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CEO Column

RalphAs you probably know, Congress and President Obama were unable to come to an agreement that would have avoided the automatic spending cuts known as sequestration. Unless an agreement is reached soon, this will mean an $85 billion reduction in spending for the remainder of the federal fiscal year, which ends on September 30th. About half of that amount would come from a five percent across-the-board cut in discretionary domestic spending. The other half would come from an eight percent reduction in defense spending.

Medicaid is exempt from the sequestration cuts, but two-percent cuts in Medicare provider payments and five-percent reductions in other federal health-care programs, including biomedical research, could soon begin to affect hospitals and health care organizations nationwide. Naturally, we at Penn are not immune from the effects of such cuts and our hope is that they will be reversed.

But if they aren’t, the quality of care that we provide to our patients will still remain exceptional. Because of careful planning and our continuing focus on using resources sensibly, we can weather the reductions triggered by sequestration. We’ve been working hard over the past several months to develop a strategy for addressing potential cutbacks such as the ones that have now been officially put into play. As a result -- and because we’re a fiscally sound institution -- the Health System is well prepared to continue delivering on its mission. Also, the Perelman School of Medicine will continue providing world-class training of future physicians, and faculty members will still perform high-caliber research that offers fresh hope to patients worldwide.

To sustain our ability to address the ramifications of sequestration, we are fully invested in a two-track approach. First, we’ll continue to refine our short-term plan for ensuring that core activities continue in an uninterrupted manner and at a high level. Second, we’re working closely with our peer institutions and professional organizations to help Washington understand the potentially serious national consequences of the health care cuts. 

Sequestration is taking place in the middle of a slowly recovering economy, continuing uncertainty surrounding health-care reform, rising costs, and lower reimbursement rates. But, in spite of these difficulties, we will maintain our commitment to improving the well being of our patients and community while making our health  system even stronger for the future.

These are dynamic times for Penn Medicine, and the pace will only get faster. Expanding opportunities await us and we won’t be diverted by short-term crises. We recognize that events such as sequestration are part of what it means to be a major health-care organization in a highly complex macro-environment.

The contributions that each of you makes every day enable us to withstand such major external challenges, and for that I am grateful. Your resourcefulness and commitment to efficiency have helped create the conditions of fiscal strength that will allow us to absorb sequestration with little noticeable impact. I know that you will continue to be vigilant in seeking out ways to do more with less. Working together, I am confident that we will come out of this process an even stronger institution.

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