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Meeting Information


Friday, November 7, 1997
8:15 - 9:15 a.m.
East Oval Room, The Rotunda

Committee Members:

Charles M. Caravati, Jr., Chair
John P. Ackerly, III
William G. Crutchfield, Jr.
William H. Goodwin, Jr.
T. Keister Greer
C. Wilson McNeely, III
Albert H. Small
Hovey S. Dabney, Ex Officio


I. ACTION ITEMS (Dr. Cantrell)
A. Health Care Professionals - Salary Adjustments
B. Corporate Compliance Program
C. I.Q. Health
D. Gainsharing Plan for Medical Center Employees including wage employees and Clinical Faculty (Dr. Cantrell to introduce Mr. Halseth; Mr. Michael Halseth to report)

A. Vice Presidents Remarks
B. Medical Center Financial Report, September 30, 1997 (Dr. Cantrell to introduce Mr. Munger; Mr. Peter L. Munger to report)
C. Remuneration Task Force Report (Dr. Cantrell to introduce Dr. Jones; Dr. R. Scott Jones to report)

Discussion of proprietary, business related information of the Medical Center in connection with its proposed joint venture, as provided in Section 2.1-344 (A)(24) of the Code of Virginia.

Investing of public funds where competition or bargaining is involved when if made public initially the financial interest of the University would be adversely affected, as provided for in Section 2.1-344 (A)(6) of the Code of Virginia.

I.A. Health Care Professionals - Salary Adjustments

BACKGROUND: In 1990, the Commonwealth of Virginia authorized the University of Virginia and the Medical College of Virginia to remove Health Care Professional Employees from the State Classification System. This action was requested because of the recruitment and retention difficulties experienced by the Commonwealths two teaching hospitals. This action of the General Assembly authorized each institutions Board of Visitors to establish Compensation Plans. The codified autonomy legislation, which became effective July 1, 1996, authorized the Board of Visitors to establish competitive compensation plans for employees of the University of Virginia Medical Center.

DISCUSSION: Health Care Professionals are recruited primarily in the Southeast, Northeast and Midwest with the remaining sections of the country serving as a secondary recruiting market for these individuals.

Compensation surveys are an essential management tool to ensure competitive salaries. The Virginia Society for Healthcare Human Resources Administration contracts for an annual survey of 52 Virginia healthcare organizations which cover 152 job classifications (in the areas of management, direct patient care and support staff). Additionally, the UVA Department of Human Resources conducts an annual survey of health care compensation with hospitals in the Northeast, Southeast and Midwest. The Council of Teaching Hospitals (COTH) conducts a survey of teaching hospitals the results of which have served as the basis for establishing stipends (salaries) for Housestaff.

These compensation surveys, coupled with turnover data, information on difficult to recruit jobs and Bureau of Labor Statistics compensation trends, are used to adjust the Medical Center compensation structure. The Medical Center budget for fiscal 1997/1998 anticipated an overall average 4% salary increase. The budget also assumed another 1/2% for market equity adjustments for Health Care Professionals other than Housestaff.

REQUIRED ACTION: Approval by the Health Affairs Committee with the recommendation that the salary adjustments for Medical Center Health Care Professionals be approved by the Finance Committee.


The President will propose the adoption of the following resolution:

WHEREAS, the codified autonomy legislation expanded the Board of Visitors authority to establish compensation plans; and

WHEREAS, compensation surveys of salaries paid by area, state and regional health care and other employers have been conducted and analyzed; and

WHEREAS, the results of these surveys support an average salary increase of 4%, plus 1/2% of salary for market equity adjustments for some Health Care Professionals, effective November 30, 1997; and

WHEREAS, the Medical Center has proposed that the salary increases reflected in the attached 1997 Salary Adjustments Implementing Guidelines for Health Care Professionals be adopted;

RESOLVED that the attached 1997 Salary Adjustments Implementing Guidelines for Health Care Professionals are approved.


Health Care Professionals will be eligible for an average 4% salary increase allocated on the basis of merit. Some Health Care Professionals may also receive an equity adjustment because of external market factors or internal alignment concerns. All market equity adjustments must be recommended by the manager and be approved by the divisional executive and the Executive Director of the Medical Center.

Individual salary adjustments, including both merit and equity that exceed 10%, will require approval of the Executive Director of the Medical Center.

