Next Gazetteer item | Mar/Apr
Contents | Gazette home
for Health System:
Keep Hospitals and Take a 501(c)(3)
months of speculation
about the future of the University of Pennsylvania Health System (UPHS),
a joint committee of medical faculty and University trustees presented
its formal recommendations to the board of trustees at their February
meeting. Before posting a profit for the first six months of the 2001
fiscal year, the Health System had lost some $350 million from 1997 to
2000, and is carrying nearly $800 million in long-term debt. As a result,
the University has been considering all options, including selling off
some or all of its hospitals and clinical-care practices.
Judith Rodin CW66 made it clear that the recommendations constitute a
direction, not a final decision, and that much hard work remains before
the trustees vote on the matter. But, she noted, simply maintaining the
status quo, in this situation, is not an option.
committees main recommendations are that:
The University will not sell any of its hospitals, since Penn is committed
to maintaining an integrated Health System. (The four hospitals owned
by Penn are the Hospital of the University of Pennsylvania, Pennsylvania
Hospital, Presbyterian Hospital and Phoenixville Hospital.)
A new, not-for-profit, 501(c)(3) organization, wholly owned by the University,
will be established for the Health System, its hospitals, doctors practices
and walk-in treatment centers. While the new corporation will be owned
by the University, it will have its own CEO and governing board, allowing
it the flexibility it needs to compete in a challenging marketplace,
in Rodins words.
The University, said Rodin, will continue to be open to joint ventures
on capital projects and potential alliances with partners who share our
commitment to academic medicine and vision of a tripartite commitment
to teaching, research and patient care.
of those steps, she noted, will position UPHS in a way that will protect
and enhance the academic mission of the School of Medicine, allow UPHS
to compete effectively in the commercial marketplace, and enhance its
ability to raise capital. Given the Health Systems very sizeable debt
burden, Rodin added, it will need additional capital over the next several
years to support our academic and clinical missions, reinvest in our fixed
assets, and cover debt service.
the creation of a separate 501(c)(3) corporation does not automatically
shield Penn from the Health Systems debts, it will allow the Health System
to restructure its debt at some point without obligating the University.
In addition, the 501(c)(3) classification will permit the Health System
to make its budgetary decisions without going through the Universitys
relatively cumbersome budget process, noted Penn spokeswoman Lori Doyle.
Wasserstein, chair of the Medical School Faculty Senate and a member of
the joint committee which issued the recommendations, said that one reason
for creating the 501(c)(3) was to make the Health System more nimble
in the marketplace, more capable [of] doing a deal.
faculty is relieved and satisfied with this outcome, Wasserstein added.
We were afraid that sale of the Health System in whole or in part would
compromise the academic mission.
he warned, Now is not the time for us to become complacent, noting that
reorganizing the Health System as a separate corporation does not infuse
it with capital. Capital is desperately needed to improve clinical services,
support the medical school, and attract and retain first-class researchers.
The president and the trustees are therefore obliged to continue to look
at joint ventures, foundations, fundraising and other sources of capital.
of the faculty feel that the need for such a deal could be lessened if
only the Health System reached its economic potential, he added. Working
here every day we are painfully aware of inefficiencies in clinical operations.
These involve not only high-profile items like billing and collections
but subtler things like time of [patients] discharge. He suggested that
faculty and administrators need to work together better to improve efficiencies.
facultydoctors in generalare conservative and averse to change, Wasserstein
said. This recent crisis may make us more amenable to it. Weve had a
wake-up call, and we have to respond or face a similar crisis down the
Health Systems future was the subject of a medical Faculty Senate symposium
on January 29, attended by about 300 employees. Four scholars from other
universities who have studied or participated in the sales and mergers
of academic health centers offered their perspectives. Dr. Arthur Asbury,
interim dean of the School of Medicine, highlighted the Health Systems
financial challenges, noting that capital spending last year and this
year has been relatively spare and that more expenditures will be needed
in the future for replacement, renewal and new technology. Another responsibility
to consider, he observed, is the care and feeding of the academic programs.
that, as Rodin noted, is a core priority. The decision not to sell the
Health System, she told the trustees, reaffirms what we hold most dearly:
that is, the central academic mission of this institution.
Next Gazetteer item | Mar/Apr
Contents | Gazette home
Copyright 2001 The Pennsylvania
Gazette Last modified 3/6/01