At UVA, How Much Is Health Care to Blame for Sullivan's Ouster?

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Sabrina Schaeffer / The Daily Progress / AP

University of Virginia President Teresa Sullivan walks through a crowd of supporters on her way to the Board of Visitors meeting at the Rotunda on Monday, June 18, 2012, in Charlottesville, Va.

Updated: This story includes new statements made Friday by Helen Dragas, head of the university's Board of Visitors (BOV).

As the drama continues at the University of Virginia, where the same board of trustees that forced the resignation of President Teresa Sullivan two weeks ago is preparing to meet on Tuesday and possibly reinstate her, it's still unclear what brought on this P.R. fiasco. Much of the speculation on why the board ousted Sullivan has focused on the trustees' interest in online education, but it's also worth looking at the role UVA's medical school and medical center may have played in the board's decision to cut her loose. Helen Dragas, the head of the university's Board of Visitors (BOV), mentioned health care in her first public statement, on June 10, about Sullivan's resignation and reiterated her concern, in a June 21 statement attempting to clarify the board's actions, about the "dynamic and rapidly changing health care environment."

The impetus for the leadership change at UVA may have been due at least in part to the university health system's shifting bottom line. According to the university's budget for 2012-13, patient revenue is expected to make up 45% of UVA's total revenue, but the medical center's projected net revenue of $74.8 million represents a 54% decrease from 2010-11.

That's a pretty steep plunge, but Uwe Reinhardt, an expert on health care economics and professor of economics at Princeton University, points out that the medical center is still projecting a 6% profit margin for 2012-2013. Reinhardt served on the Duke board for many years, during which, he noted, that school's medical center had lean years as well as flush years. "This does not look like a sick medical center," he says of UVA. "Maybe these guys were spoiled in 2010 when their profit margin was 16%. A 6% margin is certainly not something you would worry about."

But Dragas isn't the only person at UVA under the impression that its health system is in trouble. A high-ranking university official described the medical school as a "significant beneficiary of subsidies from other parts of the university." According to the administrator, "the amount that tuition-paying students bring in isn't nearly enough to pay these very high salaries of numerous faculty."

Neither Edward Howell, CEO of the UVA Medical Center, nor Steven DeKosky, dean of the UVA School of Medicine, could be reached for comment for this article.

But Chris Holstege, chair-elect of the faculty senate and assistant professor of emergency medicine, said he would be "stunned" to find out that the medical school was largely subsidized by other parts of the university, and that while there are real financial concerns, President Sullivan was not the cause. "These are hard economic times, no doubt," Holstege said. "There are certainly financial challenges across the school. There have been decreases in clinical revenues, it's getting harder to get grants. But no one placed any blame on the president for that."

In addition to grappling with the same pressures that have affected the health care industry nationwide, UVA is also dealing with stiffer competition locally. In 2010, Norfolk, Va.-based health system, Sentara Healthcare, merged with a small hospital in Charlottesville, where the university is located. In a phone conversation with TIME, UVA spokeswoman Carol Wood cited the merger as a change in the local healthcare market that had the potential to affect the school as a whole since the medical center's budget accounts for roughly half of the university's overall budget.

Last year the board added two trustees with health care expertise, one of whom is Edward Miller, CEO of John Hopkins Medicine and dean of the John Hopkins University School of Medicine. Newspapers have reported that Dragas this spring had been quietly pushing for Miller to be the interim president after Sullivan resigned.

Dragas and Sullivan have publicly taken swipes at each other over how quickly UVA is moving forward. "We are all aware that the UVA needs to change," Sullivan said in a June 18 statement. "Apparently, the area of disagreement appears to be just how that change should occur and at what pace." Dragas, in her June 21 statement, parried that, "At the behest of the Board of Visitors, the Medical Center undertook a strategic planning study in 2011 that resulted in a well-articulated plan. Implementation will require strong leadership and very ambitious interim steps." The implication is that Sullivan wasn't moving fast enough.

But as recently as last month, DeKosky, the medical-school dean, spoke positively about the steps the med school was taking. "To ensure a bright future for the health system, this summer we're shifting from strategic planning to strategic implementation, from ideas to actuality, from presentation slides to real-world successes," DeKosky wrote on the med school's website. But, he added, the broad changes put forth in the strategic plan "may take months and years to accomplish."

As UVA faculty and students continue to lobby for Sullivan to be reinstated, the board will have to follow Dragas' own advice and move quickly. Governor Robert McDonnell has warned that he will ask the entire board to step down if it is unable to decide on Tuesday whether to reinstate Sullivan. "Regardless of your decision, I expect you to make a clear, detailed and unified statement on the future leadership of the University," McDonnell said in a statement released Friday.

Dragas, a real estate developer, responded by agreeing with the governor on the need for a final resolution. "I also agree with him on the importance of providing clear explanations of our actions, as I aimed to do in my statement yesterday, while being mindful of the constraints of the confidentiality of personnel matters and the non-disparagement agreements in the President's contract," she said in a statement released on Friday. "I look forward to a respectful and dignified meeting on Tuesday."