Q&A: CFO details how one health system digests Trump policies

Adam Anolik, senior vice president and CFO at the University of Rochester Medical Center, recently discussed his organization’s approach to processing and responding to the flurry of healthcare initiatives from the Trump administration.

These interview excerpts were edited for length and clarity.

FastFinance: What is your early read on the new Trump administration and its healthcare priorities?

The approach we’re taking here is we recognize the pace of change is going to be something that’s unprecedented. But we’re not overreacting to what I call the crisis du jour because every day there’s something that comes out of Washington that could be dramatically negative to our industry.

So, one day it might be changes to Medicaid; one day it might be proposed draconian cuts to indirect cost rates for NIH grants. It could be restrictions on some student financial aid — we’re part of a university, so that affects us. Tariffs have a huge impact on our capital and operating costs, so we’re thinking about those.

So, the way we’ve thought about it here is we review everything that comes out, we have multiple committees of the medical center-university where we digest the news that comes out of the day and figure out how we want to respond.

There are some things that are out there that are coming out that we feel very strongly about that we want to put our name on them. An example is 13 days ago when they said they were going to reduce the cap on indirect costs rate for NIH grants. For us, that’s $40 million per year. A fairly significant amount and not something small enough where we can say we won’t worry about it. Forty million dollars matters, significantly, and would wipe out most of our operating margin.

[Editors’ note: A Feb. 7 notice from the National Institutes of Health (NIH) aimed to implement ‘a standard indirect rate of 15% across all NIH grants for indirect costs instead of the previous practice of separately negotiated rates for indirect costs’ in every research grant.]

So, we elected to put our names on the line as one of the institutions that sued the government.

Those are one of the ones we talked about where we said, ‘This is too important, and we have to be out there and take a stand.’

Part of it is playing the advocacy part. We had our senator, Sen. [Kirsten] Gillibrand [D-N.Y.] speak at our institution. And her and the university president and CEO of the medical center, Dr. [David] Linehan, all spoke about what that cut would mean to us. And how the indirect cost rates are being completely obfuscated by people trying to make reductions. And we just said, ‘Let’s stick with the facts, let’s talk about what does that cover.’

So, we try not to overreact. That’s one thing that’s very key for any institution now. You can’t overreact.

The balance that we see — not sure we’re perfect on this but I talk about it a lot — is how do you communicate enough? We don’t want to send out a daily email saying, ‘Oh my God, this is what happened today in Washington.’ That’s just going to evoke fear.

We try to have routine updates where we say, ‘Hey, we’re responding to these things, we’re filing a lawsuit, or we’re going to work with different folks about how to respond to this; reminding our elected officials — whether they are Democrat or Republican — what some of those mean to the employment in their districts.’

So, when we talk about some of the reductions that are going to come down the pike, it doesn’t matter whether you are Democrat or Republican, hospitals and places like ours are usually some of the largest employers in those towns. 

We try to be measured but we’re also analyzing everything. So, all of the things that are coming out we can say, ‘This is worth $20 million, $50 million, $100 million.’ And what’s challenging — that’s part of what keeps people like me up at night — is if even half of these things come to fruition, the financial sustainability of organizations like ours is in question.

FF: There have been many previous proposals for healthcare cuts. How is this time different?

The fact that they all seem to be happening quickly without any vetting through Congress and the courts, that’s what’s different now. What’s great about having Sen. Gillibrand here was because she said, ‘When President Trump, does this, that’s illegal.’ She used those words at the press conference. She said, ‘That’s our job. We’re Congress. We’re the ones who approve the budget.’

What will be interesting is will there be any Republicans who stand up? Because everything that’s been out there from an executive order perspective, most have been put out in a statement and face temporary restraining orders.

That’s the game plan for what Congress will have to think about when they come back in session in March, and they have to pass a budget in March. Is everyone going to line up behind President Trump or are some — because it only takes a couple Republicans in the House or Senate — where he doesn’t have the votes?

FF: How do you respond to Republicans who insist cuts are needed to address the $37 trillion federal debt?

No one would ever say that there’s no waste or inefficiency. But it does come back to education. When you say, ‘We’re just going to cut indirect rates on NIH grants,’ when you say, ‘We’re going to cut overhead,’ the overhead you’re cutting is the buildings that support the research. You’re cutting the equipment that we use. You’re cutting the support staff that run those labs. We’re cutting the electricity. How can you just willy-nilly come up with something?

It’s just educating our elected officials on both sides of the aisle.

FF: What do you say when others in your organization ask you what to do?

I said, ‘You should be helping me identify opportunities to become more efficient — the thing we should be doing anyway.’ We shouldn’t be overreacting to the crisis de jour. Every industry needs to become more efficient. No one would ever argue that.

But we have to do it the way that doesn’t believe you just snap your fingers and say — like the no warning with the NIH cuts. That’s not really effective. I’m not sure if the goal is to just stick [these proposals] in the courts for two years. That’s not going to be helpful.

President Trump had an agenda and he’s trying to keep his campaign promises, so when people come to me and say, ‘Oh my God, can you believe it?’ I can absolutely believe it. He said what he was going to do.

But Trump has two-year window. Whatever he doesn’t get done and [then] loses the majority in either house of Congress, [then] all bets are off, which is true for every president.

So, he feels pressured to do something. But the way he’s doing it, I don’t think is going to lend itself to being successful. It’s going to create a lot of chaos, which if that’s the goal, they are succeeding.

For us here, we tend to be analytical, collaborate, talk about things a lot, not overreach. But it is something that generates a lot of anxiety from everybody, including our workforce. Our workforce is concerned about what this will mean for them and their ability to care for the patients and do the research and provide the education that they do here.

FF: Are there playbooks you’re using from previous crises?

Absolutely. A lot of the playbooks we had are about modeling out these scenarios, what could we do to keep our head above water during challenging times. The difference now, versus COVID, when COVID hit, all people remember is, ‘Oh my God, we see people dying in New York City hospitals on ventilators.’ And we were viewed as heroes.

At that point, the government helped us, gave us money because they were worried that people were not going to get the care they needed. We were viewed as healthcare heroes.

We are now being vilified by the government. Somehow in five years we went from ‘Oh my God, we need you guys to care for all of these sick patients’ to ‘We’re just going to reduce your rates, and you will figure it out, somehow.’