State Auditor’s Report On Governance of UofL and Its Foundation Relationship Highly Critical.

New University and Foundation leadership a breath of fresh air.

I went to Frankfort today for an early look aaudit-pix-12-14-16t the long-awaited result of Kentucky’s Auditor of Public Accounts of the relationship between the University of Louisville and its investment arm, the University of Louisville Foundation.  Alas, even before the press conference began, most of the major news outlets in Louisville had already published in-depth reports of the Auditor’s findings.  [Their reporters had access to an embargoed early release of the full report. My request for that opportunity went unanswered.]  My observations of those who spoke or asked questions at the session interpreted the report as highly critical of how the University and Foundation interacted under the administration of Former President James Ramsey– except for Dr. Ramsey’s attorney who termed the report a disservice to the community.  I will not duplicate the reports of  Chris Otts of WDRB, Tom Loftus of the Courier Journal, Kate Howard of the Kentucky Center for Investigative Reporting, Joe Sonka of Insider Louisville, Kyeland Jackson of the Louisville Cardinal,  or whatever other entity picks up this important story; but I encourage my readers to read some of these reports yourselves.  You can read a summary handed out at the session here, and a rebuttal offered by Dr. Ramsey’s attorney, Steve Pence.  The full report is available on the Auditor’s website.  It contains  responses by current leadership of the University and Foundation, a response by Former President Ramsey, and a rebuttal to that response by the Auditor’s office.  A video of the conference is also available. I have just begun to analyze the full report myself. At least read its Executive Summary, duplicated here, which contains specific recommendations. The summaries look rather damming to me, as was in my opinion the whole presentation by Auditor Mike Harmon. Continue reading “State Auditor’s Report On Governance of UofL and Its Foundation Relationship Highly Critical.”

Dr. David Dunn Receives $1.15 Million While Parting From UofL

A lot happened today at the Executive Committee meeting of the UofL Board of Trustees.  I was unable to attend. It is being reported that UofL and KentuckyOne Health are dissolving the Joint Operating Agreement under which KentuckyOne managed most of the clinical activities of University of Louisville Hospital. I do not yet have access to the details of the dissolution process which had a myriad of contractural agreements to settle including penalties and non-compete clauses. I hope to be able to provide an analysis in coming days. Much may be revealed in the fine print, including why KentuckyOne will continue to put money into University Hospital.  The two entities have agreed to prepare new Academic Affiliation Agreements that would allow UofL faculty and trainees to interact at Jewish Hospital, and for Jewish Hospital to capture the financial, research, and reputational advantages of being a teaching hospital.

Another matter that was apparently dealt with at today’s meeting was the status of Dr. David Dunn, one of the principal architects of the agreements with CHI and KentuckyOne, but who has been on the sidelines for many months while he was being investigated by the FBI for possible misuse of federal money,  To my knowledge, the status of that investigation has not been made public.  Dr. Dunn has been being paid one of the very highest salaries in the University even though his contract has reportedly expired.

Today, the status of Dr. Dunn has apparently been settled. The University provided the statement below in response to my request for an update:

“The University of Louisville and Dr. David L. Dunn have reached an agreement related to his employment at the university. As of Dec. 12, 2016, Dr. Dunn is no longer an employee of the University of Louisville. Dr. Dunn leaves the university as a tenured, full professor in good standing. To compensate for his relinquishing his tenured position, Dr. Dunn will receive $1.15 million.”

Some have speculated that the Board has taken no action with respect to Dr. Dunn because it agreed not to take other than “routine” actions in a settlement of a lawsuit by a group of community ministers over the racial make-up of the Board. Perhaps no action was appropriate.  The Board recently prefaces its retirement into executive session by declaring that it is for “routine” matters only. I must say that I felt uncomfortable with the optic earlier this month when the full Board terminated the tenure of an African-American faculty member.  To that person, no matter what the merits of the situation, the termination action was hardly routine. I would argue that an agreement to deal only with routine or non-structural matters no matters longer holds any water and in fact has already been abandoned.  That is as it should be!  Dissolution of the Joint Operating Agreement is no more or less routine than granting degrees, approving a budget, hiring fiduciary auditors, granting or removing tenure, or for that matter, raising tuition. Perhaps there are legal niceties of language to be honored, but this Board is doing exactly  exactly what needs to be done and must be allowed to do in an unfettered manner.

Peter Hasselbacher, MD
Emeritus Professor of Medicine, UofL
President, KHPI.
December 13, 2016

Somethings Big Are In The Air

The Executive Committee of the UofL Board of Trustees is assembling now. The executive committee can act for the whole. I predict it will vote on the relationship with KentuckyOne Health. It is likely the vote will involve severance of the joint operating agreements. UMC would then take control of the entire Hospital. From what I have heard, and because of recent financial events, I will be surprised if this does not happen.

Tomorrow the State Auditor will announce the results of the audit of the relationship between the University and its Foundation. I understand that the audit will not be kind.

