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HEALTH
AFFAIRS COMMITTEE
Saturday, May 15, 1999
8:30 - 9:30 a.m.
East Oval Room, The Rotunda
Committee
Members:
Charles
M. Caravati, Jr., Chair
Terence P. Ross
William G. Crutchfield, Jr.
William H. Goodwin, Jr.
Elizabeth A. Twohy
John P. Ackerly, III, Ex Officio
AGENDA
- I.
CONSENT AGENDA (Dr. Cantrell)
- A.
Conflict of Interest Exemption (E-site)
- B.
Conflict of Interest Exemption (MMS)
- II.
REPORTS BY THE VICE PRESIDENT AND PROVOST FOR HEALTH SCIENCES
(Dr. Cantrell)
- A.
Medical Center Financial Report (as of
March 31, 1999) (Dr. Cantrell to introduce Mr. Carter) (Mr. William
E. Carter to report)
- B.
Medical Supply and Pharmaceutical Cost Review
(Dr. Cantrell to introduce Dr. Massaro) (Dr. Thomas A. Massaro
to report)
- C.
Vice President's Remarks
- III.
EXECUTIVE SESSION
- Discussion
of proprietary, business related information of the Medical Center
in connection with its proposed and existing joint ventures, and
the investing of public funds where competition or bargaining
is involved, when if made public initially the financial interests
of the University would be adversely affected, as provided for
in Section 2.1-344 (A)(6) and (24) of the Code of Virginia.
- I.A.
Conflict of Interest Exemption
- BACKGROUND:
The School of Medicine is negotiating a sponsored research contract
with E-SITE THERAPEUTICS, INC., a Delaware corporation ("E-Site"),
for funding basic research in the use of antibodies in the diagnosis,
imaging, prevention, treatment and monitoring of cancer. This
research contract would fund approximately $500,000 in the laboratories
of Drs. Ronald Taylor and Leland Chung. This is an extension of
work already in progress in these laboratories supported by grants
from the National Institutes of Health and the Defense Advanced
Projects Agency. A change in state law now requires approval of
such arrangements by the Board of Visitors.
- DISCUSSION:
The research funding would help support the on-going cancer research
by Drs. Taylor and Chung. Dr. Taylor's 10% equity interest in
the company creates a conflict of interest that will prevent agreement
with E-SITE unless the Board approves the conflict. Such action
is permitted under state law in the case of sponsored research
contracts.
- The
design of the law is to advance the public interests in approved
research undertaken by state institutions of higher education,
while requiring disclosures of employee financial interests for
administrative management and oversight. The law and University
policy provides that Dr. Taylor will be required to file annually
a disclosure statement of economic interests as long as he holds
an equity interest in the company exceeding 3%. (The University
Patent Foundation also holds a small equity interest in E-Site
less than 10%). Dr. Chung has no equity interest in the company
or other known conflict, except that he works occasionally as
a paid consultant to the company. Dr. Chung's consultancy does
not create any unlawful conflict in the proposed contract because
he is not involved in the negotiation, approval, or procurement
of the contract terms.
- As
a separate but related conflicts consideration, the spouses of
each researcher work in the laboratories of Dr. Taylor and Dr.
Chung respectively and are employed by the University. The dual
employment of the spouses is permissible under state law if approved
by the Board and so long as one spouse does not exercise sole
authority over to supervise, evaluate, or make personnel decisions
as to the other.
- Neither
Dr. Taylor or Dr. Chung is involved in the University's negotiation,
approval, or procurement of contract terms with E-SITE, nor are
their spouses. The departmental chairs are responsible for managing
and overseeing the research including independently supervising,
evaluating and making personnel decisions concerning the spouses
to ensure that the continuing best interests of the University
are served. As an additional precaution, the chairs will report
at least each quarter to the dean on the progress of sponsored
research activity and utilization of University resources.
- ACTION
REQUIRED: Approval by the Health Affairs Committee and the
Board of Visitors.
