Harvard Medical School achieved breakeven on unrestricted cash flows again in FY23 by focusing on managing its unrestricted resources, despite facing financial headwinds that led to an operating loss of $28 million.
As reported according to generally accepted accounting principles (GAAP), FY23 revenues declined by $27 million, or 3 percent, to $829 million; the decline was driven primarily by the final pledge payment of a four-year gift that was received in FY22 and was not anticipated to repeat in FY23. Adjusting for this $40 million gift receipt in FY22, revenue was up $13 million, or 1.5 percent, year-over-year, primarily due to growth in sponsored research, an increase in the endowment distribution, and net tuition. This growth was partially offset by declines in royalty and external education revenue.
Overall, FY23 expenses increased by $41 million, or 5 percent, to $857 million. The majority of this increase was anticipated due to planned strategic investments in people as well as expenditures returning closer to pre-pandemic levels in categories such as travel and in-person teaching. In addition, expenses related to restricted gifts, where the revenue was received in prior years, drove an anticipated mismatch of revenue and expenses that resulted in deficit spending on a GAAP basis.
Despite the GAAP operating loss, HMS was able to maintain its current level of unrestricted reserves while continuing robust investments in our mission, our priorities, and our people. In FY23, we made several exciting new faculty hires that demonstrate our commitment to cutting-edge ideas and research, including a joint hire with the Kempner Institute for the Study of Natural and Artificial Intelligence at Harvard University. The School invested in curriculum redesign for the Harvard-MIT Program in Health Sciences and Technology track of the MD program, increased the growth and reach of master’s degree programs, and made additional renovations to the Francis A. Countway Library of Medicine, which will expand collaboration and study spaces for students. Research spending was back to pre-pandemic levels, with exciting new federal awards in the pipeline. Finally, we had a record-breaking fundraising year, which helps enhance investments in our programs and people.
While we are facing continued revenue and inflation pressures, HMS has much to be proud of and many reasons to be optimistic.
—Dean George Q. Daley
FY 2023 Operating Revenue
Research grants and contracts $317,342,287 (38%)
Endowment distribution for operations $224,075,470 (27%)
Other revenues* $128,207,853 (16%)
Gifts for current use $67,806,879 (8%)
Rental income $48,568,609 (6%)
Net student income $43,114,032 (5%)
Total $829,115,130
* Includes continuing medical education, publications, service income, and royalties
FY 2023 Operating Expenses
Personnel costs $353,673,394 (41%)
Supplies and other expenses $255,613,482 (30%)
Research subcontracts and affiliates $116,636,571 (14%)
Plant operations and interest $84,940,035 (10%)
Depreciation $46,316,794 (5%)
Total $857,180,276