The minimum and maximum of all salary ranges will be adjusted by 4%, except operating room technicians will be adjusted by 8% and pharmacists will be adjusted by 6%.

I.B. University of Virginia Medical Center Corporate Compliance Program

BACKGROUND: The University of Virginia on behalf of its Medical Center and other health services delivery activities (collectively referred to herein as the University) is committed to conducting its business in compliance with the law. In some circumstances, the interpretation and application of the law is highly specialized and technical, and common concepts of right and wrong lend little guidance. Thus, employees, physicians and agents who believe that they are conducting themselves properly may, in fact, be risking potential for violating applicable laws. Violations of the law by employees, physicians and agents, even unwitting violations, can subject the University to the risk of substantial monetary penalties and embarrassment.

With the authorization of the Attorney General, the University has engaged the law firm of Vinson & Elkins to assist in the development of a Health Services Delivery Compliance Plan. The purpose of the Plan is preventive in nature, providing a comprehensive self-assessment of health services delivery practices and policies, identifying significant risks and recommending alternative or preferred solutions.

DISCUSSION: The University can meet its commitment to complying with the law only through the efforts of our highly skilled care givers and dedicated support staffs. It is they who must earn the trust and respect of patients and others by continuing to conduct their daily affairs with honesty, integrity and in compliance with the letter and spirit of all applicable laws. Although honesty and integrity are individual attributes and each individual ultimately is responsible for his or her own conduct, the University is committed to maintaining a working environment that promotes these ideals and permits our employees, physicians and agents to demonstrate the highest ethical standards in performing their daily tasks.

The Board's action in authorizing management to proceed in the development and implementation of a Corporate Compliance Program should in no way be interpreted as a conclusion that present management systems are inadequate. Rather, development and implementation of a Corporate Compliance Program is a preventive element in the Universitys continuing effort to improve quality and performance, responsive to the increasing complexity of the health services delivery operations implicating highly specialized areas of law.

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

University of Virginia Medical Center Corporate Compliance Program

The President will propose the adoption of the following resolution:

WHEREAS, the Board of Visitors is committed to continuing efforts to improve quality and performance;


  1. The President of the University is authorized to dedicate the necessary resources toward development of an effective Corporate Compliance Program (the Program) designed to prevent and detect potential violations of law and/or risky practices in the conduct of their business affairs by employees, physicians and agents of the Medical Center.
  1. The Program will:

    a) Establish compliance standards and procedures reasonably capable of reducing the risk of wrongful conduct;

    b) Appoint specific, high-level individual(s) (responsible to the Executive Vice President and Chief Financial Officer with responsibility to coordinate programs with the General Counsel and the Vice President and Provost for Health Sciences) with overall responsibility to oversee the administration of the program;

    c) Take steps to communicate effectively the compliance standards and procedures to all employees and agents by, for example, mandatory training sessions or the dissemination of publications;

    d) Take reasonable steps to achieve compliance by, for example, utilizing monitoring and auditing systems, and by publicizing a reporting system whereby employees and agents can report perceived wrongful conduct by others within the organization without fear of retribution;

    e) Consistently enforce its standards through appropriate disciplinary mechanisms, including as appropriate, discipline of individuals for failure to detect noncompliance; and

    f) Take reasonable steps to respond appropriately to noncompliance after detection and to prevent recurrence, which may require modifications to the compliance program.

  2. The development of specific recommendations, educating and training employees with respect to those specific recommendations, and reviewing and possibly enhancing internal controls and monitoring systems will be time-consuming. Accordingly, management is directed to proceed in a responsible manner that may include several phases. Periodic progress reports shall be provided to the Board.

I.C. New Business Venture - I.Q. Health

BACKGROUND: The Institute for Quality Health (IQ Health) is a division of the University of Virginia Health Services Foundation (HSF) established in July 1990. From its inception, IQ Health has provided a wide range of health promotion and disease prevention services to the approximately 13,000 University faculty and staff. While the University remains IQ Healths major client, IQ Health has steadily grown to provide services to outside businesses, municipalities and community organizations throughout the region. Health Enhancement, Employee Assistance and Occupational Health are the primary services of IQ Health. It is a recognized leader in providing demand management strategies as a means of controlling health care costs and achieving optimal health for individuals and populations. IQ Health is positioned to track program impact and outcomes through specialized computer programs it developed.

