At the 11th hour of heated legislative debate, the state-run Medical University of South Carolina won some freedom from state constraints, but the victory came at a price.
In a plan approved June 3, the day before the South Carolina Legislature ended its session, the House passed a bill that allows Charleston-based MUSC to determine its procurement and employee policies. The measure, however, also imposes greater scrutiny and some new restrictions on the medical university.
The bill creates a public authority to oversee MUSC's flagship 587-bed medical center in Charleston, in a loosening of reins that MUSC officials predict will save the medical university $10 million annually.
The public authority was MUSC's latest solution to the challenges of remaining solitary in an increasingly consolidated market. Several years ago, MUSC tried to lease its hospital to Columbia/HCA Healthcare Corp., but the attempt failed. The curbs were put into the legislation to ensure that the flexibility granted to MUSC did not eliminate state oversight.
"We're very pleased that we have the legislation, because we know that the two systems that were very costly for us to operate were procurement and human resources," said Pam Cipriano, chief operating officer at MUSC Medical Center.
The hospital had a $400 million budget last year and posted a net loss of $14 million, she said.
Under the bill, the public authority can sell or lease the hospital's nonessential property only with the approval of the state's Budget and Control Board, which comprises the governor, the state treasurer, the comptroller general and the chairmen of the Senate Finance and House Ways and Means committees.
The measure prohibits transactions such as the unpopular proposed lease agreement between MUSC and Nashville-based Columbia. That deal was scrapped following lawsuits that led the case all the way to the South Carolina Supreme Court (April 5, p. 36).
The proposed deal caused other area medical systems to form alliances. Despite the state Supreme Court's approval of the MUSC-Columbia deal in February, both parties decided to part ways.
The new public authority will not go into effect until the governor signs the legislation and the MUSC board of trustees approves the changes, Cipriano said. Conversion of the oversight structure is targeted for Jan. 1, 2000.
Before letting the Senate bill pass through the House, state Rep. Lynn Seithel, a Charleston Republican, held the measure hostage with a slate of 340 amendments. Ultimately, the amended version stated that all of MUSC's revenues would be considered public funds. That provision came in direct response to a recently released audit that scrutinized the relationship between MUSC and its doctor group. The audit, prepared by the state's Legislative Audit Council, suggested the current structure may create a conflict of interest about the use of public money.
The doctor group, University Medical Associates, is a separate not-for-profit corporation that operates the practices of MUSC physicians. It is governed by a board of MUSC College of Medicine faculty and administrators, and has established three for-profit corporations, which are set up to expand MUSC's network of physicians.
The doctor group gives about $4 million per year to the medical center. That money will now be considered public funds that can't be used for recruitment or gifts, as was previously the case, Cipriano said.
The relationship between MUSC and the physicians has blurred the lines between public and private functions, allowing MUSC to avoid accountability for its use of public money, the audit charged.
Also, in fiscal 1997 and 1998, MUSC made most of its contributions through the doctor group. The audit charged that some of the contributions were made to religious organizations, and some seemed unrelated to MUSC's mission, according to the audit.
While the legislation allows MUSC to forgo state procurement restrictions, it requires the medical university to use competitive bidding and seek construction contract approval from the state's budget and control board.
Overall, the university is willing to put up with the requirements to gain freedom from direct state control, Cipriano said.
"We believe there may be some difficulty," she said, "but we are willing to make that trade-off."