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Meeting Information

MEETING OF THE HEALTH AFFAIRS COMMITTEE

OCTOBER 6, 2000



HEALTH AFFAIRS COMMITTEE

Friday, October 6, 2000

9:30 — 10:45 a.m.

Board Room, The Rotunda

Committee Members:

Charles M. Caravati, Jr., M.D., Chair

H. Christopher Alexander, III, M.D. Terence P. Ross

Thomas J. Bliley, Jr. Elizabeth A. Twohy

William G. Crutchfield, Jr. Harry J.G. van Beek

William H. Goodwin, Jr. John P. Ackerly, III, Ex Officio

AGENDA

  1. CONSENT AGENDA (Dr. Cantrell)

Conflict of Interest Exemption (GeNeuron Therapeutics, Inc.)

  • Fiscal Impact Statement

Conflict of Interest Exemption

(Respiratory Research, Inc.)

  • Fiscal Impact Statement

Conflict of Interest Exemption (Apache Medical Systems)

  • Fiscal Impact Statement
  1. REPORTS BY THE VICE PRESIDENT AND PROVOST

FOR THE HEALTH SYSTEM (Dr. Cantrell)

A. Medical Center Financial Report

(as of August 31, 2000) (Mr. Sandridge

to introduce Mr. Larry Fitzgerald;

Mr. Fitzgerald to report)

    1. Performance Improvement Project

(Mr. Sandridge to introduce Mr. William

Carter; Mr. Carter to report)

C. Clinical Issues - Lungs for Life Screening

Program (Dr. Cantrell to introduce Thomas

M. Daniel, M.D.; Dr. Daniel to report)

D. Remarks by the Vice President and Provost 18

for the Health System (Dr. Cantrell)

III. EXECUTIVE SESSION

  • Discussion of performance and appointment of specific public officers, appointees and employees of the University of Virginia Medical Center, and evaluation of performance of departments where such evaluation will necessarily involve discussion of the performance of specific individuals. Discussion and consideration of negotiations regarding provider services contracts for clinical services to be performed by the Medical Center, and discussion and consideration of negotiations regarding amendment and implementation of a computer services contract for the Medical Center, and of proprietary computer systems information concerning the implementation of the Medical Center’s Clinical Information System, where disclosure would adversely affect the competitive position of the Medical Center. Consultation with legal counsel concerning federal regulations governing clinic billing practices. These items are provided for in Section 2.1-344(A)(1), (7), (8) and (23) of the Code of Virginia.

BOARD OF VISITORS CONSENT AGENDA

I. A. CONFLICT OF INTEREST EXEMPTION: Approval of personal interests in a sponsored research contract with GeNeuron Therapeutics, Inc.

The School of Medicine is negotiating sponsored research contracts and a material transfer agreement with GeNeuron Therapeutics, Inc., a Virginia biotechnology company created in 1997 for the development and commercialization of biologically enhanced devices for treatment of neurovascular disease. Technology developed at the University of Virginia has been licensed to GeNeuron by the University of Virginia Patent Foundation.

Three University faculty members, Gerald R. Hankins, Ph.D., Gregory A. Helm, M.D., and David F. Kallmes, M.D., own in excess of three percent of the equity in the company. Under the Virginia Conflict of Interests Act, the University’s contracting with GeNeuron Therapeutics, Inc. would place Mr. Hankins, Dr. Helm and Dr. Kallmes in violation of the Act, unless the Board of Visitors approves the conflict created by their equity interest. State law grants such approval authority to the Board in the case of sponsored research, in order to allow research furthering the public interest.

Virginia law and University of Virginia policy will require Mr. Hankins, Dr. Helm and Dr. Kallmes to file annual disclosure statements of their economic interests in the company. Mr. Hankins, Dr. Helm and Dr. Kallmes will not be involved in the University’s negotiation, approval, or procurement of contract terms with GeNeuron Therapeutics, Inc. The Associate Dean for Research, School of Medicine, heads a University oversight team responsible for managing and overseeing the research, including independently supervising, evaluating, and making personnel decisions to ensure that the continuing best interests of the University are served. As an additional precaution, the Associate Dean for Research will report at least each quarter to the Dean of the School of Medicine on the progress of sponsored research activity and the utilization of University resources.

