Observation Deck: Join the Crowd

Higher education’s day of reckoning is here

Journal of Healthcare Contracting readers have been under pressure for a long time to reduce costs while helping their facilities maintain high quality standards. Strategic sourcing, group purchasing, value analysis, standardization – these are the tools of your trade, and you wield them well.

Your counterparts in higher education are facing some of the same challenges and mandates. But they’re newer to it than you are, and they have a steep learning curve ahead of them.

“After years of cuts in state subsidies and growing resistance to rising tuition, U.S. colleges and universities are starting to unwind decades of administrative bloat and back-office waste that helped push up costs and tuition,” reads a recent Wall Street Journal article by Douglas Belkin.

Federal higher-education data show back-office expenses have been growing rapidly, according to the article. “In inflation-adjusted dollars, back-office expenses between 2001 to 2011, as measured by the combined categories of academic and institutional support as reported to the Department of Education, increased 68 percent at the University of Michigan, Ann Arbor; 91 percent at the University of Texas at Austin; 59 percent at the University of California Berkeley; and 99 percent at the University of Kansas.”

Many public universities have “papered over” cuts from their states by raising tuition. In fact, tuition rose at three times the rate of inflation over the past decade, according to the report. Here’s the rub for universities: Student debt is rising, and the public is rebelling against rising tuition. More bad news: The value of a college education is being seriously questioned in our tough economy.

JHC readers will recognize some of the strategies that universities are employing to reduce costs. The SUNY (State University of New York), for example, consolidated elevator-service contracts, saving half a million dollars a year. University of Kansas revamped its back office operations, and now uses 11 million fewer pieces of paper a year.

Needless to say, there’s been backlash, some of which will sound familiar to JHC readers. For example, an engineering professor at the University of Michigan in Ann Arbor is quoted as saying that the university’s plan to consolidate support staff into a single facility “is based on standardized operations as one would find in a state agency” or a big manufacturer, reports the Journal. “Those types of operations are a world apart from what happens in a university.”

How many times have we heard people say, “That might work elsewhere, but healthcare is different than other industries” as a way to refute the need for cost-cutting measures? You don’t hear that much any more, though, do you?

One person quoted in the article – John Wilton, vice chancellor for administration and finance at University of California Berkeley – seems to have it right. He believes that public universities can’t conduct business as usual while their state legislatures continue to cut their budgets. “You have a burning platform. If you just stand on it, you’re going to burn to death.” That pretty much sums it up.

Now, I’m not saying that misery loves company. But doesn’t it offer you just a bit of comfort to know that others are just now tackling the challenges you’ve been working on for decades?

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