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September 3, 1998

Pitt, UPMC announce new agreement

UPMC Health System has pledged more than $1 billion to the University over the next 10 years, about the same amount UPMC provided to Pitt during the last decade.

The UPMC money will support Pitt clinical programs and will include "substantial" discretionary funds for promising areas of Health Sciences education and research, Pitt and UPMC officials said at a Sept. 1 news conference to announce a new 10-year agreement between the two organizations.

Chancellor Mark Nordenberg called the new agreement "far broader" than the previous management contract between Pitt and UPMC, reflecting a shared desire for closer links during a time of great turbulence in the health care market.

Also under the new agreement, UPMC will build a major research facility with lab space for Pitt physicians and scientists, and control of Pitt physicians' practices will be transferred to the health system. The current 18 practice plans will be unified as the University of Pittsburgh Physicians (UPP), a new non-profit corporation that will be a subsidiary of UPMC.

While UPMC Health System's acquisition of Pitt physician practices is a done deal, UPP bylaws and other documents defining the future job duties and compensation of medical faculty remain "works in progress," Nordenberg said at Tuesday's news conference.

Since last winter, an elected committee of medical school professors has been reviewing the documents and meeting with Nordenberg, UPP President Richard Baron and other officials to address faculty concerns.

Few, if any, of the medical school's 1,300-some faculty members have questioned the need for a unified plan here similar to those at nearly all other academic medical centers. (Among its other advantages, a unified practice plan will eliminate multiple billing of patients treated by doctors from more than one of the 18 current plans.) But some Pitt professors say they fear that handing over control of physician practices to UPMC's bottom line-driven administrators will result in faculty spending more time producing clinical revenue, at the expense of teaching and academic research.

At a Sept. 9 School of Medicine meeting, the committee monitoring UPP negotiations plans to report its latest findings and ask faculty to vote to endorse or reject current drafts of UPP bylaws and a contract for practice plan employees.

It's uncertain what impact, if any, such a vote would have as administrators and lawyers from Pitt and UPMC finalize the wording of the documents over the next several weeks. See story on this page.

University and UPMC officials said their new agreement will strengthen the educational mission of Pitt's six Health Sciences schools by: * Reaffirming what officials described as a joint commitment to the highest levels of medical and biomedical education and research; efforts to attract the best clinicians, teachers and researchers; and greater effectiveness in joint enterprises such as delivery of clinical care.

"The University is fortunate that its principal partner has been, and will continue to be, a health system with a demonstrated commitment to our academic mission and with both the will and the capacity to support it," Nordenberg said.

UPMC President Jeffrey Romoff described Pitt Health Sciences faculty as "the distinguishing characteristic" and "the very heart" of the health system. "In today's challenging health care environment, it is only by linking the schools with the health system that both can continue to flourish," he said.

* Allotting space to Pitt faculty in the planned UPMC research facility. Romoff would not provide details on the facility except to describe it as a large-scope project, "in the neighborhood of a couple hundred thousand square feet," to be constructed in Oakland or Shadyside. An announcement on the project will be made next month, Romoff said.

* Continuing the current practice of granting Pitt one-third of the seats on UPMC's board of directors plus one-third of the seats on its executive committee.

* Improving efficiency and effectiveness of clinical services through creation of UPP. Although it will be a UPMC subsidiary, UPP will operate as a separate line of business with its own board, dominated numerically by medical school department chairpersons and faculty, Nordenberg said. Should the Pitt-UPMC contract be terminated, UPP would revert to University control, he said.

* Guaranteeing an annual flow of some $100 million in UPMC revenue to the schools, with a substantial portion earmarked for academic research and teaching. The discretionary funds will be controlled by Arthur Levine, who will become Pitt's new senior vice chancellor for Health Sciences and medical school dean on Nov. 1.

The man Levine will succeed as senior vice chancellor, Thomas Detre, was largely responsible for Pitt's progress to date in the Health Sciences, Nordenberg noted in a Sept. 1 letter to medical faculty. "At various points, some have expressed the fear that Dr. Detre's successor, lacking the same type of personal history with the [UPMC] Health System and its leaders, would be financially constrained and would have little ability to advance worthy initiatives," Nordenberg wrote. "To the extent that this expressed concern had any merit, it now has been addressed contractually." Over the last decade, UPMC likewise pumped about $1 billion into Pitt — but the payments projected for the next 10 years "will be made in far more challenging times," Nordenberg wrote in his letter to medical faculty. "Obviously, we are making projections over what must be viewed as an extended period, particularly given the rapidly changing market. Therefore, the agreements will include appropriate mechanisms for crafting adjustments (if they should be required) and for resolving disputes (if they should arise)." Officials at Tuesday's news conference dismissed suggestions that a 10-year Pitt-UPMC commitment may be risky, given the volatile health care market.

Nordenberg, Romoff and J. W. Connolly, who chairs Pitt's Board of Trustees and is first vice chairperson of the UPMC Health System board, described the Pitt-UPMC relationship as a natural partnership with a proven track record extending back over 70 years.

Romoff said the Pitt-UPMC relationship differs greatly from the financially troubled one between Allegheny General Hospital and its parent company, AHERF. Unlike the latter, UPMC invests mainly in western Pennsylvania, not across the state; also, neither Pitt nor UPMC is acquiring the other, Romoff said.

The "truly equal partnership" between Pitt and UPMC is virtually unique, according to Senior Vice Chancellor-designate Levine.

"In the other cases that I'm aware of, there's an asymmetry of power," he said. "In some of those situations, the university is more powerful than the hospital complex — usually to the detriment of the health complex, because academicians and researchers aren't necessarily the best businessmen. In other cases, the hospital so dominates the academic establishment that the academic partner becomes feeble." — Bruce Steele

Filed under: Feature,Volume 31 Issue 1

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