ACTION REQUIRED: Approval by the Health Affairs Committee and by the Board of Visitors.

CONFLICT OF INTEREST EXEMPTION

WHEREAS, the School of Medicine wishes to enter into sponsored research contracts with GeNeuron, Inc., for developing biologically enhanced devices for treatment of neurovascular disease; and

WHEREAS, Gerald R. Hankins, Ph.D., Gregory A. Helm, M.D., David F. Kallmes, M.D., have disclosed in advance their equity interests of 23.3, 24.2, 23.8, percent, respectively, in GeNeuron Therapeutics, Inc., and

WHEREAS, the University’s entry into research agreements with GeNeuron Therapeutics, Inc., would thereby expose Mr. Hankins, Dr. Helm and Dr. Kallmes to violation of the Virginia Conflicts of Interest Act unless approved by the Board as permitted by §2.1-639.6(c) (7) of the Code of Virginia;

RESOLVED that the conflict of interest of Gerald R. Hankins, Ph.D., Gregory A. Helm, M.D., and David F. Kallmes, M.D., is approved by the Board of Visitors in order to permit the University to enter into agreements with GeNeuron, Inc., for research funding for the development of biologically enhanced devices for treatment of neurovascular disease; provided, as required by the law, Mr. Hankins, Dr. Helm, and Dr. Kallmes file the required annual disclosure statement of personal interests in GeNeuron Therapeutics, Inc., the University files the required annual report concerning the contracts with the Secretary of the Commonwealth, and the Associate Dean for Research vigilantly oversees application of University resources in the best interests of the University and in accordance with policy.

UNIVERSITY OF VIRGINIA

FISCAL IMPACT STATEMENT

PROJECT/PROPOSED BOARD OF VISITORS ACTION: Approval of personal interests in sponsored research contracts with GeNeuron Therapeutics, Inc.

DESCRIPTION: The School of Medicine is negotiating sponsored research contracts with GeNeuron Therapeutics, Inc., a Virginia biotechnology start-up company created in 1997. The founding members of GeNeuron Therapeutics, Inc. include five University of Virginia faculty members.

Three faculty own a total of 71.3 percent in the company. Under the Virginia Conflict of Interests Act, the University may enter into research contracts with GeNeuron Therapeutics, Inc. without placing these faculty members in violation of the Act, if the Board of Visitors approves the conflict created by their ownership in excess of three percent.

The research contracts would help fund research into the development of biologically enhanced devices for treatment of neurovascular disease, which has great potential for patient treatment.

FISCAL IMPACT: Fiscal impact is negligible. Major breakthroughs could result in significant revenue gain for the University.

CONCLUSION: It is recommended that the Board of Visitors approve the personal interests in contracts with GeNeuron, Inc., for developing biologically enhanced devices for treatment of neurovascular disease.

RECOMMEND APPROVAL OF BOARD ACTION:

Leonard W. Sandridge

October 6, 2000

BOARD OF VISITORS CONSENT AGENDA

I. B. Conflict of Interest Exemption: Approval of personal interests in a sponsored research contract with Respiratory Research, Inc.

The School of Medicine is negotiating a contract with Respiratory Research, Inc., a Virginia biotechnology company created in 2000 to develop technologies to assist in the assessment and management of asthma and other lung diseases. Technology developed at the University of Virginia has been licensed to Respiratory Research, Inc., by the University of Virginia Patent Foundation.

Two University faculty members, Benjamin M Gaston, M.D., and John F. Hunt, M.D., own in excess of three percent of the equity in the company. Under the Virginia Conflict of Interests Act, the University’s contracting with Respiratory Research, Inc. would place its faculty who own in excess of three percent in violation of the Act, unless the Board of Visitors approves the conflict created by their equity interest. State law grants such approval authority to the Board in the case of sponsored research, in order to allow research furthering the public interest.

