by Doug Henze
February 16, 2008

When insurers tightened the screws on businesses seeking coverage in the late 1980s, Michigan’s public universities found themselves in a tough spot.

“Not only were premiums very high, but some universities could not get insurance at all,” recalls Lowell P. Rinker, vice president for business and finance at Western Michigan University in Kalamazoo.

So, to protect themselves against slip and fall, workers’ compensation and other claims, the bulk of the schools banded together and formed a self-insurance corporation. The idea was to share the risk and avoid devastation from any large claim.

“By spreading risk out among these schools, we could have one school have a disaster and not tank itself,” said Rinker, past president of the Michigan Universities Self-Insurance Corp., which was created in 1987. “Some of these things are not foreseeable and it could happen to any of the universities. It does protect us all.”

The self-insurance company, known as MUSIC, is only one example of the cooperative efforts undertaken by the state’s universities in recent decades to save money or to improve programs. A recently released report by the Presidents Council, State Universities of Michigan, entitled “Collaborating for Efficiency and Quality,” outlines 14 such programs. The group is an advocacy organization for the state’s universities, but the report — the first of its kind in Michigan — was required by state lawmakers through 2007 legislation (Public Act 136) intended to make sure public universities are maximizing their resources.

“We have a responsibility to make sure there’s consideration given to stretching the dollar.” — Sen. Glenn S. Anderson (D-Westland), who called for the first-ever legislative report on university collaboration.

“We’re always looking at trying to find additional money for institutions,” said Sen. Glenn S. Anderson (D-Westland). “We have a responsibility to make sure there’s consideration given to stretching the dollar.”

During last year’s tough state budget talks, it was Anderson who brought up the idea of requiring universities to demonstrate how resources are being shared. “Universities should be cooperating as much as possible in purchasing and contracting to try and stretch the dollar — and I think, for the most part, they are doing that,” he said. “If they can band together and get a better deal, it just doesn’t make any sense for it not to be happening.”

The savings that the universities have realized from MUSIC are substantial. Since its formation, MUSIC has returned about $27.4 million in dividends to its 11 members, according to Tim Kellogg, WMU’s manager of business services and MUSIC’s current president. The money represents premiums collected but not paid out as claims.

“What might have been profit margins for an insurance company are returned to the universities,” Rinker said. In just the past four years, MUSIC estimates, it saved members another $25.4 million, based on a comparison of its premiums and those charged in the traditional insurance market. MUSIC members also share “best practices” to make sure each is doing all it can to minimize risk to the cooperative.

“When you work together as a group, you tend to be able to provide better services for students and faculty.”— Michael Boulus, executive director of the Presidents Council, State Universities of Michigan, who put together the report.

Even prior to Michigan’s current economic crisis, universities worked together — through efforts such as MUSIC — out of need, said Michael Boulus, executive director of the Presidents Council. But with state funding shrinking, resource-sharing has become critical.

“Our funding has been cut $2,600 a student,” Boulus said. “We’ve been losing money.

We’ve been cut six consecutive years.”

Boulus cites figures that show state funding per student has declined from $6,869 in 2001 to $5,758 today. The figures assume that per-student spending would have to rise to $8,325 to keep pace with inflation. Meanwhile, state tax support for higher education in 2007-08 climbed 7.5 percent on a national average, Boulus said.

“If you look at the five-year trend, Michigan’s investment has been the lowest in the nation,” he said. “We’ve been hitting pretty hard on (state government) that you have to fund, you have to invest in education. We’re falling behind the rest of the country.”

Those pleas, together with significant tuition hikes and a perception that universities don’t cooperate, may have fueled the legislature’s mandate that institutions prove they’re working together, Boulus said. “It gave us the opportunity to show that we do work together.”

And while cost-savings is a big part of the collaboration equation, it’s not all of it, Boulus said. “When you work together as a group, you tend to be able to provide better services for students and faculty,” he said.

In addition to MUSIC, universities’ collaborative efforts include:

— Merit Network
Formed in 1966, the nonprofit group designed, and now operates, a computer network between Michigan public universities. The group’s activities allowed Michigan universities to receive high-speed Internet access before most other states, according to the Presidents Council report;

— Midwestern Higher Education Compact
Established in 1991, the Compact’s mission is to establish interstate resource sharing between universities in Michigan, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio and Wisconsin. The Compact saved Michigan more than $10.5 million in 2006-07 alone in costs for computer hardware, office products and other items, according to the report;

— Michigan Delivering Extended Agreements Locally
The program, in place since 1975, allows universities and local units of government to purchase goods and services using the same contract terms and prices the state negotiates. A purchasing task force established in 2003 identified five area of focus: energy, information technology, travel, vehicles and written agreements;

— Michigan Universities Commercialization Initiative
The initiative is aimed at promoting the growth of a life sciences industry in the state. It helps foster the transfer of technology between universities, investors and industry by sharing educational materials and best practices through a website, newsletters and joint meetings.

The collaborative efforts between state universities also include a focus on a key issue of the times: health care.

The Michigan Universities Coalition on Health, known as MUCH, aims to reduce the cost of prescription drugs and other health benefits to universities through negotiation with health care providers. “The larger your group, the more there’s a direct correlation to price,” said Renee Rivard, chairwoman of MUCH.

Four of MUCH’s 12 members are participating in a third-party administrator contract, signed with Blue Cross Blue Shield of Michigan in January 2006. The deal affects costs for 12,000 university employees across the state.

It is estimated that the schools — Central Michigan, Ferris State, Michigan State and Wayne State universities — are saving a combined $393,000 in administrative fees this fiscal year, with an additional savings of $131,000 in provider discount credits.

MUCH also is considering similar negotiations for pharmaceutical benefits. MUCH may become an affiliate member of a labor-employer benefits coalition known as AEPC. “It’s really a group that’s coming together to look at ways to capitalize on size, whether we’re providing health care or other benefits,” Rivard said.

And MUCH members also benefit from regular discussions on how each school is addressing common issues. “One may have an idea that someone else hasn’t thought about,” said Chris Hanna, interim assistant vice president of human resources at Michigan State.

Still other collaborative efforts the universities are involved in include the Core Technology Alliance, the Higher Education Recruitment Consortium, the Michigan Transfer Network, the Academic Program Review, the Detroit Compact and Wade McCree Scholars, Arts in the Legislature, Professor of the Year and the Japan Center.

“There are a lot of reasons we work together — for cost-savings and efficiency,” Boulus said.

Doug Henze is a freelance writer and former business reporter for the Oakland Press in Pontiac.