CONFLICT
OF INTEREST EXEMPTION
- The
President will propose the adoption of the following resolution:
- WHEREAS,
the School of Medicine wishes to enter into a sponsored research
contract with E-SITE THERAPEUTICS, INC., a Delaware corporation,
for investigation and research into the use of antibodies in the
diagnosis, imaging, prevention, treatment and monitoring of cancer;
and
- WHEREAS,
as noted, Dr.Taylor has a conflicting equity interest exceeding
3% in E-SITE THERAPEUTICS, INC. which has been disclosed to the
University as provided by '2.1-639.6(C)(7) of the Code of Virginia
and as required by University policy; and neither Dr. Taylor nor
Dr. Chung is involved in the University's negotiation, approval,
or procurement of the sponsored research contract, nor are their
spouses;
- RESOLVED
that the exemption under '2.1-639.6(C)(7) of the Code of Virginia
is approved by the Board of Visitors in order to permit the University
to contract with E-Site and secure funding of ongoing cancer research
provided the annual disclosure statement of economic interests
is filed by Dr. Taylor as required by law, the University files
its required annual report with the Secretary of the Commonwealth
reporting the contract and responsible managers overseeing its
administration, and the chairs of both departments vigilantly
oversee and monitor the utilization of University resources in
implementation of any contract with E-SITE THERAPEUTICS, INC and
report to the dean on at least a quarterly basis.
- RESOLVED
FURTHER that the exemption for dual University employment of the
spouses of Drs. Taylor and Chung, under '2.1-639.6(C)(2) of the
Code of Virginia, is approved in order to maintain ongoing cancer
research which appears to be in the public interest and to retain
competent scientists familiar with the subject matter, with the
understanding and on the condition that neither Dr. Chung nor
Dr. Taylor evaluate, supervise or otherwise make personnel decisions
concerning their spouses and that these actions will be taken
independently by the chairs of their departments in strict accordance
with applicable University personnel policies.
- I.B.
Conflict of Interest Exemption
- BACKGROUND:
The School of Medicine, with assistance from the Office of General
Counsel, is negotiating a contract with Multimedia Medical Systems
Inc. (MMS), a Delaware corporation with its principal place of
business in Charlottesville, Virginia to test and evaluate software
developed by MMS with the capability of transmitting medical images
over the Internet.
- The
Internet is expected to have significant impact on the delivery
of health care and the economics and quality of service delivery.
Health care institutions will face enormous challenges in evaluating
the benefits of this technology. The proposed contract with MMS
will allow the University to gain considerable insight into the
practical aspects of incorporating this technology into its health
care delivery network. The proposed testing activity will also
help position the University's School of Medicine as an innovator
in using the Internet to pioneer new methods of delivering health
care services. It is hoped that the contract will be a model for
attracting industry investment and related opportunities to advance
health care delivery systems.
- DISCUSSION:
Neal Kassell, M.D., a member of the faculty in the School of Medicine,
owns a 13.3% equity interest in MMS, and his spouse, Lynn Kassell,
owns a 0.1% equity interest. The University also has a 3.3% equity
interest in MMS. Neither Dr. Kassell nor Ms. Kassell will have
a role in negotiating, approving or procuring the contract with
the company or involvement in the research and evaluation, but
a contract with MMS places them in technical violation of the
Virginia Conflict of Interests Act unless the conflict is approved
by the Board of Visitors which is permitted by state law in the
context of such research and development contracts.
- ACTION
REQUIRED: Approval by the Health Affairs Committee and by
the Board of Visitors.
CONFLICT OF INTEREST EXEMPTION
- The
President will propose the adoption of the following resolution:
- WHEREAS,
the School of Medicine wishes to enter into a sponsored research
contract with Multimedia Medical Systems, Inc., a Delaware Corporation,
for testing MMS computer software for transmitting medical images
over the Internet; and
- WHEREAS,
Neal Kassell, M.D., a faculty member in the School of Medicine,
and his spouse, have equity interests of 13.3% and 0.1%, respectively,
in Multimedia Medical Systems, Inc. and the University's entry
into an agreement with Multimedia Medical Systems, Inc., would
thereby expose them to violation of the Conflicts of Interest
Act unless approved by the Board as provided by '2.1-639.6(C)(7)
of the Code of Virginia.
- RESOLVED
that the conflict is approved by the Board of Visitors in order
to permit the University to negotiate and enter into a proposed
contract for testing MMS computer software, which transmits medical
images over the Internet; provided, as required by the law, the
faculty file the required annual disclosure statement of personal
interests in Multimedia Medical Systems, Inc., the University
files the required annual report concerning the contract with
the Secretary of the Commonwealth, and the department chair vigilantly
oversees implementation of University resources in the best interests
of the University and in accordance with policy.