Virginia law and University of Virginia policy will require Drs. Gaston and Hunt to file annual disclosure statements of their economic interests in the company. Drs. Gaston and Hunt will not be involved in the University’s negotiation, approval, or procurement of contract terms with Respiratory Research, Inc. The chair of the Department of Pediatrics heads a University oversight team responsible for managing and overseeing the research, including independently supervising, evaluating, and making personnel decisions to ensure that the continuing best interests of the University are served. As an additional precaution, the chair will report at least each quarter to the Dean of the School of Medicine on the progress of sponsored research activity and the utilization of University resources.

ACTION REQUIRED: Approval by the Health Affairs Committee and by the Board of Visitors.

CONFLICT OF INTEREST EXEMPTION

WHEREAS, the School of Medicine wishes to enter into a contract with Respiratory Research, Inc., to purchase a device to assist researchers in the development of technology and medications for the treatment of asthma and tuberculosis; and

WHEREAS, Benjamin Gaston, M.D., and John Hunt, M.D., have disclosed in advance their equity interests of 9.4 and 43.4 percent, respectively, in Respiratory Research, Inc.; and

WHEREAS, the University’s entry into a contract with Respiratory Research, Inc. would thereby expose Drs. Gaston and Hunt to violation of the Virginia Conflicts of Interest Act unless approved by the Board as permitted by §2.1-639.6(c) (7) of the Code of Virginia;

RESOLVED that the conflict of interest of Benjamin Gaston, M.D., and John Hunt, M.D., is approved by the Board of Visitors in order to permit the University to enter an agreement with Respiratory Research, Inc., to purchase a device to be used for the development of technology for the treatment of asthma; provided, as required by the Virginia Conflict of Interests Act, the faculty file the required annual disclosure statement of personal interests in Respiratory Research, Inc., the University files the required annual report concerning the contact with the Secretary of the Commonwealth, and the relevant department chair vigilantly oversees application of University resources in the best interests of the University and in accordance with policy.

UNIVERSITY OF VIRGINIA

FISCAL IMPACT STATEMENT

PROJECT/PROPOSED BOARD OF VISITORS ACTION: Approval of personal interests in a contract with Respiratory Research, Inc.

DESCRIPTION: The School of Medicine is negotiating a contract with Respiratory Research, Inc., a Virginia biotechnology start-up company created in 2000. The founding members of Respiratory Research, Inc. include two University of Virginia faculty members.

Two faculty members own in excess of three percent of the equity in the company. Under the Virginia Conflict of Interests Act, the University may enter into a contract with Respiratory Research, Inc., without placing the faculty members in violation of the Act, if the Board of Visitors approves the conflict created by their ownership in excess of three percent.

The contract would allow the University of Virginia to procure a device to assist researchers in the development of technology for treatment of asthma.

FISCAL IMPACT: Fiscal impact is negligible. Major breakthroughs could result in significant revenue gain for the University.

CONCLUSION: It is recommended that the Board of Visitors approve the personal interests in the proposed contract with Respiratory Research, Inc., for a procurement of a device to assist researchers in developing technology for the treatment of asthma.

RECOMMEND APPROVAL OF BOARD ACTION:

Leonard W. Sandridge

October 6, 2000

BOARD OF VISITORS CONSENT AGENDA

I. C. Conflict of Interest Exemption: Approval of a personal interest in a sponsored research contract with Apache Medical Systems, Inc.

The School of Medicine is negotiating a sponsored research contract with Apache Medical Systems, Inc., a Virginia company created in 1987 to provide clinically based decision support information systems, research and consulting services to the healthcare industry.

One University faculty member, William A. Knaus, M.D., owns in excess of three percent of the equity in the company. Under the Virginia Conflict of Interests Act, the University’s contracting with Apache Medical Systems, Inc. would place Dr. Knaus in violation of the Act, unless the Board of Visitors approves the conflict created by his equity interest. State law grants such approval authority to the Board in the case of sponsored research in order to allow research furthering the public interest.

Virginia law and University of Virginia policy will require Dr. Knaus to file annual disclosure statements of his economic interests in the company. Dr. Knaus will not be involved in the University’s negotiation, approval, or procurement of contract terms with Apache Medical Systems, Inc. The Associate Dean for Research, School of Medicine, heads a University oversight team responsible for managing and overseeing the research, including independently supervising, evaluating, and making personnel decisions to ensure that the continuing best interests of the University are served. As an additional precaution, the Associate Dean for Research will report at least each quarter to the Dean of the School of Medicine on the progress of sponsored research activity and the utilization of University resources.

