Committee appointed that may choose to privatize Health System

Amidst speculation that Penn may privatize the financially beleaguered Health System, a committee of trustees and faculty has been formed to consider the system's best options. The University Trustees Executive Committee authorized the appointment of four Trustees and eight faculty members to the committee at its meeting last Friday. The committee was charged with examining how to make the University of Pennsylvania Health System's four wholly-owned hospitals and 12 affiliates more profitable and competitive. But in an e-mail sent to Health faculty and staff, University President Judith Rodin tried to dispel rumors that the committee was already looking to sell parts of the Health System. Instead, she wrote in the e-mail, the committee will look at possible changes in structure to raise money, increase the market competitiveness of the Health System and retain the academic mission of the Medical School. Rodin denied that the decision to look at alternative options for the Health System was solely due to its financial problems. Over the past three years, the Health System has lost over $330 million. "It's not driven by our prior financial problems alone, it's driven by the change in environment in academic medicine and health care," Rodin said in an interview yesterday. University spokeswoman Phyllis Holtzman said it was too soon to predict the course of action the committee might take, adding that there are no definite plans for privatization. "The University has made no decision to sell the Health System, and no decision is imminent," she said, cautioning that the committee should be allowed a deliberative process before speculations begin. "The committee has just been formed," Holtzman added. "We need to let them get started and do their work." However, several possibilities remain open for the Health System. The University could choose to sell the entire system -- or even just some of its hospitals -- to the for-profit private sector. Speculation that the University was going to follow this course of action had penetrated the Health System faculty and staff this week. Besides selling the system, the University could instead create a not-for-profit spin-off. Penn could also choose to pursue a partnership between the Health System and another University or an investment group in the private sector. For example, the medical centers of Stanford University and the University of California San Francisco merged several years ago, although the merger recently collapsed after financial losses. Holtzman said that the University had already been approached by potential partners, but she would not identify the partners or specify how many had contacted Penn. "The Health System's financial improvement has prompted other institutions and organizations to express some interest," she said, noting the almost $170 million deficit reduction the Health System posted in Fiscal Year 2000. Both Rodin and Holtzman noted that the committee's discussion was typical of debates in all academic medical centers today. "Every academic medical center in the United States is having strategic conversations," Rodin noted. Added Holtzman, "There are a lot of conversations taking place because of the volatile health care environment."

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