Transcript of the Second "State of the Institute Address" Presented by Dr. Donald L. Trump, President & CEO, to RPCI Staff and Faculty on Tuesday, March 17, noon to 12:30, in the Hohn Lecture Hall.

Good Afternoon.

In April of 2007 - when I last spoke to you regarding the State of the Institute - who would have predicted the changes we would see in the Institute, in New York State, and in the nation in the last two years?

• Roswell Park received its best score EVER at our NCI core grant review.

• Numerous science, clinical and cancer prevention advances have originated at Roswell Park.

• The first African-American President, elected with the hope and enthusiasm of so many Americans.

• An economic crisis of unprecedented proportions: the collapse of Wall Street, the failure of major banks and lending institutions, an auto industry on life support, an upheaval in health care... and these changes and others have led to skyrocketing unemployment rates.

This economic downturn has been unexpected and far-reaching. It has affected every sector of our economy and every institution, including health care and academic medicine:

• At Harvard, construction has stopped on a multimillion-dollar building project.

• Partners HealthCare, the Harvard Systems Medical Partnership, has announced a $185 million loss.

• The University of Chicago has a $100 million deficit and employee layoffs.

• The University at Pittsburgh has laid off more than 500 employees.

• Fox Chase Cancer Center has laid off 70 employees.

• In Rochester, the University and Rochester General Hospital combined have eliminated more than 200 positions

And these are only a few examples of the upheaval in science and health care institutions.

In Western New York, economic challenges have affected the Catholic Health System, Kaleida Health System and the University at Buffalo - though there is less public information about changes in local systems.

Roswell Park is not immune to these economic pressures. To understand our economic challenges, let's look at the sources of operating revenue for Roswell Park.

In fiscal year 2008, at a time when our operating budget was $484 million, 55% of our revenues, or $268 million, came from clinical practice; 24%, or $118 million, came from New York State; 14% came from research grants; and 7% from philanthropy, royalties and other sources.

Roswell Park's programs have undergone remarkable growth over the last 10 years:

• Clinical revenues have increased almost four-fold since 1999.

• Grant revenues have doubled... while our New York State support has been essentially flat. (Indeed, since 1999, while our overall budget has doubled... adjusted for inflation, Roswell is getting fewer real dollars from the State of New York.)

• Since 1999, our outstanding faculty and staff have led Roswell Park to develop, by far, the best clinical care programs in Upstate New York - and among the best in the country - and in conducting internationally recognized basic, translational, prevention and clinical research.

• Our partnership with the State of New York has helped us make incredible progress in clinical care and cancer research. However, because of the unique aspects of our relationship with the State, we also have greater expenses than other cancer institutes and hospitals that do not have a state linkage like ours.

Now the State of New York has serious financial challenges, and Roswell Park is affected in a major way... and we must act. I assure you that our senior leadership has been anticipating these challenges for several months and has spent significant time identifying, planning, evaluating and measuring ways to enable us to weather the economic storm. To emphasize, we do have plans to work through these challenges. It will not be easy, and there will be disruptions.

But our scientific mission is too critical, our workforce too committed, and our patients too important to stop our progress in developing better ways to treat and prevent cancer. Roswell will emerge from this storm as it has from others, but it will not be easy.

Let's look at some more numbers. As you recall, in our budgets in fiscal years 2008 and 2009, we received $118 and $116.1 million in direct State support. This support was allocated in three different revenue streams from the State of New York: the HEAL-NY program and two separate Health Care Reform Act (HCRA) revenue streams called HCRA funds through the Department of Health. HCRA funds come from surcharges on insurance, tobacco settlement and tobacco tax revenues.

For fiscal year 2010 - the business year that begins on April 1, two weeks from now - the Governor's proposed budget will have a dramatic impact on Roswell Park. The line allocated for research operations support is completely eliminated in the Governor's budget, reducing our overall State support to $101.4 million.

The Governor's proposed budget reduced our direct support by $14.7 million, but that isn't the only effect of the budget developed by the Governor. There are also a series of line item eliminations, revenue assessments or taxes that will result in additional expenses for Roswell Park in the amount of $5.8 million.

