Health System decision could come on Friday

Questions of whether Penn plans to unload the beleaguered Health System finally may be answered, as University President Judith Rodin will likely present recommendations regarding a potential sale at a Board of Trustees meeting tomorrow. Last night, the special committee of Trustees and medical faculty charged with drawing up those recommendations met in a closed-door session, according to University spokeswoman Lori Doyle. The full group of University Trustees begin their scheduled two-day winter meeting today at the Inn at Penn. "If something is to be shared with the Trustees, it would be on Friday," Doyle said. What exactly that announcement will be is a question that has left Medical School faculty, department chairs and Health System doctors guessing. Rumors of everything from a sale to Nashville, Tenn.-based Vanguard Health Systems to an alliance with the Children's Hospital of Philadelphia have been circulating through Health System e-mails for the past three weeks. "I've heard equally definitive rumors that [the University is] not going to sell the flagship," a doctor said regarding the Hospital of the University of Pennsylvania, located on 34th Street. "I've also heard definitive rumors that CHOP is going to buy it." Regardless of what will be decided, if a decision is announced tomorrow, changes must be made to the existing framework of the Health System, Doyle said. "The HealthSystem has a very large debt burden and has a continual need for new capital," Doyle said. The $1.9 billion HealthSystem includes HUP, Presbyterian Medical Center, Pennsylvania Hospital, Phoenixville Hospital and about 70 private practices. Currently, the Health System owes close to $800 million that it received from investors in the form of tax-exempt bonds. Should the Health System be sold to a for-profit company like Vanguard, those bonds would most likely be paid in full. "They would pretty much have to [repay]," said Robert Field, director of the Health Policy Program at the University of the Sciences, noting that the Health System would "no longer issue tax-exempt bonds to raise money." But a sale to a for-profit is just one option on a menu of choices that include bringing in an outside firm to manage the Health System's assets. The special committee was appointed by Rodin in December to provide the Trustees with recommendations on how to absolve the University of the debt incurred by the Health System over the past few years. "It's no secret that the institution is under great financial pressure," Alan Wasserstein, chairman of the Medical Faculty Senate, said last month. Wasserstein is also a member of the joint Trustee-faculty committee. The Health System has lost $330 million in the past three years. The growing financial instability of the Health System led Moody's Investor Service to lower the University's bond rating in 1999, making it more difficult for the University to borrow money. While the University has owned and operated HUP for more than 100 years, the Health System was established in 1993 as a strategic move designed to counter the growing power of Health Maintenance Organizations. Unfortunately for the Health System, efforts to integrate area hospitals and private practices been difficult, causing considerable financial distress. Other academic institutions have found themselves in the same position the University is now facing. Over 10 years ago, the University of Chicago separated from its teaching hospital, and in 1996, Philadelphia-based Thomas Jefferson University created a separate organization for its hospital. But Penn is also sailing in uncharted waters. 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," said John Kastor, a professor of medicine at the University of Maryland.