a period where the very nature of music pedagogy is radically changing. And what we’re seeing now under the leadership of (Dean) Jamal Rossi is work with the faculty on a strategic plan that will be amplified over the next several months. They are focusing on—again, conceptually and with scale—what are the major projects they want to pursue.

For example, Block F (a 1.7-acre East Main Street parcel now used for parking), which is across the street from the school of music, is now owned by the university, and we anticipate developing this at some point.

The big question is: For what will it be developed? How do you link the equivalent of a mini-College Town to an academic mission?

When you look at the longer-term future of the university, where are we going? Not just the next five years but longer. One of the most important developments that occurred in the recent past was the completion of the (Kendrick Road) I-390 interchange. This unlocks a future for us.

We were getting to the point where zoning laws were going to limit our capacity to develop the university on the medical center side of Elmwood. With I-390, that side of Elmwood is going to go through a renaissance.

It’s starting, obviously, with College Town, the Golisano Children’s Hospital, the development and expansion of Wilmot (Cancer Center), the construction of the Saunders Building. But this also helps the Costco development and the Reserve that Anthony Costello is working on. And, I suspect, a good deal else.

We’re going to see a renaissance in this side of the city that is led by the medical center. It potentially may have some facilities over time in what are now surface parking lots that are interdisciplinary or possibly more traditional arts, science and engineering.

We’ve got the opportunity now over the next decades to expand the university and potentially have a major economic impact as we go forward because of the I-390 project. I can’t overstate the significance of it.

RBJ: As you expand physically as well as economically, what is the university’s relationship to local governments? Specifically, what payment-in-lieu-of-taxes arrangements do you have, if any?

SELIGMAN: We have been so fortunate with local, county, state, federal (governments) to get systematically just terrific support. Sometimes I kid people: There’s only one party in Upstate New York, the economic development party.

It has been the case that each project has its own dimensions, its own challenges, but I’ve been very grateful for everyone I’ve worked with.

I don’t know, Brad, what your experience has been, but it’s just been enormously positive generally.

BERK: I think we’re an asset to any one of the communities. Really, the city of Rochester and the town of Brighton are the two main governmental components that we interact with around infrastructure. Both have been very positive.

I think it’s because we’ve reached out to the community. We’re very cognizant of community needs. And we’ve taken our time to make sure that it fits into whatever their own master plans are.

SELIGMAN: To give you an illustration, College Town required at certain points the support of the City Council, the mayor—this was when it was Mayor Richards—and City Council President Lovely Warren.

It required significant support from (the Department of) Housing and Urban Development. Sen. Schumer was decisive there. It required financial support through the Finger Lakes Regional Economic Development Council from state government. And it required coordination with Monroe County. Every step of the way we just got absolutely emphatic support.

RBJ: I was also asking about going the other way. I understand the economic development benefits the university generates. Is there a direct contribution you make in terms of dollars, in PILOT payments?

SELIGMAN: We don’t like the phrase PILOT. There have been limited circumstances where we’ve been willing to provide support. We understand the cost of us being in a place. But it’s a negotiation and a discussion.

It’s been limited, and it’s been really based more than anything else on the premise that Brad and I really believe in, (which) is that we bring enormous economic benefits in terms of jobs, in terms of tax payments, in terms of greater residential housing, in terms of new retail to areas, and this is the real way we support local government.

RBJ: If I can double back, Brad, on something you touched on earlier, UR Medicine’s role in supporting area community hospitals. URMC and the new system being formed with the merger of Unity and Rochester General health systems are equally involved in partnering with and sometimes acquiring outlying community hospitals and health systems. What are the effects of this trend?

BERK: Here or there?

RBJ: Here and there.

BERK: We need to hire new employed physicians whom we can deploy out there, who can help build up the strength of those programs.

(F.F) Thompson (Hospital) is a good example. We are providing pulmonary care and nephrology care. We have neurology and neurosurgery down in Big Flats servicing the Elmira area; that’s another example. Cayuga Medical Group in Ithaca hired a neurosurgeon who has a faculty appointment here and comes up to attend grand rounds, does telemedicine. So the first point is we’re hiring physicians to work out in the community.

The second thing is those hospitals have all seen remarkable declines in their census. They have to transition, and we can help them with that transition, a large amount of which is to ambulatory care. We can help them with the development of ambulatory care facilities.

A lot of them have an aging physician workforce. We can help them recruit people. Physicians are much more likely to go to a smaller hospital if it’s affiliated with a large institution that’s going to support them and provide them with the kind of specialty care they need.

The first thing we’re all trying to do is strengthen the hubs, strengthen the relationships we have, but also to build ambulatory facilities in those regions.

