It's one thing to see it as an architect's rendering, quite another to get a look at the actual first phase of expansion of the University of Kentucky Medical Center and a real mind-boggler to wrap your mind around the implications for Lexington. "It's 1.2 million square feet. It will be the equivalent of 18 stories high, and we'll be fitting out about half of it," explained Dr. Michael Karpf, who was lured from UCLA Medical Center by UK president Lee Todd, Jr., in 2003 with the challenge of placing a university medical program then in decline on a new path to a ranking among the nation's top 20 academic and research institutions. "That's Phase 1A. The price tag right now is $532 million, and it's very much in progress," he said.
In an interview available in full as a podcast on bizlex.com, Dr. Karpf detailed an expansion program that is creating thousands of new, high-salary jobs in the Lexington area, pumping tens of millions into the local economy as it drives UK's efforts to rise to among the nation's top 20 public research institutions by 2020.
Karpf acknowledged that the experience has been an eye-opener. Most astonishing has been an unanticipated growth of 70 percent in patient discharges since 2003. "I'm very much surprised by the increase. I thought we were aggressive when we originally did our budgeting, looking out five years. We were hoping for five percent growth, and we were hoping by 2010 or '11 we'd reach 30,000 discharges." Instead, discharges had topped 33,000 at the end of fiscal 2008. "Our growth has exceeded anything I could have imagined or I would have been courageous enough to project," he said.
Kentucky ranks among the highest in the nation for rates of cancer and heart disease among its population, so it's easy to assume there must be a connection with this dramatic increase. Karpf, however, attributes the explosive growth to an expansion of key services. "I think it's a reflection of the fact that there were some people who weren't getting advanced services that should have been getting them. So we've seen growth in things like transplantation, dramatic growth in pediatrics, dramatic growth in cancer. By recruiting nationally recognized specialists and advancing specialty care, we've brought a degree of sophistication to health care and availability that didn't exist before."
Leadership has been a key attraction for those talents. Since arriving, Karpf has assembled a team that includes Dr. Jay Perman in the dual roles of dean of the College of Medicine and vice president for clinical affairs. Perman was recruited in 2004 from the University of Maryland School of Medicine, where he chaired the Department of Pediatrics. Dr. Richard P. Lofgren was lured from his positions as senior associate dean for clinical affairs, chief medical officer and professor of medicine at the Medical College of Wisconsin in Milwaukee to become UK's chief medical officer. He has since become vice president for healthcare operations and chief clinical officer, succeeded as CMO by Dr. Paul DePriest - UK's former associate chief medical officer. And UCLA's chief financial officer, Sergio Melgar was enticed to Lexington to become senior vice president for finance and administration and CFO at UK. "This is not a one man show," Karpf asserted. "I'm a conductor, but I have a fabulous orchestra in front of me, and I would put my team up against any major medical center in the country."
The growth that was occurring even as moving vans were arriving at the new Lexington addresses of these recruits sent Karpf and his team back to the drawing board. "When we originally started, we thought we'd be building essentially about 180 beds. Ö Then we saw our volumes go up dramatically and realized we had to build something bigger, and that we'd have to build both towers at the same time, and that took it to $450 million. When the volumes continued to exceed anything that we could expect, we realized that we needed to put on two additional floors in each of the patient care towers, and that took it up to $525 million. And because of some early success in fundraising, we've added some major amenities for patients and their families that takes it to $532 million." (More on how philanthropy is enhancing the medical center project is available in Healing with Music, the cover story of the June 13 edition of Business Lexington, online at bizlex.com.)
Karpf now projects a patient care facility accommodating as many as 650 beds. "We are projecting much more modest growth over the next several years; you just can't keep growing by 10 percent. But we're also becoming a regional provider, seeing an increasing number of patients from West Virginia, Tennessee and Ohio. Even with modest growth, my successor will probably have to add additional beds. I think I'll be finished building by the time we get this thing done. But I do think that in the long run, it's not inconceivable that we could grow to become an 800-bed hospital."
With construction of phase 1A now underway, the fit-out of the additional 600,000 square feet - phase 1B - is next on Karpf's agenda. "We're now starting to understand the finances of that, and over this next year we will know that in much greater detail. Right now we think it's pretty much a $240 million project, on top of the $532 million," he said.
Primary goals include strengthening the university's research efforts at the academic medical center. Karp arrived in 2003 to a university encountering difficulties with its clinical service. Admissions were shrinking along with funding from the National Institutes of Health. "In 2003, when the clinical efforts sort of hit the nadir, UK slipped to 35th out of 88. We're now back up to 28th, I think. Maybe at the end of the next federal fiscal year, things will be better than 28th - maybe 26th or 27th - and we actually can see 25 and number 20 in the public research domain in our sights now."
Such rankings, explained Karpf, help the rest of the university "because many of our researchers then collaborate with people in engineering, in the ag school and the nursing college and the biology department. So there's a synergy that develops that helps the entire university move forward."
As goes the success of Karpf and his team in achieving that goal, so goes the health of Lexington's economy and a municipal general fund that is overwhelmingly dependent on payroll taxes. "Economically, we are a very important driver right now. We originally said we'd create 1,300 direct jobs. We've now created over 2,000 direct jobs between the hospital and the College of Medicine. We've added $215 million to payroll and benefits. That's an awful lot of money. Ö And I think that we can add at least another 500 jobs; that is what our projections show. I would be surprised if we didn't add another 1,000 or 1,500 jobs, and add more than $200 million to the economy in terms of salaries and benefits. That's a lot."
According to the university's latest projections, the hospital's 2008 business will approach $800 million, with the College of Medicine expected to top $500 million. "That makes us $1.3 billion and we're growing, and I've told President Todd that it won't be long before we approach a $1.5-$2 billion organization. And we're putting the infrastructure in to be able to run that kind of organization."
Asked if the city of Lexington is giving him what he needs to maintain this momentum, Karpf offered his considerable influence to the push for revitalization of the city's urban core. "This town is very attractive, and we need to keep making it even more attractive. I compete with Ann Arbor, Palo Alto, Raleigh and the research triangle, Cambridge, Massachusetts. Those are the places I compete with in bringing talent to this place. For me it's the opportunities I provide for folks to be able to do for their programs, but it has to be in an environment that they find really very supportive. Lexington has done that real well, and we need to make sure it keeps fixing its downtown; keeping the flavor of the town the way it is and getting more bike paths, supporting the philharmonic and having excellent music and developing an art scene - that's exciting. I think that (Mayor) Newberry is on the right track with those issues, as is the entire council."
Five years into perhaps one of the pinnacle projects of his career, Dr. Karpf is satisfied with progress to date, but he is also mildly concerned about how well the community grasps the need to share in the investment.
"What people will see coming out in this next phase is the first $532 million, which we've pretty much taken care of financially. We've saved a lot of money which now will start getting spent down. We're not going to have a whole lot of money left in the bank when this is done. We'll have enough to keep the bond people happy, but this next phase for $240 million will require some support from the community in terms of fundraising. And we will start going into a campaign. There is no major medical center that can build $800 million, or billions, of dollars worth of construction without some support from the community. We'll also be thinking through, should we be borrowing any more money? We think we have the capacity to do that. We need to understand that that makes financial sense, and so we may in a year or two start thinking about whether we're going to have another bond issuance. But I feel pretty good about where we are right now. We have a real challenge ahead of us over the next five years. These last five years have gone by in a flash. Because of the support of (Dr. Lee) Todd, because of the support of the Board of Trustees, because of help we've had in Frankfort and the city council and mayor's office, it's gone dramatically well. Our challenges are very significant moving forward, and we'll need all the help we can get."