The failing economy was the prime focus of the annual State of the Medical Center address given by Vice Chancellor for Health Affairs Harry Jacobson, M.D. on Wednesday.

In front of a packed auditorium of medical center staff and employees, Jacobson acknowledged the economic hard times yet also expressed his belief the medical center would come out of the recession a stronger institution.

"Call me crazy, I call it optimism," Jacobson said. "Two things happen to companies in a recession: They falter and fail or they struggle, adapt and come through strongly. The second course is exactly what is in store for us, we will struggle and become smarter, survive and thrive," he said.

Despite the optimism, Jacobson admitted the medical center had not been able to avoid the effects of the crisis. He reported the value of the medical center's endowment dropped and that investment income is down $24 million as of Dec. 31, 2008. Due to rising rates of unemployment and loss of income, Jacobson predicts a lower demand for elective surgery, further cutting profits.

The medical center has reacted to the economic crisis by cutting back spending and even freezing some building projects.

"We responded with a sense of purpose and resolve and we brought down spending quickly and efficiently with no effect in patient care," Jacobson said proudly. He also said the medical center is committed to keeping spending low while "keeping the team together." Although work has been frozen on the expansion of the Medical Research Building, thereby terminating construction jobs, Jacobson said the management team decided to reduce their hours in order to maintain employment.

Jacobson continued his optimism by highlighting the positive change he expects in the coming as a result of the new president.

"The new president brought renewed energy to Washington ... a new approach to health care and biomedical research and higher education," Jacobson said. President Barack Obama has pledged to provide additional funding for the National Institute of Health and extra Medicaid funding, which would be helpful to balance Gov. Phil Bredesen's proposed cuts in TennCare, Tennessee's Medicaid program.

For the second half of the address Jacobson reflected on the past year and how the medical center fared in the completion of the 2009 goals. Generally, he said, the medical center exceeded expectations, rising in national rankings, successfully banning smoking and receiving new grant money.