State of the Department 2011 Jay L. Hess M.D. Ph.D. July 27, 2011.

State of the Department 2011

Jay L. Hess M.D. Ph.D. July 27, 2011

Overview

2

1. External environment

2. Department highlights - Clinical - Education - Research - Financial performance - Faculty 3. New building

4. Priorities

Overview

3

1. External environment

2. Department highlights - Clinical - Education - Research - Financial performance - Faculty 3. New building

4. Priorities

External environment – Federal, State and Region

4

1. National debt ($14.3 trillion)

- Reducing growth of Medicare costs

- Pressure on NIH spending

(try doing the Budget Puzzle: You Fix the Budget, NYT November 13, 2011)

2. Healthcare reform

- Return to capitated payment systems/bundled payments

- Increasing focus on paying for quality and outcomes

- Increasing focus on patient perception of care including Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS)

- UMHS has submitted Pioneer ACO letter of intent

External environment – Federal, State and Region

5

1. State

- Aging population

- $4 million reduction in Indirect Medical Education

- Gradual but steady decrease in commercial insurance

2. Region

- Corporate closures (Borders, ?Thomson Reuters) - Ann Arbor Public Schools (62.3 teaching FTE cut, reduced bus service, etc.)

Change in MI population 2000-2010

External environment – UMHS

6

1. Leadership: Dean and CEO reappointed for 5 year terms Search ongoing for CIO, CFO, Head of Development, three clinical chairs

2. UMHS: margin: 2.66% on revenues of $2.1 billion

A negative (-1.1%) margin is projected for FY12

Fiscal Year % $

FY02 1.00% $10.2M

FY03 2.10% $23.0M

FY04 4.10% $49.2M

FY05 5.40% $70.7M

FY06 5.52% $79.4M

FY07 3.90% $61.7M

FY08 1.30% $22.4M

FY09 1.00% $18.5M

FY10 3.20% $63.4M

FY11 2.66%* $55.9M*

Merit program

2.0% Staff3.0% Faculty

External Environment: UMMS Growth in NIH funding

Ran

k

Federal Fiscal Year

Mark

et

Sh

are

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External Environment: North Campus Research Complex

Expenditures thus far are under projections

Overview

10

1. External environment

2. Department highlights - Clinical - Education - Research - Financial performance - Faculty 3. New building

4. Priorities

Clinical Highlights

2003 2004 2005 2006 2007 2008 2009 2010 2011$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$8,532,919

$10,306,537

$11,331,000 $12,002,111 $11,974,304

$13,054,775 $13,924,576

$14,550,858

$16,046,236

$6,266,870

$7,648,963

$8,761,581 $9,245,472 $9,592,076

$10,306,828 $11,153,870

$11,610,733

$12,669,924

$2,266,049 $2,657,574 $2,569,419 $2,756,639

$2,382,228 $2,747,947 $2,770,706 $2,940,126

$3,376,312

Pathology Net Collections By Fiscal Year

Total CollectionsHealth SystemMlabs

Net

Collecti

ons

89,785 surgicals 11.3% increase over FY10Consults +23.6% Dermpath +23.0%Placenta +26.4%

Clinical Highlights: Keeping up with clinical demand

Pathology Revenue FY 2011Hospital Net Revenue Not Included

3707

3

3716

5

3725

7

3734

7

3743

8

3753

0

3762

2

3771

2

3780

3

3789

5

3798

7

3807

8

3816

9

3826

1

3835

3

3844

3

3853

4

3862

6

3871

8

3880

8

3889

9

3899

1

3908

3

3917

3

3927

0

3935

6

3945

5

3954

6

3963

0

3972

2

3981

4

3990

4

3999

5

4008

7

4017

9

4026

9

4036

0

4045

2

4054

4

4063

4

400

450

500

550

600

AP RVUs per Clinical FTE (12 month rolling average)

RV

Us/

FT

E/m

on

th

Clinical Highlights

13

New Clinical Faculty

Aleodar Andea M.D. dermatopathology (molecular dermatopathology) Michael Bachman M.D. Ph.D. microbiology (molecular microbiology) May Chan M.D. dermatopathology Amer Heider M.D. pediatric pathology Alexandra Hristov M.D. dermatopathology Julie Jorns M.D. Breast pathology David Keren M.D. clinical chemistry

