The Rice Stuff

Should the small but elite private college that I attended merge with the top-notch but troubled Baylor College of Medicine? Can it afford to? Can it afford not to?

February 2010By Comments

For the February issue, the subject of my column was the ongoing discussion between Rice University and Baylor Medical School, concerning a merger of the two institutions. The issue went to press last week, before discussions came to an end today, January 12, with a joint announcement from the two presidents, David Leebron of Rice and William Butler of Baylor. As I wrote in this column, Baylor’s ongoing financial problems made the merger a dicey problem for Rice. Nonetheless, the proposed merger revealed a great deal about how Rice has changed since I was a student there in the 1960s—and how it hasn’t.—PB

Rice University, my alma mater, e-mails a monthly newsletter to alumni. The December version contained what you would expect: the inevitable fund-raising appeals, good-news items (early-decision applications are up, Rice continues to rank fourth on Kiplinger’s list of the best values in private universities), reports of honors won by faculty members who hadn’t been born when I was a student, and vignettes destined to go unread by most recipients (“Rice Architecture alum’s Ice House project will raise awareness of urban woes”; “Rice, Texas Heart Institute to use nanoparticles to track stem cells”). In short, the newsletter typically offers as much or as little about Rice as an alum might care to digest. I tend to fall on the “as little” end of the spectrum. Rice today is so much better academically and so much more user-friendly than the school I attended that it is unrecognizable in everything except the name.

Or so I thought, before I read university president David Leebron’s message in the December newsletter. “We are considering perhaps the most important question this university has faced in more than fifty years,” he wrote. “Should Baylor College of Medicine (BCM) become part of Rice University?” I knew about the merger, of course. It has been the subject of stories in the Houston Chronicle, including an op-ed piece written last November by faculty members opposed to the merger. It turns out that Rice today is not so different from the school I knew after all. The fundamental issue the university has wrestled with since its founding, in 1912, is a yearning for recognition of its excellence, which has been forever elusive. In the U.S. News & World Report rankings, Rice is tied with Vanderbilt and Emory for seventeenth among national universities, just a notch behind Brown and Cornell. But in the academic world, where reputation is everything, Brown and Cornell and even Vanderbilt have much more cachet than Rice. Even Kiplinger’s designation of Rice as a best-value institution could be seen as a backhanded compliment. Rice deliberately keeps its undergraduate tuition well below Ivy League range—around $30,000, compared with Brown’s $38,000. Is Rice’s relatively lower sticker price a tacit admission that the university is leery of charging Range Rover prices for what buyers view as a Suburban?

The Rice-Baylor merger, then, is Rice’s attempt to fulfill what it sees as its destiny, to compensate for the limitations imposed by the primary emphasis on undergraduate education and to finally break into the world of mega-research. “A merger would expand Rice’s intellectual scope into a field that accounts for more than 17 percent of GDP,” Leebron wrote, “and which is expected to be a wellspring of basic and applied knowledge in the coming century. That would also enable us to compete for major interdisciplinary grants in biomedical fields, where Rice is now at a strong disadvantage.” The difference in grant money the two institutions received from the National Institutes of Health in 2008 indicates just how strong that disadvantage is: Rice, $11.8 million; Baylor, $212.8 million. According to Leebron, if Rice and Baylor had merged in 2007, their combined federal grant money (in all fields) would have ranked twenty-third nationally, just behind Yale.

Sounds like a good deal, right? I would love to see Rice finally hit the big time, but the more I have learned about the merger, the more dubious I have become. Baylor remains a great medical school, but its institutional operations are a mess. BCM and Methodist Hospital ended their long-standing relationship in 2004, after a battle of egos that could have been avoided. Baylor soon signed a fifty-year deal for St. Luke’s Episcopal Hospital to be its primary private adult teaching hospital; it lasted all of three years. Then Baylor decided to build its own hospital and clinic in 2007. That effort was doomed by the economic slowdown, and in March 2009 construction was suspended on the interior of the building. Baylor currently has no affiliation agreement with a primary private adult teaching hospital. No medical school can prosper without such an arrangement. The tie-in between a hospital and a medical school works best when the medical school controls what happens in the hospital, that is, if the department heads at the medical school are also the department heads at the hospital. That prospect seems light-years away.

