RE: The future of UTMC
The Chronicle of Higher Education
In late March, as the coronavirus pandemic swept the globe, a tiny bit of good news surfaced in Northwest Ohio.
The University of Toledo Medical Center announced that its molecular-diagnostics laboratory, which detects and monitors infectious disease, was providing faster testing for the virus — producing results in 48 hours or less. Previously, local results had taken as long as eight days.
It was a reminder of the vital role that hospitals serve in fighting the pandemic on the ground, in their communities — in this case, a public hospital run by a public university in South Toledo. But the hospital itself, known as UTMC, faces an uncertain future because of dwindling services and shaky finances.
It may be sold. It might even close its doors.
Local residents are angry. Activists and former elected officials who have organized to save the hospital blame a $2.5-billion partnership deal that the university’s Board of Trustees signed in 2015 with ProMedica, a regional hospital chain. The agreement sent most of UTMC’s doctors and residents to ProMedica in exchange for cash payments and upgraded medical-school facilities.
At the center of the debate are a pair of uncomfortable questions: Did the trustees approve and execute an agreement that gave unfair advantages to ProMedica? And did two of the trustees involved have conflicts of interest with the hospital chain?
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The FBI is scrutinizing the 2015 affiliation agreement, the largest contract in the university’s history, according to a source with knowledge of the inquiry. A spokeswoman for the agency’s Cleveland division declined to confirm or deny that an investigation is taking place.
If the 210-bed university hospital shuts down, it could happen at a time when coronavirus is still a widespread health crisis, with the possibility of a second wave of infections in the fall or winter. The loss of hospital beds could become a big problem.
Even before coronavirus struck, the hospital was in the red, with a projected budget deficit of $25 million this fiscal year. That deficit is increasing, and could even double, thanks to the virus.
“COVID-19 is exacerbating the financial problems of the hospital,” Sharon L. Gaber, the University of Toledo’s president, wrote last month in an emailed response to questions from The Chronicle. The president said current estimates “indicate we are losing $1 million per week during this pandemic.”
The university is weighing its options, Gaber wrote: “No final decisions regarding the hospital have been made. We expect this process to take several months, and to date, we do not yet have recommendations for next steps.”
Adding to the uncertainty: the university announced in late April that Gaber is resigning as president to take a job as chancellor of the University of North Carolina at Charlotte. The effective date of her resignation is still being negotiated.
Academic medical centers were once reliable moneymakers for universities, but they have become a risky bet: Such hospitals charge higher fees to help fund instruction and research, and that makes them less attractive to the exchange-based insurance networks created under 2010’s Affordable Care Act.
Independent hospitals also have a tough time surviving in this era of hospital chains and consolidation.
In an op-ed in The Toledo Blade, S. Amjad Hussain, a former trustee and an emeritus professor of surgery and humanities at Toledo, argued that the hospital’s predicament requires urgent action. One-time federal stimulus dollars won’t be enough to stop it from hemorrhaging money, he wrote, emphasizing that the era of small academic medical centers is “long gone.”
Last month the university issued a formal request for proposals ‘for a potential acquisition, lease, management agreement or other transaction of its community hospital.”
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Companies have until June 10 to submit a proposal, and the university’s timeline suggests a decision on the hospital’s fate could be reached as soon as August.
The university’s announcement cited “ongoing fiscal challenges, exacerbated further by the COVID-19 pandemic.”
But the problems at UTMC, some say, are mostly self-inflicted.
Critics of the ProMedica deal complain it was one-sided in the hospital chain's favor, as most of UTMC’s doctors and residents shifted to either ProMedica Toledo Hospital or its adjoining ProMedica Russell J. Ebeid Children’s Hospital.
By next year, the agreement calls for more than 270 of the medical school’s 328 resident programs to be housed at ProMedica facilities instead of in the university’s own public hospital.
