Where’s transparency in UW dollars headed out of state?

UW Health logoInformation gleaned from a recent Illinois financial analysis makes the case for a deep and broad look at how the University of Wisconsin System operates.

In a gift of transparency, the state of Illinois issued a review of an aggressive move by the UW Health into the northern Illinois market. Reports in the press referred to it as an acquisition of SwedishAmerican Health System, a two-hospital operation in Rockford. It was also labeled a merger.

In either case, the deal, which closes quickly in January, will involve a $250 million investment by UW Health. That’s a big number. The decision was obviously made to attract more patients from northern Illinois to the specialty care offered at UW Hospitals. It is a business initiative.

Any deal of this magnitude raises numerous questions. Illinois requires a public review of such transactions, but Wisconsin government apparently does not.
UW Health is a non-profit that includes under its umbrella UW Medical Foundation, the non-profit home for faculty doctors and a clinic organization, and the UW Hospitals and Clinics. Both are under the auspices of the UW Hospital and Clinics Authority, whose board made the merger decision.

UW Health bills itself as “independent,” meaning independent of the university and state government, and that looks to be at least partly true. It does get free rent from the university, uses the powerful UW logo and brand and enjoys lower malpractice rates as part of the UW. Its complicated organizational structure shows a tight linkage with the UW School of Medicine and Public Health.

As a non-profit, UW Health is tax exempt. Note, though, that most non-profit hospital organizations operate in much the same manner as for-profit health systems. Executive salaries, for example, are on par with executive pay at for-profit health corporations.

Some of the questions:

*UW Health had already entered into an affiliation for specialty care with SwedishAmerican in 2010, so how much more volume will be generated?

* What will be the impact of the acquisition on UW Health’s viability?

* Where will the $250 million come from? Will UW Health take on debt to do the deal? The Illinois report reveals that the combined UW Health enterprises will make a surplus (aka profit, or revenues in excess of expenses) of $150 million in 2014. It is also sitting on a net worth of $1.5 billion. These numbers are not disclosed in Wisconsin.

* Could the $250 million have been invested in better health in Wisconsin, where the “profits” and reserves are generated? It’s not like there aren’t major health issues in this state.

* Should UW Health’s reserves and “profits” be used to support UW System in terms of faculty salaries, research or student scholarships.

Universities often generate an audited set of financial reports for all entities under their umbrellas. Illinois does. Wisconsin needs to do so; its affiliated off-balance sheet entities are very opaque. Accounting rules generally require consolidated financials.

The cloudy accounting practices of UW Health recall the UW reserves controversy of the last biennium.

There has been a growing conviction in some quarters that the state’s leaders need to create a blue ribbon commission to take a fresh look at strategies and resources for UW System going forward. There has been no comprehensive examination of its mission and operations for more than four decades.

The last reorganization commission resulted in the 1972 merger of the two public college systems in the state. That was a long time ago.

Such a commission also should probe the missions and resources of other “independent” entities at UW – Madison: the UW Madison Foundation and the Wisconsin Alumni Research Foundation. The combined assets of the three independent but affiliated organizations top $6 billion. That’s real money. Are they paying back enough dividends to the financially strapped UW campuses?

Education is facing numerous challenges and new dynamics, including high levels of student debt, lagging support from legislatures, less costly web-based education models and the need for greater involvement of universities in the economic destinies of states and regions.

Other governors and legislatures across the country are launching examinations of the role of public universities. The Wisconsin Idea – the philosophy of involving citizens from all quarters in the state in major policy issues – cries out for a commission on the future of the University of Wisconsin System.

Transparent accounting for all of the entities sharing the UW name would be a good start.

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