DISCUSSION: As a result of discussions begun in 1995, The Cerner Corporation, a large Kansas City-based health information company, has negotiated with IQ Health to purchase, through a perpetual license, the intellectual property developed by IQ Health called the Health Risk Assessment. In addition, Cerner Corporation by contract will fund continued Health Risk Assessment product development. The license will remain exclusive as long as Cerners development funding continues. The HSF is in the process of evaluating financial details of the proposed relationship.

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


The President will propose the adoption of the following resolution:

WHEREAS, the Institute for Quality Health (IQ Health), a division of the University of Virginia Health Services Foundation (HSF), a University-related foundation, proposes to enter into a new business venture with the Cerner Corporation to license its Health Risk Assessment to Cerner and to enter into an agreement whereby it continues to provide services to Cerner related to development and enhancement to the Health Risk Assessment; and

WHEREAS, under the Policy on University-related Foundations, HSF is required to submit all new business ventures for approval of the Board of Visitors; and

WHEREAS, the Vice President and Provost for Health Sciences recommends that, in the best interests of the University of Virginia Health Sciences Center, approval be granted for this venture;

RESOLVED that the described business arrangement between HSF and the Cerner Corporation is approved; and

RESOLVED FURTHER that the Executive Vice President and Chief Financial Officer is authorized, with advice of the General Counsel, to execute such agreement or agreements as may be in the best interests of the University of Virginia, with the HSF, regarding the limitations on the use of the University of Virginia name in conjunction with the Cerner venture.

I.D. 1998 Gainsharing Plan

BACKGROUND: The codified autonomy legislation for the Medical Center, which became effective July 1, 1996, requires approval of compensation plans for the Medical Center by the Board of Visitors. Revenue and expenditure variations allow the Medical Center to consider new approaches to compensate employees. One component of compensation approved by the Board of Visitors is a Gainsharing Plan. Under this plan, the gainsharing component is based on overall institutional performance. The compensation adjustment is determined by a combination of the Medical Centers financial performance and quality of service as determined through quarterly patient satisfaction surveys performed by a private firm.

DISCUSSION: The 1998 Gainsharing Plan is a means of providing a financial incentive to employees if the Medical Center is able to meet predetermined targets for patient satisfaction (as measured by the quality index) and financial performance (as measured by operating margin). The patient satisfaction survey is used as the standard index of ability to deliver quality care and is derived from quarterly Adult and Pediatrics Inpatient, Outpatient Clinics, and Emergency Department surveys carrying a weight of 60%, 30% and 10% respectively in the overall survey analysis.

The financial strategy for the Medical Center for Fiscal Year 1997-98 must take into consideration the Bond requirements for cash reserves, physician practice acquisition costs and technology improvements that are essential for our future. The target margin for the 1998 Gainsharing Plan is $24,360,000 prior to gainsharing payout. Gainsharing will not be available unless the Medical Center has achieved its established financial target and the Quality Index for Patient Satisfaction.

Level I Gainsharing will occur when the Quality Index is 4.49% or higher. The gainsharing increase will be determined by applying the appropriate percentage from the matrix shown below to each employees base salary. Level I Gainsharing will be a minimum of 1% and a maximum of 4%. If our Quality Index is less than 4.49, Gainsharing will be varied by five levels as depicted in the matrix. If the Quality Index is below 4.36 there will be no Gainsharing. These payments will not be included in the employees base salary for the next year. The gainsharing payment will be paid in August of 1998 as a one-time lump sum payment.

Those eligible for participation in the Gainsharing Program will include: All Medical Center employees including Housestaff and wage employees who have worked at least 700 hours (Gainsharing will be proportional for wage employees), and School of Medicine Clinical Faculty who are on the payroll as of June 30, 1998. Employees who join the Medical Center during the year will receive Gainsharing on a prorated basis that reflects the period of time worked. Gainsharing will not be provided to any employee who is not performing at a satisfactory level.

KPMG Peat Marwick has been retained to assist the Medical Center in developing a comprehensive gainsharing plan for subsequent years.

Gainsharing Matrix


The President will propose the adoption of the following resolution:

WHEREAS, the Medical Centers approved budget projects a 22,200,000 operating margin for FY 1997-98; and

WHEREAS, the proposed 1998 Gainsharing Plan consists of a one-time payment to eligible Medical Center employees and School of Medicine clinical faculty who are performing at a satisfactory level; and

WHEREAS, the Gainsharing payment will be made in August of 1998 in accordance with the Gainsharing Program and matrix;

RESOLVED that the 1998 Gainsharing Plan is approved.