In exchange for giving up its doctors and residents, the university received large sums from ProMedica: $250 million for medical-school campus development, and annual payments of roughly $50 million a year. Some of that construction money, however, can be spent on ProMedica’s own properties, since they are now part of the larger “campus.”
For medical-school students, the agreement carried some positives, as it expanded local hospital residency options. President Gaber said the “capacity constraints” of the university hospital threatened to limit the medical school’s growth.
Thanks to the affiliation agreement, Gaber said, the medical school has increased its total number of residents and fellows to a projected 367 next year, from 320 today. And the number of students staying in Toledo to perform residencies has more than doubled.
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“All of this translates into better access to physicians right here in our community –– now and in the future,” Gaber wrote.
But the university hospital has struggled to replace the exodus of doctors. Five more residency programs, including orthopedic surgery and pediatrics, are scheduled to leave for ProMedica in July.
“The agreement is clearly benefiting ProMedica significantly more at this time, and to date, than it is the campus in South Toledo,” said Carty Finkbeiner, a former Toledo mayor who is one of the organizers of the Save UTMC Citizens Group. “There is no question. That isn’t up for debate.”
More than 2,500 people have signed an online petition to save the hospital.
If a potential buyer expresses interest in UTMC, the affiliation agreement guarantees ProMedica the right to submit a competing bid, and the university must accept ProMedica’s proposal if it “substantially meets UT’s objectives.”
ProMedica did not respond to questions emailed by The Chronicle. A spokeswoman for the hospital chain, Tausha Moore, said it is focused on coronavirus, and “we aren’t doing any interviews that are not Covid-19-related until this is all over.”
Meanwhile, questions surround the financial connections between ProMedica and two members of the University of Toledo Board of Trustees.
One former trustee, Steve Cavanaugh, was a top executive with HCR ManorCare, a joint-venture partner of ProMedica’s at the time. The two entities teamed up on a nursing home at another ProMedica hospital.
That means ProMedica was a business associate of Cavanaugh’s company while he was serving on the university’s board.
Cavanaugh nevertheless voted twice on the 2015 affiliation agreement between ProMedica and Toledo’s medical school — first to begin negotiations in the spring and then to approve the contract that summer.
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Both decisions were approved by the board unanimously. At the time, Cavanaugh was an executive vice president and chief operating officer for HCR ManorCare, the nation’s second-largest nursing-home chain.
He was promoted to chief executive in 2017, two months after becoming chair of the university Board of Trustees.
The following year, his nursing-home company was teetering on the edge of bankruptcy. ProMedica bought the financially troubled firm for $1.4 billion — $300 million in cash and the assumption of $1.1 billion of ManorCare’s debt.
The university asked the state that year for an ethics opinion regarding Cavanaugh and whether he could continue to be involved with issues related to ProMedica, given that it had just acquired his company and he was about to become a ProMedica employee.
The university’s inquiry to the ethics body did not mention Cavanaugh’s two votes in 2015 for the affiliation agreement, nor did it mention that ProMedica had paid more than a billion dollars to buy his company. It merely stated that Cavanaugh was about to become a ProMedica employee.
Amy E. Voigt, The Blade
The U. of Toledo Medical Center is losing an estimated $1 million per week during the pandemic, the university’s president said.
That was enough for the Ohio Ethics Commission to recommend that Cavanaugh recuse himself from board activities related to ProMedica’s affiliation agreement. The commission wrote that “a public official who is in the position of making, or influencing, an official decision regarding the interests of his private employer would have an inherent conflict of interest impairing his objectivity and independence of judgement.”
Cavanaugh became a ProMedica employee, and remained on the board. Records show that he began recusing himself from votes related to the hospital.
A year later, ProMedica promoted Cavanaugh to be chief financial officer for the entire hospital chain, and he resigned from the university board of trustees.
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Cavanaugh did not respond to phone calls or an email from The Chronicle requesting comment.
Cavanaugh’s successor as board chair is Mary Ellen Pisanelli. Pisanelli is a senior vice president at Welltower Inc., a business partner with ProMedica. The two firms teamed up in 2018 to buy the real-estate arm of HCR Manorcare, the nursing-home company that Cavanaugh led.