ACTION REQUIRED: Approval by the Health Affairs Committee and by the Board of Visitors.

CONFLICT OF INTEREST EXEMPTION

WHEREAS, the School of Medicine wishes to enter into a sponsored research contract with Apache Medical Systems, Inc., for activities that would assist in the development and validation of statistical and mathematical decision support models for cardiovascular diseases, HIV, cancer and women’s health issues; and

WHEREAS, William A. Knaus, M.D., has disclosed in advance his equity interests of 5.8 percent, in Apache Medical Systems Inc.; and

WHEREAS, the University’s entry into a research agreement with Apache Medical Systems, Inc., would thereby expose Dr. Knaus to violation of the Conflicts of Interest Act unless approved by the Board as permitted by §2.1-639.6(c) (7) of the Code of Virginia;

RESOLVED that the conflict of interest of William A. Knaus, M.D., is approved by the Board of Visitors in order to permit the University to enter into an agreement with Apache Medical Systems, Inc., for activities that would assist in the development and validation of statistical and mathematical decision support models for cardiovascular diseases, HIV, cancer and women’s health issues; provided, as required by the Virginia Conflict of Interests Act, Dr.Knaus, files the required annual disclosure statement of personal interests in Apache Medical Systems, Inc., the University files the required annual report concerning the contract with the Secretary of the Commonwealth, and the Associate Dean for Research vigilantly oversees the application of University resources in the best interests of the University and in accordance with policy.

UNIVERSITY OF VIRGINIA

FISCAL IMPACT STATEMENT

PROJECT/PROPOSED BOARD OF VISITORS ACTION: Approval of a personal interest in a contract with Apache Medical Systems, Inc.

DESCRIPTION: The School of Medicine is negotiating a sponsored research contract with Apache Medical Systems, Inc., a Virginia company created in 1987. The founding members of Apache Medical Systems, Inc. include a University of Virginia faculty member.

One faculty member owns in excess of three percent equity in the company. Under the Virginia Conflict of Interests Act, the University may enter into a research contract with Apache Medical Systems, Inc., without placing the faculty member in violation of the Act, if the Board of Visitors approves the conflict created by his ownership in excess of three percent.

The research contract would encompass project activities that would assist in the development and validation of statistical and mathematical decision support models for cardiovascular diseases, HIV, cancer, and women’s health issues.

FISCAL IMPACT: Fiscal impact is negligible. Major breakthroughs could result in significant revenue gain for the University.

CONCLUSION: It is recommended that the Board of Visitors approve a personal interest in a contract with Apache Medical Systems, Inc., for project activities that would assist in the development and validation of statistical and mathematical decision support models for cardiovascular diseases, HIV, cancer, and women’s health issues.

RECOMMEND APPROVAL OF BOARD ACTION:



Leonard W. Sandridge

October 6, 2000

UNIVERSITY OF VIRGINIA

BOARD OF VISITORS AGENDA ITEM SUMMARY

BOARD MEETING: October 6, 2000

COMMITTEE: Health Affairs

AGENDA ITEM: II.A. Medical Center Financial

Report as of July 31, 2000

ACTION REQUIRED: None

BACKGROUND: The Medical Center prepares a financial report and reviews it with the Executive Vice President and Chief Operating Officer before submitting the report to the Health Affairs Committee of the Board of Visitors. The Health Services Foundation (HSF) prepares and presents financial statements to the Vice President and Provost for the Health System.

DISCUSSION: Discharges from the Medical Center for the month of July Fiscal Year 2001 were below budget by 3.5 percent and below Fiscal Year 2000 by 2.4 percent. The Neurology and Pediatrics service lines experienced the most significant decrease in discharges over last year, while the Nursery, Obstetrics and Surgery service lines experienced the most significant increases in discharges over last year. Although discharges were below expectations, patient days were 1.8 percent above budget and 1.9 percent above prior year. A higher than expected case mix index led to a higher than expected average length of stay for the month.

