Meeting Minutes

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PRESENT: Andrews, Areen, Arend, Bates, P.Betz, Bloch, Breall, Brown, Cohn, Cole, Davis, DeGioia, Diamond, Dretchen, Fasold, Finkel, Glazer, Goldfrank, Hauser, Iglarsh, Kellar, Kopac, Lauerman, Lieber, Martire, McFadden,S.J., McGrail, Morris, A.Myers, Nelson, Nishioka, Noyes, Peck, Pfeiffer, Rameh, Scribanu, Serene, Soudee, Subramanian, Tracy, Vroman, J.Walsh,S.J., T.Walsh, Wasserstrom, Young, Zucarelli

GUESTS: Minor Anderson (Sr. Exec. Dir., Network Bus. Dev. Strategy), Winston Churchill (Chair, Bd. of Directors), Paul Katz (Chair & Chief Op. Officer, Dept. of Medicine), Nicole Mandeville (VP & Treasurer), Steve Moore (Price Waterhouse)

ABSENT: Angel, Byrne, Danielsen, Dover, Fink, Fisher, Fort, Gallucci, Gerli, Haft, Harter, Joyner, Lawton,S.J., Lepgold, McCabe, Mujal-Leon, K.Myers, Oakley, Nelson, Pinkard, Puto, Regan, Richardson, Ronkainen, Rothstein, Spiegel, Stent, Terrio, Tracy, Viksnins, Vroman, T.J. Walsh, Weidenbruch, Wiesel, Wientzen.
 

Prof. Bates opened the meeting at 4:30 p.m. by stating the purpose: to discuss the University's negotiation with MedStar, and the Medical Center finances.

Winston Churchill presented the Board perspective on the transaction with MedStar.  If closed, it will help restore some of the accumulated losses.  The Medical School will be preserved - "that piece is inviolate."  The Board is anticipating the need to subsidize the Medical School at $10 million annually after the transaction; some money will flow from MedStar to the School.

Prof. Hauser questioned Mr. Churchill on the Faculty Practice Group's (FPG) future; Dr. Wiesel has stated that he is negotiating the incorporation of the FPG into MedStar, in contrast to his earlier statements.  Mr. Churchill acknowledged this issue, and stated that this will be negotiated further with MedStar.  Prof. Cole cited the need for more direct Board-Faculty communications.

Minor Anderson presented further on the transaction.  During negotiations, several principles have been followed - a partner who appreciates academics is needed; the risk from the clinical enterprise must be mitigated, etc.  The transaction is structured as a long term lease, but is best conceptualized as a sale.  There will be initial payments to G.U.; investments will continue to be made by MedStar in the clinical business, and there will be on-going profit sharing from MedStar to G.U.  There will also be a one-time investment of $5M in the School of Medicine.  MedStar is not necessarily committed to a full service practice at Georgetown, but is committed to that across the whole of MedStar.

Jack De Gioia presented on the financial implications of the partnership.  He began by reviewing the recent financial news.  The FY98 budget was revised to $65M debt due to aging of accounts receivables.  Dr. De Gioia and Dr. Paul Katz then, on orders from the Board, began to assess our finances.  A $76M loss is anticipated this year - $32M in hospital, $20M in FPG, $5.2M community practice, $2.4M education, $12.7M research.  Of $85M Medical Center overhead, $27M is to University.

The following 5 items need to be dealt with.  There is now $80M capital debt on clinical portion of the Medical Center.  The structural deficit on academics is $15M.  There is $60M deferred maintenance on the non-clinical space. $6M to $31M of overhead for University services will be lost after the transaction.  Approximately $160M of reserves needs to be restored ultimately to make up for Medical Center losses through FY 1999.

Prof. Lieber pointed out that Medical Center losses are getting worse and worse, and there should be accountability.  If the negotiation fails, there still needs to be a plan to prevent catastrophe.

Wayne Davis presented further numbers, which confirmed a $76M
loss at the Medical Center this year, and $75M loss for the University as a whole.  Within the Medical Center, $58M will be lost in the clinical business and $15M in academics.  The University has borrowed $100M to keep cash reserve accounts solvent.

Steve Moore of Price Waterhouse (PW) presented on improvements in financial reporting.  In November 1998, PW undertook a massive review of the numbers for the Medical Center.  PW is engaged to make numbers realistic so that the transaction with MedStar can proceed.  He feels the numbers now being reported are accurate and realistic, and operating processes are improved.

Paul Katz spoke on operational improvements.  A plan has been developed to improve performance in clinical and research spheres, and in the Medical Center as a whole.  The focus is now on revenue enhancements as well as cost reduction.  Prof. Myers expressed disappointment that Dr. Katz's presentation was similar to statements made over the last two and a half years.  Prof. Hauser asked about the expense reduction goals.  In particular, he decried the poor support services in the hospital and the risk of further cuts in this area.  Nursing staff is hard to retain when support is poor.  Dr. Katz agreed on the need to enhance nurse recruitment and retention.

There was substantial discussion on the implications of the financial crisis and the transaction on education, research, and clinical practice.

The meeting adjourned at 7 p.m.

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