II.B. University of Virginia Medical Center Financial Report, September 1997

BACKGROUND: The Medical Center prepares a quarterly financial report and reviews the results with the Executive Vice President and Chief Financial Officer before it is sent to the Health Affairs Committee of the Board of Visitors. Financial Statements for the Health Services Foundation are presented to its Board and made available to the Vice President and Provost for Health Sciences.

DISCUSSION: The attached are Medical Center operating and financial summaries for the quarter ending September 1997 compared to previous periods. Each graph shows budget and actual results for the current and prior fiscal year.

Inpatient occupancy averaged above 75.8% for the quarter compared to 76.3% last year. The graphs show that admissions and patient days for the September quarter exceeded both budget and the prior year. Clinic and ER visits were substantially higher than budget and the September 1996 quarter.

Operating revenues in the first quarter exceeded expenses by $11.5 million, compared to $9.5 million for 1995. Medical Center revenues were $11.4 million higher than last year. Part of the revenue increase was due to higher admissions and part was due to favorable reimbursement rates. Reduction in Medicare revenues as a result of the Federal Balanced Budget Act will not be realized until after October 1, 1997. Operating expenses were 11.1% higher than last year due to increase in medical supply costs and an understatement last year of purchased services.

Operating and total margins for the quarter were 10.1% and 8.5%, respectively, an improvement over the September 1996 quarter. Operating Cash reserves remain strong; however, capital commitments totaling over $51 million were outstanding at the end of September. Days in patient accounts receivable increased by 2.1 days over last year. The increase was due to slower payments from Medicaid and problems in obtaining timely clinical information required for billing.

The first quarter traditionally yields a higher than average performance for the year. The variation may be more pronounced given the anticipated cuts in Medicare revenue starting in the December 1997 quarter.


II.C. Remuneration Task Force Report

BACKGROUND: The School of Medicine's Faculty Practice Plan was approved by the Board of Visitors in 1990. It establishes rules and guidelines to compensate clinical faculty working at the University of Virginia Health Sciences Center and its clinical facilities. Its two major components are negotiated salary and incentive payments. Major change in the health care environment triggered a comprehensive review of the current plan by the Clinical Faculty Remuneration Task Force chaired by R. Scott Jones, M.D., Chair of the Department of Surgery and President of the University of Virginia Health Services Foundation. Issues addressed include:

  • A projected drop in clinical income caused by managed care, discounted payment and capitation
  • The need to align clinical faculty compensation with the goals, objectives and missions of the Health Sciences Center
  • The need to better align clinical faculty compensation with individual productivity
  • The projected physician surplus, especially of specialists
  • The need to strategically align compensation criteria across departments

DISCUSSION: A wide range of internal factors have an impact on clinical faculty remuneration. These include multiple types of practice (from generalist to subspecialist), multiple institutional missions and revenue sources. This creates overhead that must be borne by clinical income. While these issues are given close management attention, productivity of each member of the clinical faculty is a critical component of the Health Sciences Centers success.

It was in this context that the Task Force recommended a new compensation plan. Envisioned is a consistent structure for clinical faculty remuneration rewarding productivity, stressing individual accountability and addressing the changing nature of health care. Consistent with the overall goal of the University of Virginia, to be able to compensate the faculty at the 60th percentile of peer institutions (for the Health Sciences Center, the goal is based on the Association of American Medical Colleges figures) and in light of the changing environment, the Task Force recommendations included:

  • A rational and fair method for distributing all institutional revenues to departments and their faculty to be integrated into the compensation plan
  • All clinical faculty shall receive a Base Salary, providing a minimum level of compensation for general participation in the institution's clinical, teaching, research and administrative activities with adjustments to be made from time to time
  • Additional guaranteed salary may be paid to clinical faculty designated as Variable Salary
  • The sum of the Base Salary and the Variable Salary will be the Negotiated Salary
  • New faculty will be guaranteed a Negotiated Salary for 36 months and all faculty will be reviewed annually
  • A key element is that Negotiated Salaries can go up or down depending on productivity and revenue production

The Task Force also made implementing recommendations concerning documentation, review and timing. The goal for full implementation is July 1, 1998. Data collection and related steps necessary for implementation are underway.




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