- II.A.
University of Virginia Medical Center Financial Report as of
March 31, 1999
- BACKGROUND:
The Medical Center prepares a quarterly financial report and reviews
it with the Executive Vice President and Chief Financial Officer
before submission to the Health Affairs Committee of the Board
of Visitors. The Health Services Foundation (HSF) prepares and
presents financial statements to the HSF Board and to the Vice
President and Provost for Health Sciences.
- DISCUSSION:
At the end of the first nine months, gross inpatient revenue was
3.4 percent less than budget and gross outpatient revenue was
6.1 percent less than budget. A decrease in indigent care charges
($9.7 million less than budget year-to-date) offsets an increase
in bad debt ($1.8 million greater than budget year-to-date). Better
than expected contractual adjustments were experienced resulting
in an $7.7 million favorable comparison to budget. These activities,
in combination with miscellaneous revenue being $0.7 million lower
than budget, result in total operating revenue being $1.9 million
lower, or six-tenths of a percent lower, than budget.
- Expenses
are $14.6 million higher than budget through March primarily because
of medical supplies and pharmaceuticals, which represent $8.7
million of the budget variance. Purchased Services & Other expenses
represent another $4.6 million of the variance. Salaries and wages
increased to $1.9 million over budget and Bad Debt is $1.8 million
greater than budget. Favorable Contracts, Fringe Benefit Expenses
and Depreciation & Amortization partially offset these unfavorable
variances. The resulting operating margin is 1.1% of net operating
revenue and $16.5 million less than budgeted.
- The
financial position at the end of the first 9 months is less than
optimal. Lower than budgeted gross inpatient and outpatient revenues
have been experienced despite higher than budgeted admissions.
Although this is offset by favorable indigent and contractual
adjustments, higher admissions contribute to expenses being higher
than budget. The resulting operating margin positions the Medical
Center poorly for the remainder of the year as it faces increased
costs and decreased reimbursements.
- The
commitment to achieving an acceptable operating margin as a percentage
of net operating revenue holds firm, despite challenges of the
first 9 months' financial results. Management continues to aggressively
apply medical management, cost containment, and process improvement
with an emphasis on both quality patient care and lower cost.
- REQUIRED
ACTION: None
- II.B.
Medical Supply and Pharmaceutical Cost Review
- BACKGROUND:
Pharmaceutical and medical supply costs are spiraling nationally
and at the UVA Health System. Management's attention is focused
on controlling this inflationary situation.
- DISCUSSION:
Tremendous scientific advances have brought powerful new tools
for patient care. Patients are increasingly making decisions based
on availability of the latest innovations and advances.
- Todays
managed care and prospective payment systems often make it impossible
for providers to pass on these additional expenses to consumers
(patients and insurance companies). The UVA Health System is responding
in several ways.
- Our
first response is to "buy smart". UVA is a partner in the University
Health System Consortium buyers cooperative, "Novation", currently
the largest buying group in the world, with over $11.5 billion
in annual transactions for 2000 health care organizations. This
virtually guarantees the best price, but even these are rising
steadily. As a result, major efforts are underway to use these
products more efficiently and effectively.
- Improved
utilization is a two pronged approach. The first targets specific
drugs or technologies and focuses best practice for those items.
The second basic and probably more sustained change requires fundamental
reengineering of the clinical practice process. It is multi-disciplinary.
At times it conflicts with the prevailing medical culture of autonomous
decision-making at the level of the patient and physician.
- Several
examples of each approach in this area will also be discussed.
- REQUIRED
ACTION: None
- II.C.
Vice President's Remarks
- The
Vice President and Provost for Health Sciences will use 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.
- The
Vice President and Provost for Health Sciences will introduce
Mr. Robert J. Baker, President and CEO of the University Health
System Consortium an alliance of more than 80 academic health
centers and over 60 affiliated health care organizations. He has
extensive experience in managing academic health care enterprises,
having served as chief executive officer for the University of
Nebraska Hospital and Clinic and in senior management positions
at the University of Minnesota Hospital Clinics. He holds an MBA
with a concentration in hospital administration from the University
of Chicago.
- Mr.
Baker will present an overview of the financial impact of the
Balanced Budget Act on university health systems nationwide.
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