Net operating revenue for July Fiscal Year 2001 was 7.9 percent above net operating revenue for Fiscal Year 2000, but 5.4 percent below the Fiscal Year 2001 budget. Inpatient revenue was 3.3 percent lower than budget and outpatient revenue was 12.3 percent lower than budget.

Total operating expenses for July Fiscal Year 2001 were virtually equal to budget for the month. Salaries and wages were over budget, but were offset by lower than budgeted purchased services expenses. When compared to prior year, July Fiscal Year 2001 operating expenses were $3.4 million higher. This was primarily the result of higher salaries and wages, medical supplies and purchased services expenses. The number of full-time equivalent employees (FTEs) was 36 below budget and 229 above prior year. The increase in salaries and FTEs over prior year is primarily the result of University and HSF employees moving to the Medical Center’s payroll with the conversion to provider-based clinics in Fiscal Year 2001.

The operating margin for July Fiscal Year 2001 was 3.8 percent, which was below the budgeted margin of 9.0 percent, and below prior year’s 4.9 percent margin. The operating margin in July was budgeted high because historically the Medical Center has experienced low expenses in July and a high operating margin.



University of Virginia Medical Center
Income Statement
(Dollars in Millions)


Most Recent Three Fiscal Years
Budgeted
Description
July 99
July 00
July 01
July 01
Net Patient Revenue
$39.0
$38.2
$41.3
$43.8
Other Revenue
1.0
0.7
0.7
0.6
Total Operating Revenue
$40.0
$38.9
$42.0
$44.4
Operating Expenses
36.1
34.1
37.4
37.4
Depreciation
2.5
2.5
2.6
2.6
Interest Expense
0.5
0.4
0.4
0.4
Total Operating Expenses
$39.1
$37.0
$40.4
$40.4
Operating Income
(Loss)
$0.9
$1.9
$1.6
$4.0

Non-operating income
(Loss)

$0.5
$0.7
$0.7
$0.4
Net Income
$1.4
$2.6
$2.3
4.4
Debt. Principal
$0.3
$0.3
$0.4
$0.4


University of Virginia Medical Center
Balance Sheet
(Dollars in Millions)



Description
07/31/98
07/31/99
07/31/00
Assets
     
Operating cash and investments
$103.0
$95.9
$64.1
Patient accounts receivables
55.2
44.1
50.8
Other current assets
20.5
27.2
35.2
Property, plant, and equipment
216.5
214.7
215.2
Depreciation reserve investments
123.1
143.7
156.4
Other assets
19.6
10.9
18.3
       
TOTAL ASSETS
$537.9
$536.5
$540.0
       
Liabilities
     
Current portion long-term debt
$3.7
$3.8
$4.2

Accounts payable and other liabilities

65.2
56.5
34.5
Longterm Debt
92.5
93.0
93.2
Accrued Leave and other LT liabilities
12.9
12.4
13.3
       
TOTAL LIABILITIES
$174.3
$165.7
$145.2
FUND BALANCE
$363.6
$370.8
$394.8
TOTAL LIABILITIES AND FUND BALANCE
$537.9
$536.5
$540.0

University of Virginia Medical Center
Finance Ratios


Most Recent Three Fiscal Years
Budgeted
Description
July 99
July 00
July 01
July 01
Operating Margin (%)
2.3
4.9
3.8
9.0
Total Margin (%)
3.5
6.6
5.4
9.8
Current Ratio (x)
2.6
2.8
3.9
4.0
Days cash on hand (days)
195.7
220.0
185.3
190.0
Gross Accounts receivable (days)
83.8
77.2
85.2
80.0
Average payment period (days)
58.4
54.2
31.7
30.6
Annual debt service coverage (x)
5.5
7.7
7.1
9.9
Debt-to-capitalization (%)
20.3
20.1
19.1
20.0

Capital expense
(%)

7.7
7.8
7.4
7.4

University of Virginia Medical Center
Operating Statistics

Most Recent Three Fiscal Years
Budgeted
Description
July 99
July 00
July 01
July 01
Discharges
2,535
2,392
2,335
2,419
Patient Days
13,936
12,553
12,788
12,566
Average Length of Stay
5.6
5.6
5.3
5.2
Clinic Visits +B57
40,069
38,767
37,554
42,686
ER Visits
4,945
4,736
4,996
5,679
Medicare Cases Mix Index
1.8743
1.7674
1.9038
1.7850
Utilization by Payor Class
         