Finally, because of the State-negotiated contracts with our unionized labor force, there are mandated increases in steps, cost of living adjustments (COLAs) and other benefits for employees which impose another $13.8 million increase in new expense starting in April, 2009 - an expense we didn't have last year. So overall, the Governor's proposed budget for fiscal year 2010, the year that starts April 1, will result in a $34.3 million shortfall in our operating budget.

What are we doing about this substantial budget shortfall at Roswell Park?

We have initiated a number of responses. Let me discuss some of them with you. There are a number of temporary or one-time budget expense modifications that we will make:

1. We will postpone investments in our strategic research initiatives.

2. We will maintain working capital at minimum required levels.

3. We will reduce our capital spending.

4. We are delaying filling faculty and staff vacancies that will, over the short term, reduce our expenses.

I want to stop here for a minute to be clear. It would be easy to look at two of the last four items and draw the conclusion that we are no longer investing in research, but that conclusion could not be further from the truth. The core of our mission is our science - basic, clinical, translational and population-based.

Science is why I came to Roswell Park. The focus of our Strategic Plan is research. The Strategic Plan is organized around three pathways - all intended to strengthen our research mission. We must look carefully at our operations and leverage strengths, collaborate to build team efforts and, recognizing the current economic situation, invest Institute resources wisely, demand productivity and reduce or reorganize those parts of the organization that are no longer critical to our mission. These are the tenets of the Strategic Plan and we are using them to guide decision-making and enhance our science. Science will always be a centerpiece in Roswell Park's future - certainly as long as I am president.

There are also more structural or broad Institute-wide changes that can be made which will have more lasting impact over more than one budgetary year.

I want to again be clear that we are looking closely at all areas of the Institute - at our research, clinical, educational and administrative departments. Each of us must be careful to minimize our expenditures on travel, society and organization memberships, subscriptions and our use of consultants.

We have already begun the careful examination of support and core laboratory facility function. We have consolidated core resources and eliminated underutilized core laboratories to reduce expenditures.

In Administration, it is important to note that the senior administrative leaders at RPCI will have their overall compensation reduced between 10% and 15%. We have further eliminated several vacant positions in Administration as well as in clinical support.

Unfortunately, as I am sure all of you know, we've also been required, because of these serious financial problems, to eliminate some jobs. In the last two weeks, 27 positions have been eliminated in the Public Benefit Corporation. These are positions that support our Science operations. In recent weeks, there have also been other layoffs in our Maintenance and Marketing Departments.

The loss of one's job is a tragedy. These have been by far the hardest decisions I have had to make since becoming president, but I concluded that, in our current crisis, such cuts were necessary to address the budgetary challenges. I would like to promise that there will be no further job eliminations, but in this economic environment, promises are not possible.

To better meet these economic challenges, it will also be necessary and appropriate to accelerate our clinical growth plans. More than 50% of our revenues come from clinical operations - caring for cancer patients. We project that our strategic plan, and, in large part, our research efforts, will be funded by substantial growth in clinical services. If we can accelerate this clinical growth, it will help us better weather the economic storm.

We also need to continue to review our processes and our way of doing things throughout the Institute. We must improve operational efficiencies - not only to serve patients better and to conduct our science mission better, but also to save money. We have many efforts like this underway. Recently, for example, we provided training to more than 50 RPCI faculty and staff in process improvement - training that was available at no cost to the Institute because of our work with the regional P2 collaborative.

I am convinced that we will make our greatest impact on employee and patient satisfaction - and financially! - if we can continue to improve our daily operations.

One item on which to focus for a moment - a point I am sure you have all heard about - is the federal stimulus dollars. How will they help Roswell Park? The Federal government is making funds available that may help Roswell Park in at least two ways:

1. First, federal stimulus dollars are being made available to New York State and we are hopeful the Governor and the Legislature will be able to use some of these dollars to reduce the cuts and fees to which Roswell Park is subject. But, as you can well imagine, there are no promises or guarantees in this arena!

2. Second, federal stimulus dollars will be available to support new and expanded grant and contract research - new scientific investigations, new science facilities renovation and expansions.

I am confident that our outstanding scientists and clinical investigators, as well as our facilities and leadership teams, will compete successfully for these funds, but this will require peer review - competition! - and it will take many months for these funds to come to Roswell Park.

