The University of Tennessee Board of Trustees took the first step late last week toward a possible sale of the university's hospital, 600-bed UT Medical Center in Knoxville, Tenn.
Specifically, the university's board OK'd a recommendation seeking approval from the state Legislature to study the hospital's future management. State law currently doesn't allow UT Medical Center to be managed, leased or owned by anyone else.
"We do not have the management options to compete in the 21st century," said University President Joe Johnson. "The healthcare industry has changed more in the past four years than in the previous 40."
Options being discussed by trustees for the medical center include: a sale of the facility; having another company manage the hospital; or privatizing the hospital by creating a new and separate not-for-profit corporation to operate the facility.
If the General Assembly allows the trustees to exercise their options for the medical center, a study committee would be formed to consider all the outlined options.
UT Medical Center is the latest university hospital to explore another ownership model. They face increasing pressures from managed care, high-cost patients, indigent care and competition.
Some, like Tulane University Medical Center in New Orleans, have sold to investor-owned chains, while others, like University of Cincinnati Hospital, have opted to privatize. Some, like the Medical College of Virginia Hospitals in Richmond, became their own public hospital authority.
Despite the pressures facing most university hospitals, UT Medical Center still turned a small profit in 1995, according to the latest available data from the Tennessee health department. It said the hospital earned about $4.6 million on total net revenues of about $255 million.
To be competitive, Johnson said UT Medical Center needs "the ability to borrow money, purchase provider networks, enter into partnerships with other hospitals and construct new facilities quickly."
Current state law allows UT Medical Center to borrow money, but such business transactions can't be expedited as quickly as a state-run entity, university officials said.
Officials said it's unlikely any changes would occur at UT Medical Center until 1998.