BUFFALO, New York (Nov. 13, 2008) – The University of Texas Medical Branch (UTMB) in Galveston, the once mighty crown jewel of the UT health science center system announced yesterday that they were laying off 3,800 employees. The UT System Board of Regents confirmed the decision at a meeting in El Paso earlier in the day. As I travel working with clients to identify next-level leaders who can help their organizations weather this building storm of bad economic news, I was struck by the magnitude of the layoffs.

In making the decision, the UT Regents said they wanted to keep the medical school in Galveston but could not continue losing $40 million a month, according to The Houston Chronicle.

UTMB includes the medical school, John Sealy Hospital, a separate hospital to treat Texas prisoners and a network of clinics across Galveston County. It also has traditionally provided care for the uninsured from nearly 160 of Texas’ 254 counties.

This is not a new issue. As the scope of healthcare delivery has changed in the Lone Star State, UTMB’s sphere of influence has been diminished by the health science centers in Houston, San Antonio and, of course, the famous UT Southwestern Medical Center in Dallas with its University Hospital, affiliation with Parkland Health and Hospital System, and the UT medical school with its massive research center.

There are two important take aways from this announcement.

First, this decision is NOT directly related to the rapidly deteriorating U.S. economy. It is a reflection more of the changing competitive environment in Texas and the effects of Hurricane Ike which devastated this island community.

Second, and perhaps more importantly, it does reflect the new economic realities for healthcare executives. Even a state university with massive financial resources, including the deep pockets of one of the largest endowments in the U.S., is not immune from making hard, heretofore unimaginable, decisions. This should be an alert for healthcare leaders across the country: get ready to make tough decisions. If the recession is deep, no one will be spared.

Leadership is not just about building an organization. Good leaders know when to make the right decisions to preserve financial integrity and patient care.

John G. Self, Chairman of JohnMarch Partners, is the Firm’s senior client advisor. He is a former investigative reporter and crime writer for a major daily newspaper. Candidates and clients say he is one of the most thorough executive recruiters working in the healthcare industry.