Two not-for-profit hospital systems unveiled major restructuring initiatives on Friday. The announcements follow by a week a similar undertaking by Catholic Healthcare West (Feb. 12, p. 4).
The debt-laden University of Pennsylvania Health System, Philadelphia, will have to stand on its own now, as the University of Pennsylvania announced plans to spin off the healthcare system into a wholly owned subsidiary with its own chief executive and governing board.
The university also reaffirmed its commitment to an integrated, not-for-profit healthcare system, squelching rumors it was poised to sell all or part of the four-hospital system to an investor-owned chain (Feb. 5, p. 36).
No timetable has been announced for the spinoff, but the university will keep the medical school under its auspices.
The spinoff, which will free the university from UPHS' $800 million in long-term debt, follows similar actions by other universities that have thought better of mixing academics and healthcare. Philadelphia's Thomas Jefferson University did the same thing when it separated from Thomas Jefferson University Hospital in 1996, forming Jefferson Health System.
University of Pennsylvania officials may be hoping that the move will bolster the university's credit rating, which has suffered under UPHS' large losses in recent years. After UPHS lost $187 million on operations in 1999, New York-based Moody's Investors Service downgraded the university's rating to A1 from AA3 and dropped the healthcare system's rating to A3 from A2. Although the university's downgrade primarily stemmed from health system problems, UPHS' rating has been helped by the system's relationship with the university, Moody's Vice President Lisa Martin said.
Despite a turnaround effort that has included massive staff reductions, UPHS' debt and capital needs have been a drain on the university, and university President Judith Rodin assembled a special joint committee of medical faculty and university trustees late last year to help decide the system's future.
The future of Ascension Health, St. Louis, may look different because of an organizational restructuring that includes adding new senior-level positions, such as the system's first-ever chief medical officer.
The reorganization comes two months after Douglas French took over as president and CEO of Ascension, the nation's largest not-for-profit hospital system. French, who was chief operating officer, replaced retiring CEO Donald Brennan.
Ascension also will add a chief information officer and hire a new chief financial officer. Ascension CFO and Senior Vice President of Finance Jerry Widman plans to leave the system.
Another key part of the reorganization is dividing management into five strategy teams. One team will focus on clinical excellence, one on innovation and another on operations improvement. A fourth "voice for the voiceless" team will include advocacy, government relations and public policy executives. A "work-life community" team will comprise officials from the mission, ethics and public relations departments.
Ascension, which owns or operates 71 hospitals, was created two years ago through the merger of Daughters of Charity National Health System, St. Louis, and Sisters of St. Joseph Health System, Ann Arbor, Mich. In the fiscal year ended June 30, 2000, Ascension earned almost $200 million on revenue of $6.4 billion.