(Associate Director Clinical Labs) Amir Lagstein M.D. GYN/pulmonary Scott Owens M.D. GI/surgical pathology Judy Pang M.D. Ph.D. breast/cytopathology

Molecular diagnostics

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May

2011

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Molecular Diagnostics LaboratorySpecimens Received and TAT

Jan 2002 - June 2011

Specimens received Linear (Specimens received)TAT (days) Linear (TAT (days))

Month/Year

# o

f S

pec

imen

s re

ceiv

ed

TA

T (

day

s)

New focus on reference lab work

Loss of Promedica

New MLabs leadership

Jeffrey L. Myers M.D.

A. James French Professor of Diagnostic Pathology

Director of Anatomic PathologyDirector of MLabs

2010 Dean’s Outstanding Clinician Award

MLabs

FY05 FY06 FY07 FY08 FY09 FY10 FY11$1,900,000

$2,100,000

$2,300,000

$2,500,000

$2,700,000

$2,900,000

$3,100,000

$3,300,000

$3,500,000

$3,700,000

$3,900,000

Total MLabs Hospital Margin

Hospital Margin

(Margin is split equally between Department and HHC)

Expansion of Forensic Services

17

Jeffrey Jentzen M.D. Autopsy and Forensic Services

A new perspective on the “Ideal patient Care Experience”

18

Service Excellence

Platnum Rule

“Treat others the way they would like to be treated”

Technical Excellence

Safety, quality and personalized diagnostics

- The right treatment - For the right patient - At the right time

Service Excellence

19

Pathology employee engagement survey: Room for improvement

Willingness to recommend work area 63.7%

We get the recognition we deserve 52.4%

Easy communicating information to higher 56.2% Levels of organization

My team had high employee motivation 57.1%

Service Excellence

20

S.E. Video & Facilitator

Guide

Curriculum Development

Prepare the Leader Phases

Staff Roll Out Phases

Measurement

Completion & Early Adopter

Phase

Consultation

April 2011 - April 2013

Future of Clinical Diagnostics: Personalized Medicine

21

1. What disease do I have?

2. Which drug(s) will it respond to?

3. How much drug should I take?

4. What are my risks of having an adverse drug reaction?

5. What’s my prognosis?

Increasingly the answers to these questions come from genomic information

Our field is changing rapidly- High throughput sequencing (HTS)

22Forbes June 3, 2010

Our focus: cancer diagnostics

• Molecularly-targeted oncology therapies are making a difference for patients

• High projected growth rate in new drugs and diagnostics

ELM4-ALK - lung cancer (ALK inhibitors) EGFR – lung cancer (gefitinib) BRAF – melanoma (BRAF/MEK inhibitors) HER2/neu – breast cancer (trastuzamab) c-KIT – GIST (imatinib) BCR-ABL- CML (imatinib, nilotinib)

• Has potential to reduce costs through more selective treatment

23

Outlook for cancer diagnostics

24

Nature Reviews Drug Discovery 8, 279-286, 2009

Outlook: The microeconomics of personalized medicine: today's challenge and tomorrow's promise. Jerel C. Davis, Laura Furstenthal, Amar A. Desai, Troy Norris, Saumya Sutaria, Edd Fleming & Philip Ma

Our strengths in sequencing-based cancer diagnostics

25

MLabs

Molecular

Diagnostics

Pathology Informatics

AP/HP

Consultation

Research and biomarker discovery

One of top two programs in pathology informatics

• Michigan Center for Translational Pathology• Top ten in NIH funding • 23.3% growth in NIH funding in FY11

14% growth in FY11 33% growth rate in FY11

Basic Research

Michigan Center for Translational Pathology (MCTP)

26

Mission

Establish the University of Michigan as the international leader in discovery and characterization of disease biomarkers and therapeutic targets using an integrated multi-disciplinary, systems biology approach.