We will soon know more.

Peter Hasselbacher

Drop In Value of UofL Endowment Confirmed.

Endowment growth stalling compared to other institutions.

Numerous earlier reports by Mr. Chris Otts of WDRB brought to the attention of the public information about financial dealings of enough concern that at least two major donors to the University of Louisville withdraw their support, triggering in large measure an intervention by the University of Board of Trustees to take a more controlling role in the University of Louisville Foundation and a full-scale fiduciary audit. This latter offers the potential to clear the air or to lead to even more troublesome revelations. Mr. Otts’s latest report  deals with unauthorized spending of the University’s endowment by the Foundation in support of its commercial research, real estate, and other agendas both known and unknown. The result has been a substantial fall in the value of the endowment as its principal is consumed.

Sparked by Mr. Otts’s use of information provided to him by the University as reported to the American Association of College and University Business Officers (NACUBO); and by comments made by Trustees Greenberg and Benz at last week’s meeting of UofL Trustees raising serious concerns about the endowment; I went to NACUBO’s website myself.  Summary files for public use are available including the market values of the endowments of some 850 of the most important Colleges and Universities in the US and Canada from 1990 to 2015.  I abstracted these and plotted the market value of UofL’s endowment along with its rank among other institutions in this regard. Spending information or investment yields for individual institutions are not made available to the public, although summary statistics on aggregates in broad categories are available. A static image is presented below, and an interactive version revealing the underlying data is available.

In summary, the amount of our endowment rose progressively from 1990 until around 2007 after which much volatility occurred to the point that the market value of the endowment in 2016 is indeed less than it was 10 years ago in 2006!  UofL appears to be eating its nest egg, and compared to other institutions of higher education, is losing ground in endowment growth.

uofl-endowment-1900-2016
Continue reading “Drop In Value of UofL Endowment Confirmed.”

Credit Ratings for UofL, UofL Foundation, and CHI Downgraded.

Financial stresses abound.

In the space of a week, Moody’s Investor Services released credit opinions for the University of Louisville and the University of Louisville Foundation; and Catholic Health Initiatives published its Annual Report for the Fiscal year ending June 30, 2016.  The results were not very pretty. The rating for the bulk of the University’s existing bonds dropped one grade to A1 with an outlook determined to be stable. The Foundation did not fare as well. Its rating dropped three steps to A3 with an outlook revised to negative. Catholic Health Initiatives disclosed operating and non-operating losses totaling $667 million. CHI had declines in its own bond ratings earlier this year, due largely to excessive debt reported to stand at $9 Billion as it seeks to partner or merge with another Catholic hospital chain. The drops in grade and financial losses are by themselves troubling.  However, language in the details of the reports links the organizations together, highlights the harmful consequences of recent management and political manipulations on the University, overestimates the health of current business relationships between the parties, and underestimates the impact of promised roll-backs to Medicaid and the Affordable Care Act on the financial health of our local hospitals and the University.  For these reasons, I fear that things are going to get worse before they get better. Continue reading “Credit Ratings for UofL, UofL Foundation, and CHI Downgraded.”

What Is Happening at Louisville’s Veterans Hospital?

hearing-crowd-11-15-16-750pxA public hearing to present the results and hear comments about the draft Environmental Impact Statement for the proposed Replacement VA Medical Center in Louisville was held on November 15 at Christ Church United Methodist on Brownsboro Road. This is just down the road from the favored site on a vacant former farm on the southeast corner of the intersections of the I-264/Waterson Expressway and Route 42/22/Brownsboro Road. Two separate sessions were held: at noon and 6 pm. I attended the earlier session which lasted just shy of three hours. I did not count heads, but I estimate that something fewer than 100 people were in attendance including VA staff, consultants, and reporters. I learned about the hearing earlier from the newspaper. When I got home that afternoon, I found my personal notice in the mail delivered after the fact by the VA to all those who signed up as interested persons.  I do not know if more people would have attended had more timely notice been given in this manner.  The people who did show up were clearly already engaged, seemed to be largely neighbors of the project, and almost uniformly against locating the project at Brownsboro for multiple reasons. I do not know how the evening session went and will limit my comments to the midday session. Continue reading “What Is Happening at Louisville’s Veterans Hospital?”

What Is Happening To Our Downtown Louisville Medical Center?

A number of threads that I have been following this past year or so came to a head this last month. These include a guilty verdict in federal court for a cardiologist in Ashland, Kentucky who had been accused of falsifying billing records to secure payment for performing medically unnecessary invasive procedures. The Leapfrog organization published its updated list of hospital safety grades. Additionally, and certainly not least, there are worsening signs of a dysfunctional and perhaps disintegrating relationship between the University of Louisville and KentuckyOne Health, the unit of Catholic Health Initiatives (CHI) that in Louisville owns Jewish and Sts. Mary and Elizabeth Hospitals, and manages the University of Louisville Hospital and its James Graham Brown Cancer Center. Although these themes are not necessarily unrelated to each other, in this article I will comment on the UofL/KentuckyOne situation and deal with others subsequently. First some background for what promises to be a major change in the alignments of the downtown medical center. Continue reading “What Is Happening To Our Downtown Louisville Medical Center?”

