Med School hears Health Sys. options

The special committee appointed to examine the future of the University of Pennsylvania Health System is still deliberating, but an independent meeting last night brought the Medical School faculty into the discussion. More than 250 faculty members packed Stemmler Hall to hear a presentation designed to brief the Penn community on the possibility of a sale or merger involving the Health System. University President Judith Rodin appointed a committee last month to analyze options for the Health System, which has lost more than $300 million over the past several years. Last year, Moody's Investor Service lowered the University's bond rating, largely because of the Health System's poor fiscal performance. "It's no secret that the institution is under great financial pressure," said Alan Wasserstein, chairman of the Medical Faculty Senate, in his introductory speech. Of chief concern to medical faculty is how the academic mission of the Medical School will be affected by any deal, particularly one that would involve a for-profit partner. And while he emphasized that he could not comment on the ongoing negotiations between the committee and a variety of organizations, Wasserstein assured the audience "that the faculty will be involved in a broad and deep way" in the final decision. "Whatever options we have, there are going to be difficulties," Wasserstein said. "I don't think we have to focus on the issue of sale to a non-profit." In an interview after the talk, Wasserstein said that ""the for-profit option has got the faculty most energized," and that he thought they would have been "more angered" than they seemed after the meeting. But the symposium did little to answer faculty concerns over the specifics of a possible sale. It instead focused on what other academic institutions have gone through in the mergers, sales and divestitures of their health systems. "I don't think I learned anything tonight that would sway me one way or another," said Kenneth Brayman, a transplant surgeon at the Hospital of the University of Pennsylvania . School of Medicine interim dean Arthur Asbury gave a bleak picture of the Health System's finances before the guest speakers told of their institutions' successes and failures. "Capital spending last year and this year has been relatively spare," Asbury said, noting that investment is crucial to an institution's success in the long-run. Asbury also pointed to the Health System's debts as a large part of the problem. Four experts in the field of health care management each addressed a different segment of how reorganization has affected different universities. And although their presentations took a broad look at all the possibilities that lie in the Health System's future, the bulk of the time was devoted to the subject of a for-profit buyout. David Blumenthal, director of the Institute for Health Policy at Massachusetts General Hospital in Boston, advised the audience that should a deal be reached with a for-profit company, a strong contract must ensure that academic control remains in the hands of Penn. "Everything should be in writing," Blumenthal said, adding that "you should have an iron-clad buyback provision." Blumenthal's conclusions were based on case studies of three buyouts of teaching hospitals. And while Blumenthal was quick to make clear that each of the hospitals he studied had little similarity to Penn, he emphasized that some lessons could be learned. In each case except one, the university retained 20 to 25 percent control of the hospital after the sale, a deal Blumenthal recommended for Penn. Of primary importance, Blumenthal reminded the audience, is that any option will have negative consequences. "In the face of financial distress, you all have to pick your pain," he said. Michael Black, vice dean for administration and finance at the School of Medicine, was one of the more vocal critics of Blumenthal's analysis. "I think it's misleading when you show the capital goes for academics," Black said when the floor was opened to comments from audience members. "The reality is the capital went to the hospital." Black's criticism stemmed from his experiences, which he said indicate that in many sales of teaching hospitals, profits are not directly fed to the medical school. "Our overall goal is to protect the academic enterprise," Asbury said in an interview last week. When asked after the meeting about the amount of time devoted to discussing sale to a for-profit institution, Wasserstein deflected suspicions that a buyout by a for-profit is more probable. "The format had no bearing to the committee's negotiations," Wasserstein said. John Kastor, who presented the wrap-up discussion on mergers in general, noted that should Penn sell the Health System, it would be an unprecedented move, given the University's size. "It would far and away be the largest, most prestigious institution to do so."