Review of UofL Hospital by Kentucky Auditor of State Accounts.

An Open Letter to State Auditor Adam Edelen.

Re: An appeal to make broad your audit of UofL Hospital.

Dear Mr. Edelen,

Although it is like pulling teeth, small amounts of information about the financing of the University of Louisville and its University Hospital are slowly becoming public. The public is aware that your office is looking at the University’s handling of its QCCT funding for indigent care in its hospital. I am writing to try to convince your office that examination of QCCT funding alone is insufficient and that to fully judge whether the state and local components of that fund are truly being used to the best advantage of the public, other aspects of University accounts must also be examined.

For example, in last week’s release of information in response to questions submitted by potential responders to the University’s RFP for a new partner, the amounts of transfers from University Hospital funds to the University were outlined to the tune of $74 million of the $430 million of hospital clinical revenues. More than 17% of hospital revenues go directly to the University! Some of this is Medicare money designated to pay the salaries of Residents, but under its ongoing veil of secrecy the University does not detail where its money came from, nor how it is spent.

Given that the University has a long history of pooling its state money and using it as it sees fit, and in the wake of the Passport and other scandals, the public is entitled to a fully justified explanation. How else can we know whether the $34.4 million of current QCCT funding is too much, too little, or just right. A dollar of money drawn from the QCCT means another dollar that might legitimately be used to support indigent care can be spent elsewhere. Indeed, I believe the whole concept of the QCCT fund needs to be revisited. Why, for example, should not state indigent dollars follow the indigent, no matter where that service is provided? Why shackle the indigent to a place they may not care to go? Does the current QCCT reimbursement formula lead to artificially higher charges to all patients at the hospital? Does having a captive patient population blunt faculty motivation to make University Hospital the most desirable and highest quality hospital in town? To make such determinations, the public needs a full audit of the University of Louisville, its Foundations and Hospital.

Additionally, I think I now understand where the $180 million or so clinical dollars deposited annually in the University of Louisville Research Foundation comes from. In the past, clinical revenue of the faculty was divided between its private practice PSCs (where inpatient billings at University Hospital also were credited) and income from the teaching clinics where Medicaid, indigent, and other disadvantaged patients were seen. This latter money was collected through departmental “Foundations,” such as University Medical Foundation of which I was once an officer. I believe that today these moneys are gong to the greater University Foundation. I have absolutely no idea what these funds are being used for, but I think your office must know in order to determine whether the clinical revenues of the medical center are being appropriately used to support the clinical needs of the indigent (or any justifiable need for that matter). The public deserves to know that its University Hospital and its indigent clinics are not being used as cash cows to support activities such as the University’s commercial research enterprise, its sports programs, or seven-figure salaries of its faculty.

Even the University has no idea what happens to the clinical revenues of its faculty private practices. The University has struggled to try to consolidate those clinical practices under a new large University Group Practice, but this is a work in progress and far from a done deal. Even if successful, the new group, University of Louisville Physicians, will likely claim to be independent of the University and thus immune from public scrutiny despite its central role in Louisville’s safety net.

I will place this letter on the Policy Blog of the Institute and thus invite the University to respond. I am hopeful that the University will agree that the truth of full disclosure provides the best path forward for the institution to recapture the confidence of our community that is essential for all of our ongoing success.


Peter Hasselbacher, M.D.
Kentucky Health Policy Institute
March 13, 2012