There Is A New Hospital in Louisville!

nch-logo-500The anticipated announcement that Norton Healthcare would change the name of its Children’s Hospital following the settlement of its legal dispute with Kosair Charities was made today.  On November 10 the, former Kosair Children’s Hospital will be named Norton Children’s Hospital.  The new name follows the format used by Norton’s other local hospitals.  The Kosair appellation will also be dropped from other healthcare facilities that shared names including outpatient centers, a women’s and children’s hospital, and a network of pediatric medical general and specialty practices.

According to today’s press release:
“In 1981, the Kosair Charities Committee and Norton-Children’s Hospital entered into an agreement whereby the Kosair name would be used on the hospital.  Following a mutual decision in late June 2016 to end the naming rights agreement, Norton Healthcare and Kosair Charities agreed that the name Kosair would be removed from all Norton-owned facilities and medical practices.” and…

 “We thank Kosair Charities and its members for their support and dedication to the Commonwealth’s children,” [Hospital President] Kmetz said. “Both organizations remain committed to meeting children’s health care needs. We will now pursue that focus independently.”

Commentary.
And so, what began as an amicable partnership that became a major focus of Kosair Charities’ fundraising efforts, ends deceptively gently after an acrimonious legal dispute initiated by Kosair Charities.  For a relatively small contribution towards charitable care in the Children’s Hospital, Kosair Charities had a top billing in the name of the largest and most respected children’s healthcare network in the state. Continue reading “There Is A New Hospital in Louisville!”

Ramsey Supporters on UofL Foundation Resisting Oversight by University Trustees.

Later this morning, the Board of Directors of the University of Louisville Foundation will meet to discuss matters crucial to its future relationship to the University of Louisville. Following the forced resignation of former UofL Pres. James Ramsey, a Foundation board comprised largely of friends and appointees of Ramsey seems more interested in protecting his legacy and image than in facing up to the wholesale loss of confidence in the Foundation by the community. Having been forced to partially lift the curtain on its internal activities, and in the face of refusal to fully disclose its confusing if not inappropriate financial machinations to University of Louisville trustees, the Foundation still clings to the incomprehensible belief that it has the right to select and oversee the outside entity that will audit its financial activities. If allowed to do so, the Foundation would thus define both the scope of such an examination and control the dissemination of its result. After all, he who pays the piper calls the tune. All this from a Board of Directors that appeared prepared to retain Ramsey as President of the Foundation and award him even more money from the University’s assets. Of course, it is possible that more than just protecting Ramsey’s reputation is at stake. As yet undocumented allegations of financial mismanagement or worse are circulating. Certainly it is in the interest of the entire University community that no doubts remain after a long-overdue, no-holds-barred audit of the vaults of the Foundation. It is follow the money time! Continue reading “Ramsey Supporters on UofL Foundation Resisting Oversight by University Trustees.”

KentuckyOne Poised To Announce Layoffs of Senior Executives.

I have been advised by two sources that KentuckyOne Health will soon announce the elimination of several system-wide or senior executive positions designed to improve efficiency, reduce costs, and emphasize local leadership.  The as-yet unconfirmed names of the individuals currently in those positions include clinical and operational executives at the highest level.  I am unaware if the names of included leadership comprise a complete list or represent the tip of the iceberg of things to come.  Perhaps as an early indicator, the senior physician executive at Jewish and Sts. Mary & Elisabeth Hospitals left that position a few weeks ago.  As a company outsider, it is impossible to know all the reasons for changes in personnel.  These often include the personal career plans of the employee, but also concerns about the fit between employer and employee in meeting the goals of the particular corporation.  KentuckyOne may well once again be feeling financial pressures that cannot be denied. It has laid-off employees in the past to decrease expenses – a strategy that in the longer run was not entirely successful at University Hospital.

On the other hand.
One of the most common complaints I hear from my University of Louisville colleagues reflects what is considered to be unwanted and disruptive outsourcing or other “outsider intrusion” on the part of Catholic Health Initiatives or KentuckyOne management that does not allow for appropriate local initiative or control, or which treats all hospitals the same no matter where they are located, or fails to acknowledge the particular needs of their patient population. From this perspective, a diminution of the role of system-wide executives might be considered a worthwhile result. On the other hand, I suppose it is possible that a state-level KentuckyOne system control might be replaced by even more direct CHI control from Colorado!  The desire for local control is, however, at odds with current national and local policy, or financial pressures for hospital and health system consolidation and coordination.  The health of KentuckyOne and its partnership with the University of Louisville is a matter of critical concern for Jefferson County and the Commonwealth.  Things have not been going well so far. Continue reading “KentuckyOne Poised To Announce Layoffs of Senior Executives.”