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Imagine this: a University of Pennsylvania that didn't have the specter of financial ruin hanging over it. A little too melodramatic? Definitely. But only a little. Ten days ago, the Trustees decided not to sell any or all of the sprawling, debt-burdened University of Pennsylvania Health System. UPHS will continue to operate as a subsidiary of the University, which will still be ultimately responsible for nearly $800 million in debt. True, the Health System has begun to see the red ink subside. Rather than $200 million in losses, it's now posting modest gains, and may turn a profit of around $30 million in the current fiscal year. It is definitely a remarkable turnaround. But it will still probably take decades to retire the debt -- and it could even increase more, as no one is at all confident that even those meager profits are here to stay. It could've been different. Penn could have chosen to sell off the Health System -- made up of four hospitals and a huge primary care network -- for about $1 billion. In other words, someone was willing to not only take a monster headache away from Penn, but to pay them a huge amount of money to do so. A sale would have retired the debt with a little bit of money left over. It would have removed a large burden from the shoulders of Penn's top administrators, all of whom have spent the past three years seeing their time increasingly eaten up by Health System-related matters. Instead, Penn will spend the next year trying to turn UPHS into a wholly-owned non-profit subsidiary of the University, which isn't much different from what it is now. That's more time and money that could be directed elsewhere. "Don't underestimate the amount of work we have to do going forward," one high-ranking administrative official told me. The decision was made for a laudable reason, one not often associated with Penn these days -- the right academic move trumped the smart financial one. The Trustees decided that the Medical School's reputation would have been damaged badly, perhaps irreparably, and that its faculty would never have forgiven the University. But this may have been one of those cases where the right financial decision was also the right academic one. Not for the Medical School, maybe, but for 11 other schools that would have stood to benefit from an institution that doesn't have to worry about a health system that could still collapse under the weight of its debt. Plus, there are plenty of top-rated medical schools around the country -- Harvard University among them -- without wholly-owned hospitals, let alone multi-billion dollar health systems. And even if a sale had gone forward with a for-profit company, the Medical School would have continued to have an academic affiliation with the Hospital of the University of Pennsylvania. (One outside buyer expressed some interest in leaving the 126-year-old HUP with Penn but purchasing the rest of the system. That too was turned down for similar reasons.) Administrators say that the financial troubles haven't directly affected the rest of the University as much as it may seem, but it does force them to approach every decision with much more caution. So the cost of keeping the Medical School happy is that every financial move Penn wants to make -- from the dorm/dining renovations to buying the postal lands -- will have to be made in the context of an institution with a huge amount of debt and the possibility of much more to come. It costs the rest of the University the ability to fully commit to large capital projects, and it costs them the services of a fully engaged president, provost and executive vice president, who will spend yet another year buried in the Health System debacle. And it costs Penn financial piece of mind down the road. Because ultimately, this new financial arrangement with UPHS isn't even that new. There will be some added protection for the University as a whole from further UPHS losses, but if things go south once again -- a strong possibility -- Penn will still be left holding the bag.

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