The University of Pennsylvania Health System received a huge booster shot yesterday when administrators officially accepted one of the largest financial gifts ever given to a university hospital, and the third largest gift ever given to Penn.
In a ceremony held yesterday afternoon, Philadelphia Health Care Trust Chairman Bernard Korman and University President Judith Rodin announced an agreement to establish a $100 million endowment for Penn Medicine, the new governing body for the Penn Health System.
The gift is especially welcome in a system recovering from the $300 million loss it was hit with during the 1998 and 1999 fiscal years.
Over the course of the next seven years, PHCT -- a charity formed in 1998 to support the advancement of healthcare delivery and research in the city -- will transfer its remaining assets to the University to be used by Penn Medicine.
"We are profoundly grateful to the Philadelphia Health Care Trust for its generous gift, which represents a significant endorsement of the Penn Medicine governance structure to effectively integrate the three-part mission of our academic medical center," Rodin said at yesterday's ceremony. "The philanthropic vision of this gift will permit the University of Pennsylvania Health System to obtain the ideal synergy among its educational, research and clinical missions."
PHCT emerged from the former Graduate Health System that was spun off from the University in 1975 as the Greater Atlantic Health System. Its copious assets originated from the sale of the for-profit organization when the Allegheny Health System bought the organization in 1996.
The entire $100 million will not be transferred to Penn Medicine until 2009. Until then, the PHCT board will dispense the interest made on its endowment both to Penn and other charities it supports in the Philadelphia area.
After this seven-year period, Korman will join Penn Medicine's Board of Trustees as vice chairman and become a member of its Executive Committee and chairman of its Finance Committee.
"I am pleased to recognize and support the role of Penn Medicine as a superbly crafted and effective governance structure for a complex academic medical center," Korman said in his remarks yesterday. "We believe Penn Medicine will become the 'gold standard' for the governance of other university-based health systems and that its successful implementation will lead to improved patient care."
In her remarks Rodin also announced that the Medical School would be establishing an endowed chair in honor of Korman.
Health System Executive Vice President and Medical School Dean Arthur Rubenstein was delighted with PHCT's generosity.
"It's a wonderful gift -- there aren't that many institutions that receive gifts of $100 million," Rubenstein said.
He noted that beyond its financial implications, PHCT's donation was a sign of the progress that Penn's Health System has made since its recent losses.
Over the past four years, the Health System has made significant steps toward pulling itself out of bankruptcy. In FY 2001 it maintained an $8.8 million operating income -- $10 million better than the budget allocation.
"The gift is also extraordinary in terms of a vote of confidence in the School of Medicine," Rubenstein said.
"A few years ago people would have hesitated in what they would have done in terms of making donations. You don't want to give money to a place that is losing money -- the turnaround of the Health System really set the stage for Mr. Korman and his board to feel comfortable about being donors," he added.
Rubenstein explained that the PHCT board would oversee the disposal of its assets to various parts of the Health System until the gift is fully entrusted to the University.
"In the next few years the way that the interest is used will be determined by the Health Care Trust board," Rubenstein said. "They have designated to focus their funding on enhancing patient care, research and education."
Once the $100 million is transferred to Penn Medicine, its Board of Trustees will decide where to direct the assets.
Established only in November of last year, Penn Medicine is the single governing body for the Health System, including the School of Medicine. It is currently engaged in a strategic planning process as it embarks upon operating a fully integrated system for medical education, biomedical research and clinical care.
University Health System Spokeswoman Rebecca Harmon said that as its priorities emerge, Penn Medicine will have a greater sense of how to expend the $100 million gift.
"After the strategic planning is concluded only then will the decision-makers begin to identify how the monies will be used to support their priorities," Harmon said. "Right now I think it's a very participatory process where the dean is soliciting input from faculty and administrators."