To the point of influencing the actions of New York State leaders, we have been very active over the last 12 months in making the case to our State legislators and officials that the Governor's budget poses considerable stress on Roswell Park operations for the coming year. We have particularly emphasized that if the budgetary reduction lasts for more than two years, the ability of Roswell to meet its mission will be seriously compromised.

Since late Spring, we have been meeting with legislative and community leaders, telling the story of Roswell Park, emphasizing the important role the Institute plays in the care of cancer patients in our community - in strengthening the economy of Western New York, and in creating jobs and making scientific discoveries that benefit Western New York, the State of New York, and, in fact, the nation.

We have had meetings with leaders in the Department of Budget and Department of Health, and met with the entire Western New York delegation here at Roswell Park. A contingent of Roswell board members and senior leaders has met with leadership in Albany, and follow-up meetings are scheduled. We are engaged with the Health Care Association of New York State and its advocacy activities for issues that affect all hospitals in New York State.

Many of you participated, in a very meaningful way, in our postcard campaign. We will deliver several thousand postcards to the Governor advocating for the important role of Roswell Park.

We will continue to be proactive with government leaders to appropriately fight for resources, not only for the coming fiscal year but also for the years that follow.

I am hopeful that with our planning for the coming fiscal year and the advocacy in which so many of you - our community leaders, faculty, staff and senior leaders - have engaged, there will be some restoration of funding and that we will be able to weather this crisis without compromise to our science, education and patient care missions. These fiscal plans set the course for the next year, and I hope that:

• Economic conditions will improve.

• State leaders will recognize the critical role that Roswell Park plays in Western New York and, in fact, the health and economy of the entire State.

We do need your help. We need your help as leaders in defining new opportunities for increased efficiencies and cost savings. We need your help in supporting your colleagues through these difficult times. At work and in our community, the economic stresses are great, and support of each other is so important. We will continue to rely on the advocacy of not only our board of directors and senior leadership, but each and every one of our community friends and faculty and staff - advocating for the importance of Roswell Park for Buffalo, Western New York and Upstate New York in maintaining the health of our citizens; of advancing the cause to prevent and cure cancer; and in maintaining jobs and making new scientific discoveries.

We also need to engage in what I might call "Institute Think." It is always important and leads to more rapid advancement of science and patient care if we think as teams rather than individuals. In these challenging economic times, it becomes ever more important to emphasize broad Institute needs and the needs of our patients over those of an individual program or department, or a personal research or clinical agenda.

We need your help to define new opportunities for revenue generation and cost savings.

We all need to help to continue the drive to implement the Strategic Plan, and, in fact, to accelerate implementation of our clinical growth strategy.

Before I close, let me reflect for just a minute on some of the things that YOU have accomplished in the last two years:

• The best NCI review ever.

• The recruitment of more than 60 new science and clinical faculty, including, most recently, Dr. Bill Cance, an internationally recognized Chair of Surgical Oncology, and Dr. Roberto Pili, a senior leader in Genitourinary Medical Oncology from Johns Hopkins.

• Program Project Grants have been funded under the leadership of Drs. Cummings, Clement Ip, (the late) Allan Oseroff and Barbara Henderson.

• Our animal facilities and our research subjects protection programs have achieved full and unconditional certification by the appropriate national regulatory agencies.

• We have opened a new clinical research unit on 7-North and hired staffing for more than 20 additional hospital beds.

• Our Amherst facility is a major success, and it has just been expanded, allowing us to serve our patients better each day.

• Electronic Medical Record, Laboratory Information Management System and Content Delivery Network implementation proceeds well, serving patient care and research better and better.

• We have now fully occupied all five floors of the Center for Genetics & Pharmacology.

• Our patient care and clinical research programs that serve minority and socio-economically disadvantaged individuals have expanded substantially.

• In development - or philanthropy - in the past two years, greater than $32 million have been raised for Roswell Park from more than 70,000 households throughout Upstate New York.

Each and every one of you should be proud of these accomplishments.

I am confident that with our current plans, the strong support we receive from the community and our elected officials and, most important, the extraordinary work ethic and commitment that you - our faculty and staff - have for the mission of Roswell Park, we will weather this economic storm. The strategic plan and the road map that it defines will be followed, and Roswell Park will emerge from this challenging time stronger. I thank all of you for your hard work and commitment.

I will update you often as we progress through this challenging year. It is important that you understand our challenges and how we are addressing them.