Establish a new paradigm of bringing personalized medicine to routine clinical care through the use of high-throughput sequencing

Arul Chinnaiyan M.D. Ph.D. Director MCTP

Biomarker discovery in prostate cancer

27

ETS inhibitors/PARP inhibitors

SPINK1 mAb/ EGFR inhibitors

RAF/MEK inhibitors

50-60%

10-15%

1-2%

28

Presented at 2011 ASCO Meeting

HTS-based clinical diagnostic testing

Over 1000 cancer transcriptomes sequencedResults now reported back to patients as part of clinical trial

Oncoseq - High throughput sequencing software

29

Timeline from Tissue Biopsy to Sequencing Results

Tumor Biopsy

Sample Prep

Pathology Sequencing Analysis

Day 1 Day 2 Day 3-9 Day 10-18 Day 19-23

GeneALKBRAFEGFRERBB2PIK3CAPTEN

StatusWTV600EWTWTWTWT

CLIAPending

Day 23-30

Sequence Results

Timeline from Tissue Biopsy to Sequencing Results

No Patient Age Prior Therapies Sequence Results Potential Pathways for Therapeutic Intervention

Examples of Approved or Investigational Agents

1 Metastatic Castrate Resistant Prostate Cancer

67 Leuprolide + bicalutamideDiethylstilbestrolNY-ESO vaccine studyAzacytidine + valproic acid study

PTEN deletionAR amplificationT2:ERG

CPNE4-NEK11TP53 mutation

PI3K inhibitors

Androgen blockadeAndrogen SignalingPARP inhibitors

(NIMA kinases?)

BEZ235, GDC-0941, XL147

Abiraterone, MDV3100

Olaparib

??

2 Metastatic Prostate Cancer

61 Hormone Naïve (Newly diagnosed)

TP53 mutationPTEN deletionT2:ERG PLK1 outlier

PI3K inhibitorsAndrogen signalingPARP inhibitors (Umich trial)Polo kinase inhibitors

BEZ235, GDC-0941, XL147 Abiraterone, MDV3100 OlaparibBI2536, GSK461364A, ON-01910

3 Myelofibrosis 59 Hydroxyurea, Anagrelide, Lenalidomide, Cladribine

MPL 515 mutation Jak Inhibitors INCB018424

4 Metastatic Colorectal Cancer

46 FOLFOX + Cetuximab Irinotecan + Cetuximab Phase 1:TAK-901

N-ras mutation

CDK8 amplification

BRAF and MEK inhibitorsPI3K inhibitorsCDK inhibitors

PLX4032, GSK2118436, AZD6244BEZ235, GDC-0941, XL147Flavopiridol

5 Metastatic Melanoma

48 Multiple Resections H-ras mutation

CDKN2C inactivation

B-raf and MEK inhibitorsPIK3 inhibitorsCDK inhibitors

PLX4032, GSK2118436, AZD6244BEZ235, GDC-0941, XL147 Flavopiridol

Personalized Oncology Through Integrative Next Generation Sequencing

>60% tumorTumor Biopsy

Sequencing & Analysis

Buccal swab or

Blood(germline)

Target X

Target Y

Target Z

Discovery

Trial: X

Trial: Y

Trial: Z

Basic Research

33

Milestone 1: Provide information to consented patients who are requesting information (n>10 in waiting). Funded by MCTP and PCF. Goal is to profile >100 patients. (Year 1, 3-12 months)

Milestone 2: Introduce Ancillary Tests (including CTCs, urine T2-ERG, Michigan Prostate Panel (ERG, ETV1, SPINK1, RAF kinase, AMACR, p63). Funded by MCTP, Gen-Probe, Ventana/Roche, PCF (Year 1, 3-12 months)

Milestone 3: Develop protocols compatible with FFPE, small/degraded samples: (Year 1, month 6 onwards)

Milestone 4: Support clinical trials with high throughput sequencing. Funded by MCTP, PCF and/or drug company (Year 2 onwards)

Milestone 5: Offer as a test in CLIA/CAP reference lab setting (Year 3 onwards)