ProMedica and Welltower spun off that real-estate venture into a separate jointly held company called Meerkat.
The Ohio Ethics Commission, in response to a university inquiry, found that Pisanelli can continue to be involved with decisions involving ProMedica’s affiliation agreement — so long as medical-school students aren’t taught on Meerkat property.
Before working at Welltower, Pisanelli was a partner at the law firm Shumaker, Loop & Kendrick. Among the firm’s clients: ProMedica.
Pisanelli did not respond to written questions submitted by The Chronicle, but she released a short statement that noted the ProMedica affiliation was approved prior to her joining the board.
“I, and the other members of the board, are honored to serve as stewards of The University of Toledo, and are committed to protecting and supporting the advancement of the University’s educational mission,” she wrote. “We hold ourselves to the highest ethical standards, following all state and federal laws including those regarding open and transparent proceedings.”
In the past few months, the university board repeatedly held closed-door meetings under an “executive session” exemption to state open-government laws, which allows for private discussion of trade secrets or “sale of property.” The board has held six such meetings since November.
State Sen. Teresa Fedor, a Democrat whose district includes UTMC, said the conflict-of-interest questions surrounding the ProMedica deal merit a closer look.
“I believe that the ball was dropped in many different ways,” Fedor said. “It tilted against the public good.”
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A year ago, an emergency-room physician at UTMC wrote to the special investigations unit of the Ohio state auditor. Geoff Mitchell asked the auditors to closely examine the finances of Cavanaugh and Pisanelli, as well as any potential conflicts of interest involving the ProMedica affiliation.
The hospital was clearly harmed by the deal, Mitchell wrote.
“With only a small percentage of doctors remaining, nursing units have closed and UTMC cannot function as it did,” Mitchell wrote. “It is but a shell of the state teaching hospital it once was.”
The state auditor wrote back and said the matter had been referred to the Ohio Ethics Commission and Ohio’s inspector general.
Two months later, UTMC announced that it would downgrade its trauma center status from the highest classification, Level I, to Level III. A Level I trauma center has 24-hour in-house coverage by general surgeons and is equipped to handle the most severe cases. Level III status requires only the “prompt availability” of surgeons.
UTMC had held Level I status for more than 25 years.
When making the announcement, Daniel Barbee, the hospital’s chief executive at the time, said the change was part of a larger strategy to shift UTMC into more of a community-hospital model, although Barbee said that the facility would still be a teaching hospital, too.
“The city's population is 280,000 and we have three Level I centers,” Barbee told The Blade, Toledo’s daily newspaper. “Columbus has 900,000 people and they have only two. Cincinnati has only one.”
Barbee resigned in March from his post as CEO. He declined an interview request from The Chronicle.
Losing Level I status was a wake-up call for the hospital’s employees, said Randy Desposito, president of Local 2415 of the American Federation of State, County, and Municipal Employees. Desposito remembers attending a 2015 town hall where employees were first told about the new ProMedica partnership.
The deal was framed, he said, as a way to offer “a much greater teaching experience.”
But in the years that followed, Desposito said, certain clinics at UTMC moved to a half-day schedule. Over time, some clinics disappeared altogether. And there were fewer open-heart surgeries and other trauma procedures taking place.
One possible lifeline going forward: The university’s Board of Trustees voted in March to remove the requirement that UTMC medical-staff members hold a faculty appointment. That change, while further eroding the facility’s “teaching hospital” identity, opens the door for more local doctors to be based there. So far, a dozen new community physicians have applied for practice rights at the hospital.
“We’ve got everything that a hospital needs to operate, except for the physicians,” Desposito said. “And the physicians are the ones that bring the patients, that bring the revenue.”
Michael Vasquez is a senior investigative reporter. Follow him on Twitter @MrMikeVasquez, or email him at michael.vasquez@chronicle.com.
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