The downturn has hit both Rice and Baylor hard, Baylor more so. The faculty members who signed their names to the op-ed that opposed the merger cited financial records that indicated that Baylor has operated at a deficit every year since it ended its long-term partnership with Methodist, and its operating expenses exceeded its revenues by more than $300 million over that period of time. Meanwhile, the Rice Thresher, the student newspaper for which I once wrote, reported that Rice’s endowment dropped by $1 billion during the 2009 fiscal year, from $4.61 billion to $3.61 billion. Leebron imposed a 5 percent budget cut for all departments and limited pay raises; he has announced his intention to do the same in 2010. Baylor’s endowment took a smaller hit, from $954 million to $778 million. Both Rice and Baylor have debt loads in the upper hundreds of millions ($760 million for Rice, $735 million for Baylor).

The timing for the merger could hardly be worse. Late last summer Baylor revealed that it was in technical default on contractual obligations regarding its debt. Rice too has issues. Moody’s Investors Service put Rice’s AAA rating on a watch list for potential downgrading due to the accumulated debt of the two institutions and the unresolved questions surrounding the merger.

It is hard to evaluate the significance of these actions or to know what it will take for Baylor to turn around its history of losing money, but you can tell that it makes Rice nervous. The university laid out conditions that Baylor would have to meet in order for the merger to occur, the idea being to assure the Rice community that the merger will not pose a financial risk. According to the conditions, BCM must solve the problem of its unfinished hospital, either by finding the money to complete it or by selling it, neither of which will be easy to do in these times. BCM must also be on “a sustainable path” to eliminate its operating deficit. This will not happen in 2010; BCM is budgeting a $24.8 million operating deficit for the fiscal year. BCM must have a stable relationship with one or more private adult hospitals. The ideal solution is Methodist, but Methodist will not get involved until the fate of the merger is known. (The situation would be much better if Methodist gave some indication to Rice—it will not talk to Baylor—before the Rice trustees have to vote.) BCM must obtain new philanthropic support. This is one condition of the merger that is likely to be met. Baylor said in December that it has obtained $200 million in verbal commitments from board members.

The Rice faculty voted on the merger in December. A resolution opposing it was defeated by a narrow vote, but only because Leebron and three other high-level administrators cast votes as faculty members, as they were entitled to do. Had they not attended, the anti-merger forces would have won. Since the final decision is up to the governing boards of the two institutions, the vote really amounted to taking the temperature of the faculty.

Leebron continues to be the driving force behind the merger. University presidents tend to be conscious of their legacies, and Leebron clearly sees this as a way to leave his mark on Rice. “I don’t think there’s a realistic scenario where Baylor College of Medicine becomes part of Rice and somehow pulls down the institution,” he told a reporter for Inside Higher Ed, an online trade publication.

But there is a realistic scenario where the Baylor tail swallows the Rice dog. One of the appealing things about Rice is that it has always been an intimate place. When I entered, the total enrollment was 1,600. Almost all were undergraduates. Tuition was free; the only cost of education was books and room and board. I knew almost everyone in my freshman class within a matter of weeks. The university was too small to merit a spot in the elite ranks of higher education. Growth was essential for Rice to become the academic powerhouse it is today, with an enrollment of more than 5,000, an increasing number of whom are graduate students. But the merger could make Rice too big. Baylor is a huge institution, with about 1,900 faculty members. Rice has fewer than 800. At most, 20 percent of the faculty would reap the benefits of the research grants Baylor would bring to the union.

I would never suggest turning back the clock to what Rice was when I was there. It was primitive: year-long courses, few majors offered in the humanities, grading policies that bordered on the sadistic. But I do wonder what effect a merger would have on a culture that puts the foremost emphasis on undergraduate education. Professionalization has been an issue at Rice for as long as anyone can remember. Since I left, Rice has added a music school and a business school. Does it want to produce professionals, or does it want to produce generalists? This is just one of the serious questions that is raised by the proposed merger.

One of Rice’s greatest charms is that when you are on campus you are in a secluded environment. The campus is situated on Main Street, but the foliage and the shrubbery create the illusion of being on an island. If the merger takes place, Baylor will practically be at Rice’s doorstep. The merger is a metaphor for the invasion of the outside world, with all its problems, into this citadel of undergraduate education. There are better ways for Rice to achieve the recognition it craves without putting the university’s unique culture—not to mention its financial security—at risk.

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