UH nonprofit bleeds $6.9M


POSTED: Monday, January 05, 2009

Mounting debt has alarmed board members of a nonprofit affiliated with the University of Hawaii John A. Burns School of Medicine.





        Answer: It is a separate nonprofit faculty practice organization created to support clinical, academic and research activities of the faculty of the University of Hawaii John A. Burns School of Medicine. Purposes include providing:

» Funding to build and sustain the medical school's infrastructure and departments.


» Funding for research, education and academic development.


» Additional resources to recruit, retain and develop faculty.


» Public health care “;with special attention to the poor and other underserved populations of Hawaii and the Pacific.”;





The red ink at last tally: $6.9 million and growing, according to board minutes made available to the Star-Bulletin.

The organization, University Clinical, Education & Research Associates, was established in 1993 to supplement salaries and support activities of medical school faculty members. It was to generate revenue and handle research grants, billings and collections to support the faculty's academic, research and clinical activities.

Instead, the agency fell into fiscal disarray.

Allan Landon, chairman of the UH Board of Regents, said the board is “;attentive”; to the situation and supports efforts to find remedies.

  But specialists brought in to tackle the trouble have quickly departed.

» Doug Sjoberg, hired in February 2006 as UCERA's administrator with a $220,000 salary, resigned on June 30, 2007.

» Kent Vaughn, a consultant from Mississippi hired last January on a five-year contract to implement a recovery plan, returned to the mainland in September with a severance package—along with colleague Jerry D. McCearley and other personnel.

In an interview in early September, Vaughn had boasted, “;We're turnaround people. It would have dragged the school down if nothing was done.”;

  ALTHOUGH FEW RESIDENTS likely have heard of it, the faculty practice organization is critical to the medical school, emphasized medical school Dean Dr. Jerris Hedges, who serves as its president, and Dr. Patricia Blanchette, the organization's interim chief operating officer.

UCERA's purpose, she said, is to fulfill the medical school's mission to provide services to the medically underserved and to help recruit and retain specialists in short supply here.

Blanchette took leave as chairwoman of the school's Gerontology Department in September at Hedges' request to help restructure the trouble-plagued practice organization. She has already made many changes and says now it is “;very much a going concern.”;

The accounting firm Accuity LLP was retained by the board in May to investigate UCERA's finances and did a thorough review covering several years, Blanchette said.

In an interview, she said she had not yet received a written report, but said a verbal report discounted “;rumors and allegations”; that funds available to pay salaries for the faculty were improperly used.

  “;It was a huge relief to hear that ... nothing was amiss financially,”; she said.

Rather than any wrongdoing, Hedges said, “;We have collectively inherited an entity undercapitalized at the beginning that has limped along and has required a re-infusion of capital to upgrade its operations.”;

Personnel changes along the way added to the costs, he said.

Gary Ostrander, UH vice chancellor for research and graduation, became involved with UCERA in May 2007 as interim medical school dean and UCERA president until Hedges arrived in March.

“;The more we all found out about it, the more concerned we were,”; Ostrander said.

He said systems had to be set up to address issues related to accounting and billing.

“;It's quite possible this was beyond the scope of what folks were comfortable with or had experience with at the time.”;

In October 2007, Ostrander and the board brought in Vaughn, who with McCearley began beefing up the billing and collection system and hiring more staff—now totaling about 204.

But the Vaughn team was at odds with board members—medical school department chairmen and the dean, as reflected in e-mails between Vaughn and Hedges.

Vaughn said, “;The fundamental issue is whether strategy should be to create a strong unified practice plan or, as I understand your vision, a weaker UCERA with more reliance on hospital parts of the practice plan.”;

Hedges said he did not view the partnership as weaker. He said the hospitals are the only community partners willing to put money into the community-based medical school and practice organization.

“;It was a mutual decision that he would resign,”; Hedges said in an interview.

Art Ushijima, Queen's Health Systems president and chief executive officer, said the hospital's relationship with the medical school and practice plan is “;a very important one.”;

Some faculty members who teach and do research at Queen's want to see patients, but they do not want to own a practice, so UCERA contracts for the services, he said.

Vaughn was replaced by Blanchette, a businesswoman as well as a physician.

Hedges said she has made a lot of progress.

UCERA paid what it owed the medical school up to and including 2006-2007—a total of $1,406,666.

And it is current on payments of about $500,000 per month to the school for 2008-2009.

UCERA's debt for the 2007-2008 fiscal year—reduced slightly to $6,235,210—is also on a repayment schedule, Hedges said.

Faculty members were refusing to sign contracts with UCERA a few months ago, but they are coming in now, said Blanchette, who worked with department chairmen and faculty to revise the contracts to meet their needs.

Dr. Elizabeth Tam, chairwoman of the Department of Internal Medicine and UCERA vice president, said a billing system that should have been installed at the start was put in at a cost of $2 million to $3 million, and collections for physicians' billings now total about $2 million a month—up to 91 percent from 41 percent.

The Council of Administrators suggested in August changing UCERA's name because it had “;a bad reputation.”;

But UCERA is keeping its name and changing its reputation, said Blanchette and Hedges.