Molecular diagnostics milestones

34

Academic Medical Centers

For profit Reference

Labs

HTS Lab University of Michigan + corporate informatics partner

Business models for HTS-based diagnostics

• Vendor• Joint venture

Hospitals

• Vendor• Cotenancy

• Vendor

Education Highlights

35

1. Educational office reorganization

2. Strong performance in match

3. New fellowships in - Pediatric Pathology - Forensic Pathology - HLA (pending) - Chemistry and Microbiology (future)

4. Clinical Scholars Program

5. Management training and personalized medicine

6. Reorganization of VA rotations (thank you Dr. Chensue)

Professorships: Godfrey Stobbe Professor of Pathology Education

Investiture August 12, 2011

Alumni Center

Research Highlights

37

New Faculty

Michael Bachman M.D. Ph.D. bacterial pathogenesis molecular microbiology

Maria “Ken” Figueroa M.D. epigenetics of MDS and leukemia

Jeff Rual Ph.D. high throughput proteomics

Research: Department external funding

Pathology Revenue FY 2011Hospital Net Revenue Not Included

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$17,

126,

967

$21,

916,

142

$20,

480,

632

$21,

260,

912

$24,

829,

140

$25,

669,

434

$21,

700,

067

$26,

757,

065

$25,

411,

779

$18,

603,

863

$23,

426,

716

$26,

266,

958

$24,

552,

395

$22,

921,

424

$59,

488,

720

$31,

908,

076

Committed Total Awards and Submitted Initial Budget Period Totals by Fiscal Year

Committed Submitted

Fiscal Year

Do

llar

s ($

)

23.3% increase over FY10 IDC $150/sq ft Benchmark $110/sq ft

Research administration

39

Medical School Faculty Satisfaction Survey-Pathology

2006 2008 2010

54.8 61.3 85.7

Professorships: Henry C. Bryant Professor of Pathology

Lymphoma Research Foundation Featured Researcher

American Society for Clinical Investigation

Investiture September 15, 2011 BSRB

Department Finances

Major changes affecting our finances:

1. NCRC ($9.5 million over 10 years) 2. Transition to RVU-based payment system 3. Revised Medical School Funds flow model (FAMIII)

What we have done to improve our finances:

4. Implemented professional component billing5. Renegotiated Professional Services Agreement (Part A)3. Revised MLabs agreement 4. Expanded MLabs business5. Submitted and secured more grants

Department Finances

2005 2006 2007 2008 2009 2010 2011$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

Department of Pathology Net Assets $ (Mil-lions)

UnrestrictedRestrictedTotals

Total margin before market changes $7,270,253Change in net assets with market changes $21,144,892

Gerald D. Abrams Endowment

Promotions

44

Colin Duckett Ph.D. ProfessorJason Gestwicki Ph.D. Associate Professor Celina Kleer Ph.D. Professor Richard Lieberman Ph.D. Associate ProfessorMegan Lim M.D. Ph.D. ProfessorPeter Lucas Ph.D. Associate Professor

Farewell

David Gordon M.D.

Next Dean of the University of Michigan Flint School of Health Professions and Studies

Reception August 3, 2011 Towsley Lobby

Farewell

Will G. Finn M.D.

Next Medical Director of Warde Medical Laboratory

Reception T.B.A.

New building

47

1. External environment

2. Department highlights - Clinical - Education - Research - Financial performance - Faculty 3. New building

4. Priorities

New building

200,000 gsf clinical laboratoriesAutomated core lab Up to 200,000 gsf faculty offices

Programming nowConceptual and schematic design 9/2011-11/2011Design development 12/2011-2/2012Construction document 3/2012- 9/2012 Bid and award 10/2012-12/2012Construction 1/2013-7/2016Activation 8/2016-9/2016Move in 10/2016

New building

New building

New building

New building

Overview

53

1. External environment

2. Department highlights - Clinical - Education - Research - Financial performance - Faculty 3. New building

4. Priorities

Priorities

Pathology Revenue FY 2011Hospital Net Revenue Not Included

Continually improve patient quality and safety Build state of the art new clinical laboratories

Replace Laboratory Information System (LIS) Establish Michigan as a leader in:

- pathology consultation - pathology informatics - biomarker discovery - bringing next generation sequencing into clinical use

Priorities

Pathology Revenue FY 2011Hospital Net Revenue Not Included

Develop new programs in epigenetics and chemical biology

Strengthen existing research programs in inflammation and aging

7. Strengthen research infrastructure and grants administration

8. Expand MLabs scope and profitability

Ensure the financial health of the Department

Ensure the Department is a place where careers of faculty and staff can thrive

Questions?