Vanderbilt University Medical Center will cut at least $250M as federal government slashes health spending

Vanderbilt University Medical Center is making at least $250 million in budget cuts for the coming year.

CEO Jeff Balser informed his staff about the reductions in a video this week. The transcript says the cuts are happening because of “actions being taken in D.C.” It doesn’t mention specific policies or any federal officials by name.

However, the announcement comes amid major disruptions to federal health agencies, public health funding and medical research infrastructure.

Balser painted a picture of uncertainty for the academic hospital.

“We can’t fully determine the impact of the actions by the administration and Congress, and federal budget reconciliation may not be finished until the fall,” he said. “But we are building a budget for July 1 that achieves $250 million in cost reductions. This is a conservative approach, as VUMC revenue reductions of more than twice this amount are possible in the coming year.”

The reconciliation refers to broad budget cuts anticipated this year under a Republican Congress. Those are expected to have severe impacts on health coverage programs like Tennessee’s Medicaid program, TennCare.

For now, the federal plan includes nearly $88 billion in cuts to Medicaid annually for the next decade. In Tennessee, that would cost the state about $1 billion a year, according to new data from the Kaiser Family Foundation. The health policy nonprofit reports that states like Tennessee could have to make up that cost by filling it with state funds, and it predicts that many states would have to cut K-12 education funding to do so.

The Vanderbilt video says hospital administrators are trying to spare clinical services from the cuts.

Support services — like human resources and IT — are likely to see reductions. And research projects are likely to take a hit.

“Some programs will experience reductions — particularly those that cannot be fully supported on grants or the generous gifts from our donors,” the transcript reads. “And some people working in those programs will be unable to continue at VUMC.”

That announcement comes as the Trump administration works to slash medical research grant funding. First, the administration ordered the National Institutes of Health to stop reviewing proposals for new grants and applications for grant renewals. And then, it began working to cut funding for projects already underway.

Tennessee gets around $700 million a year in NIH funding — with most of the money going to Vanderbilt. The grants go to universities, hospitals and biomedical companies, and they directly support about 9,000 jobs statewide.

The proposal to cut funding on already authorized projects is tied up in court challenges. Tennessee could lose more than $100 million a year. The plan would nearly eliminate the funding for so-called indirect costs. Those cover the not-so-obvious needs in a lab, like electricity, water, building maintenance, IT, support staff and janitorial services. For projects at big research universities — like Vanderbilt University and the University of Tennessee — some of the money helps the overall school stay afloat.

Leaders at the state’s top research institutions — including Vanderbilt, Meharry Medical College and St. Jude Children’s Research Hospital — pleaded their case in a letter to Tennessee’s congressional delegation. They called the cuts devastating to biomedical research. They also pointed out that current funding levels already fail to cover costs, and that universities are often on the hook for hundreds of millions of dollars a year.

The administration is firing tens of thousands of federal workers in the country’s health agencies. That includes hundreds at the NIH, and thousands more at the Centers for Disease Control and Prevention and the Centers for Medicare and Medicaid Services. It’s unclear how those firings will affect access to research grants, Medicaid coverage and public health initiatives.