Strong West (formerly Lakeside Community Hospital in Brockport) is really an ambulatory facility. It is going to have a freestanding emergency department. But the key to the facility is having an ambulatory surgery center that will end up employing in total probably about 100 people. Strong West is maintaining access for the community and bringing students at SUNY Brockport to a local facility.

I see that happening throughout the region: hospitals either becoming hubs or communities having smaller hospitals, downsizing to have primarily ambulatory facilities. The goal would be to have good ambulatory care available within 20 minutes throughout the region.

Back here the goal is, as I’ve said, to take advantage of the specialists we’ve hired.

(URMC) pediatrics is a good example. We have three pediatric neurologists, four pediatric orthopedic surgeons. We will have dedicated pediatric anesthesiologists; the operating rooms are all dedicated pediatrics. There’s an imaging facility dedicated to pediatrics in the (Golisano) Children’s Hospital.

So we’ve hired new individuals with special capabilities in pediatric subspecialties. It’s the same thing on the adult side. We’ve dramatically expanded our cancer center and hired a lot of new people there to enable us to have clinical trials of the most recent, cutting-edge therapies.

Here the biggest change would be we’re simultaneously growing primary care, because that’s critical for health reform. But we’re also growing our specialty programs to enable us to take care of people.

Medicine has gotten much more sophisticated. There’s lots and lots of new technologies all the time, and it takes a lot of people to have a high-level, specialized program like a brain tumor program or a transplant program.

In our heart program, for example, we now are among the top 10 in the entire country in left ventricular assist devices, the LVADs. We’ve also implanted three artificial hearts. It looks like we’re going to get the newest form of these LVADs to test. We’re one of only 10 sites in the country to have access to this.

So it’s really a two-part goal: to work out in the region to strengthen those hospitals and make sure residents in those areas have access to high-quality care, and to strengthen Strong by making it the referral center of choice for these complex illnesses that otherwise wouldn’t be able to be treated locally.

RBJ: So is there active coordination between you and the merged RGHS-Unity system in terms of who’s going to partner with whom in the outlying regions? You mentioned having recently put a UR faculty physician on staff with a medical group in Ithaca, where Rochester General has had a relationship with Tompkins County’s only hospital, the Cayuga Medical Center, for some time.

BERK: We both are down there. It’s hard to know. They’re obviously going to be going through an enormous change; they’re having new CEOs; they’re going to have a new board. And when that new thing emerges, at that moment in time, we’ll see what the collaborations can be. Right now it’s difficult to predict.

SELIGMAN: Let me just suggest one thing, if I may. You ask: Who will do what? We are also subject to antitrust laws. To divide markets is something we can’t do. We can coordinate in programs, which is a different point.

RBJ: I take your point.

BERK: I just ducked the question.

RBJ: Dr. Seligman, a question for you …

SELIGMAN: He’s the doctor. I’m not a doctor; I’m a lawyer.

RBJ: OK, then, Juris Doctor Seligman. (Laughter) The university itself brings a lot of high-value jobs to the area. It also employs clerical and maintenance workers, aides in nursing homes and organizations like Visiting Nurse Service of Greater Rochester Inc. Could (you) talk about its role in providing good jobs to that level of staff?

SELIGMAN: In terms of jobs, we care about those too. Literally, we’re growing at every level. From my perspective, probably the proudest aspect of how we responded to the recession in 2008 and 2009 is how we protected the core. We made cuts every other way to protect our human capital. This is one way we’re loyal to our employees, because they’ve been wonderful for us. And that will be a mantra going forward as well.

Let me focus, though, on a part we haven’t touched on, which is the dream that we’ll ultimately be able to translate some of the great ideas in basic research in clinical, translational or applied research to the marketplace. The dream is in tech transfer, and there historically we’ve been one of the leading universities in terms of tech transfer, in terms of patent royalties. We’re generating now well over $300 million in medical center and non-medical center sponsored research dollars.

When you disaggregate that on a per-faculty-member basis, it places us at the moment among the top 17 in the country. What we want to do is run the gamut. We’re taking a number of steps to strengthen tech transfer, particularly to strengthen the potential for commercialization.

RBJ: Let me understand what you’re saying. I think you’re saying that a lot and perhaps the bulk of what the university can provide is not just to be the largest direct employer but also to be a benefactor to the local economy that creates indirect benefits for the region.

SELIGMAN: That’s part of it; being the largest employer and a huge generator of tax revenues and a huge generator of retail revenue matters as well. Obviously, tech transfer matters. Obviously, having extraordinary, high-quality health care matters.

We’re playing a role right now potentially with East High School. We’re doing this because it’s consistent with what we believe the Warner School (of Education) mission will be if we can do it under the right terms and conditions.

This is a way in which, again, we’re taking advantage of concept and scale. This is the largest high school and historically one of the most important high schools in Rochester. For it to fail would be a community tragedy.

7/25/14 RBJ 75 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.





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