Surgical leadership: Ensuring financial stability through growth

Abstract

Maintaining financial stability is important for leaders in surgery because it (1) allows consistent, fair (market value) reimbursement for employees, which conveys that they are valued; (2) enables strategic investment in new programs that may not generate direct financial gains but are required; and (3) builds trust with stakeholders outside the department while strengthening the department's position in negotiations. Key strategies that we have used to increase revenue (income) over the past 6 years have been hiring more faculty, advocating for greater operating room and staffing capacity, staffing surgeons at other institutions using affiliation agreements, attempting to shift grant-funded efforts to non-clinical (research) faculty to mitigate National Institutes of Health salary cap penalties, and increasing efforts to identify external funding for educational and administrative tasks performed by surgeons (eg, increasing contact hours with medical students to secure a greater proportion of state general revenue). Using these strategies, our total revenue has increased 66% over the past 6 years, whereas Academic Support Agreement funds from the College of Medicine concurrently have decreased by 75%. Key strategies that we have used for curtailing expenses have been increasing clinic workflow efficiency; shifting advance practice provider contractual expenses and trainee indirect costs to the hospital; focusing on driving down delayed accounts receivable over time; and using net collections to preferentially invest in research likely to receive future external funding, for which indirect costs return to the department. Despite using these strategies, the total expenses of our department have increased 74% over the past 6 years, driven primarily by the doubling of clinic costs and contractual expenses for advance practice providers. These losses could theoretically be offset by (1) increasing billing by advance practice providers who can also facilitate excellent continuity of surgical care while allowing residents and fellows to shift their effort from service toward education and (2) increasing clinic capacity to generate increasing operative volumes. A department's financial stability is affected by complex interactions among several stakeholders, including the College of Medicine, faculty group practices, and hospitals, with competing interests. Leaders in surgery must understand and manage major categories of revenue and expenses to create a financially stable environment in which they can fulfill their multi-prong missions.