Finance and Philanthropy Vision

June 29, 2007

Dear Colleagues, Students, Alumni and Friends:

I have been pleased with the enthusiastic and engaging responses to my first three open letters addressing our research, clinical and education missions. I wish to address finance and philanthropy in this open letter to the School of Medicine community. My next and last letter in this series will focus on service and community outreach.

As many of you know, the financial fuel for the tremendous strides this institution has made in recent years has come primarily from research funding and philanthropy. A strong adherence to mission-based management has provided the fiscal discipline that has yielded continued growth. Yet, as we stand at the acme of significant achievement and envision our limitless potential for further progress, fiscal realities make it a challenging task to sustain our recent growth and fulfill the promising opportunities ahead. Within this context, ensuring that the School of Medicine has access to the necessary financial resources for a higher level of excellence is a primary objective for all of us.

Philanthropic initiatives to support the advancement of the University of Maryland School of Medicine harkens back to the year 1812, when faculty members contributed the funds necessary to construct Davidge Hall. In recent years, the size and scope of the School's philanthropic enterprise have increased significantly, with private support increasing from $1.7 million in FY91 to $43.6 million in FY06. The number of endowed professorships has increased from two to 40 during that same period. The size of the School of Medicine's endowment-which now exceeds $140 million-has grown in recent years as well. A primary and critical source of revenue for the School of Medicine is attracting resources through private philanthropy.

Our development program is somewhat smaller and somewhat less-funded than most of our peer institutions. However, we are encouraged by our momentum, which will put us in the ranks of our peer medical schools in private philanthropy. According to data provided through the Association of American Medical College's (AAMC) FY05 development survey, total private support for the University of Maryland School of Medicine was 33 percent higher than the average for all public and private medical schools. Private support to the medical school increased 46 percent between FY04 and FY05, while total private support for public medical institutions overall remained flat during that period.

The AAMC also ranks our School of Medicine 12th in private support among the nation's public medical schools and academic health centers, and 30th in private support among the nation's public and private medical schools and academic health centers. When one analyzes these data in more detail, it is evident that a modest increase in private support will propel the University of Maryland School of Medicine ahead of its peer institutions.

In order to provide the necessary philanthropic resources to advance our goals and objectives, the University of Maryland School of Medicine will focus on several objectives within the next five years. We will continue to cultivate a culture of philanthropy among faculty, staff, alumni, volunteers and other constituencies. Efforts to educate faculty in the art of philanthropy and encourage more active participation in philanthropic pursuits will be crucial elements of our continued growth and expansion. We will invest the resources necessary to sustain our current growth and to ensure future increases in philanthropic activity.

We will also continue to work effectively and efficiently with our hospital partners, the Medical Alumni Association, University Physicians, Inc., and the University of Maryland, Baltimore to increase philanthropic support to the School of Medicine's programs and initiatives.

The School of Medicine's 200th anniversary provides a unique opportunity to attract public attention to the School and encourage alumni and other donors to establish a legacy through philanthropy. As we conclude our $200 million bicentennial campaign (phase I) later this fall, we will use this momentum and increased profile as a basis to launch an extremely ambitious, comprehensive and expanded philanthropic bicentennial campaign (phase II). Patrick Madden, associate dean for Development, is coordinating these efforts. Please contact Pat at pmadden@som.umaryland.edu or (410) 706-8503 with any ideas, comments or questions.

It is important to emphasize that the goal of increasing philanthropic support by soliciting private gifts is not solely the responsibility of the medical school's development staff. A successful expansion of our philanthropic enterprise will require the active involvement of leadership, alumni, faculty, staff and volunteers, in collaboration with the Office of Development.

Another important partner to our future success is the state legislature. In order to maximize our full potential, we will work with University leadership to impress upon the state legislature and the University System of Maryland the pressing need for enhanced financial support from the state. Comparison data available from the AAMC for 2005 indicate that our direct allocation of state support per medical student ranks last among a set of peer state medical schools. We must reverse this trend. I believe that communicating more effectively with our state leadership on our needs and the incredible return on every dollar invested by the state will enable us to succeed in this endeavor. I have come to know and appreciate the strong support we enjoy in Annapolis.

Our case is well supported by the most recent economic impact report generated by the University of Maryland, Baltimore. The School of Medicine's direct annual spending of $624 million in FY05 generated nearly $780 million in indirect spending for a total annual impact on the Maryland economy of $1.4 billion, which is $22 in economic activity for every $1 appropriated by the state legislature. I have included our revenue pie chart to emphasize that only 5.5 percent of our total revenues come from the state and that we generate the remaining 94.5 percent of our operating revenue by other means.

To achieve the goals articulated in the research, clinical and education letters will take strong financial discipline. New opportunities will be evaluated on their multi-year return and sound investment principles. We will target certain areas of our portfolio to become more robust. We will ascertain where our revenues can be impacted by an increase in productivity, and we will increase our clinical margin by employing administrative efficiencies and economies of scale. We will use business models to conduct the School of Medicine's activities as efficiently as possible, and to adhere to appropriate expenditure levels in order to achieve the largest margins so that we can reinvest in our mission areas.

In partnership, we continue in our relentless pursuit of excellence, everyday.

Sincerely yours,

E. Albert Reece, M.D., Ph.D., M.B.A.
Vice President for Medical Affairs, University of Maryland
John Z. and Akiko K. Bowers Distinguished Professor and Dean, School of Medicine

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