Medicare %
37.7
35.4
38.9
37
Medicaid %
14.1
13.1
12.4
11.9
Blue Cross %
12.7
18.2
15.2
14
Managed Care %
11.9
12.7
11.4
15.5

Self-Pay, Commercial and others %

23.6
20.4
22.2
21.6
         
TOTAL (%)
100
100
100
100
         
FTEs
4,675
4,378
4,607
4,643

UNIVERSITY OF VIRGINIA

BOARD OF VISITORS AGENDA ITEM SUMMARY

BOARD MEETING: October 6, 2000

COMMITTEE: Health Affairs

AGENDA ITEM: II.B. Health System Performance

Improvement Project

ACTION REQUIRED: None

BACKGROUND: In January, the Health System, with the assistance of the health care consulting division of the Computer Science Corporation (CSC), began the second phase of its Performance Improvement Project. Phase one, which ran from July to November 1999, involved an assessment by CSC of the cost reduction and revenue enhancement opportunities that exist within the Health System. The analysis covered the institution’s clinical operations and administrative support areas, as well as its revenue cycle and supply chain. CSC’s findings were outlined to the Board of Visitors during executive session at the November 17,1999 Health Affairs Committee meeting. The current phase will focus on translating the financial estimates in the CSC assessment into concrete, implementable projects.

DISCUSSION: Since the Board of Visitors’ meeting on June 16, the Performance Improvement Project has solidified its efforts around administrative and operating room supply expenses and revenue cycle opportunities. In addition, the Pharmacy has had some contract negotiation successes. The Steering Committee has met twice and approved most of the wide range of proposed projects, many of which were implemented on July 1, 2000. Discussion will focus on an overview of the approved and tabled projects, and progress reports on the initiative’s five established work teams.

UNIVERSITY OF VIRGINIA

BOARD OF VISITORS AGENDA ITEM SUMMARY

BOARD MEETING: October 6, 2000

COMMITTEE: Health Affairs

AGENDA ITEM: II.C. Clinical Issues - Lungs

For Life Screening Program

ACTION REQUIRED: None

BACKGROUND: Lung cancer is the leading cause of cancer mortality in both men and women, accounting for approximately twenty-eight percent of all cancer related deaths. Dr. Thomas Daniel, Dr. Jonathon Truwit and Dr. Spencer Gay have helped bolster the fight against lung cancer with their inception of the "Lungs for Life Screening Program". The process involves a fifteen-minute screening using low-level radiation CAT scans to detect abnormal spots on the lungs. This non-invasive scan is painless and emits about twenty percent of the radiation of a normal CAT scan. In addition to the CAT scan, a breathing exhalation test is performed. The screenings are part of the University's Cancer Center, with sponsorship from the Thoracic Surgery, Pulmonary Medicine and Radiology departments.

DISCUSSION: On September 6, 2000, the Lungs for Life Screening Program began at the UVA Health System. The program is a multidisciplinary effort by chest surgeons, radiologists and pulmonary medicine specialists to offer the local, regional and statewide community an opportunity to diagnose lung cancer and emphysema early. Both of these common diseases are best treated early in their course. In fact, only fifteen percent of people currently diagnosed with lung cancer are cured. After speaking with a specially trained nurse practitioner, participants are scheduled for a low radiation-dose CT scan of the chest and a spirometry-breathing test.

If a mass is found, a multispeciality team will review the test and determine what type of follow-up treatments and/or referrals are needed.

UNIVERSITY OF VIRGINIA

BOARD OF VISITORS AGENDA ITEM SUMMARY

BOARD MEETING: October 6, 2000

COMMITTEE: Health Affairs

AGENDA ITEM: II.D. Remarks by the Vice President

and Provost for the Health System

ACTION REQUIRED: None

DISCUSSION: The Vice President and Provost for the Health System will utilize this portion of the Health Affairs Committee meeting to inform the Board of Visitors of recent events which do not require formal action, but of which they should be made aware.

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