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Archive for Friday, May 4, 2007

Written responses from Dennis McCulloch, spokesman for the Kansas University Hospital, regarding the hospital’s Board of Directors

May 4, 2007

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1) Who is on the nominating committee of the board?

George J. Farha, M.D., Chairman
Edward J. Chapman, Jr., Esq.
Irene Cumming
Chancellor Robert E. Hemenway
Betty T. Keim
John B. Payne
Charles T. Sunderland

2) How is presenting a slate of five names to the Governor for five positions compliant with the law? The Governor says there should be ten names at least.

Per the Hospital Authority Act, each open board position requires its own slate of no less than two and no more than three names. State law does not prohibit nominating a person for a subsequent slate in the event that same person was not selected from a prior slate. We understand that candidates for judicial appointments routinely reappear on slates given to the Governor. Since there has been more than one board term expiring at the same time, as a matter of efficiency the Nominating Committee has therefore simultaneously sent the Governor multiple slates, each having no less than two names such as

First Slate Person #1 Person #2
Second Slate Person #2 Person #3
Third Slate Person #3 Person #4

This process is in accordance with the customary practice for this Governor until December, 2006 and the previous Governor.

3) The governor's office says since it never received Parkinson's resignation letter, they consider him to be a current member of the board. Does the hospital agree?

No. Mark Parkinson notified the Hospital Authority Board in writing on June 5, 2006 that he had resigned from the Board. There was no issue about his resignation then, nor when the new slates of board members were being discussed with the Governor. Neither the Statute nor the Authority's bylaws require that resignations of Directors be forwarded to the Governor. Previous Board members have resigned and Mark Parkinson*s resignation was no different. Since his resignation, he discontinued attending all board meetings and functions. Subsequent to the request by the Governor that he be re-nominated, he has attended one board meeting as a guest, and while he did speak, he did not vote, nor did he attempt to vote. Mr. Parkinson resigned at the time he decided to join the Governor as her running mate. Knowledge of his resignation was widespread.

4) Whose idea was it to put Lariviere on the board in an ex officio position? How is this justified?

The Governor requested that Richard Lariviere be put on the board. As his position is Provost and Executive Vice Chancellor of the University of Kansas, he was slated to hold the ex officio position reserved by state law for the Executive Vice Chancellor of the University of Kansas Medical Center. Subsequent to inquiries, the board is reviewing whether this position meets the requirements of the statute.

5) Did the hospital present a slate of board candidates to the governor before this one? Who was on it? Did the governor ever tell, suggest or push upon the hospital names that she wanted to see on the board? Who were those names? Why did the board go along?

In December 2006, the Governor requested the board withdraw the slates of names that had been submitted to the Governor and substitute those slates with individuals she provided, which included the Lieutenant Governor and Mr. Regnier. The board was looking for support from the governor and others to create a win/win/win situation with the affiliation negotiations and was hoping that cooperation would lead to achieving that goal.

6) Speaker Neufeld believes these board appointments are an attempt for the university to regain control of the hospital and to seize its cash reserves for research, which he believes will harm medical education. Does the hospital agree?

The Hospital believes that there are people who want the University to have more influence over the Hospital Authority. If that should happen, we are not able to predict what that would mean for medical education or the impact on the hospital. However, there is historical evidence of declining volume and unsatisfactory financial results of the hospital from when it was under the control of the University, which precipitated the formation of the Authority. In

1999, the hospital transferred a mere $7 million to the University to support its missions. In 2007, that amount is more than $30 million, with many indirect mission support projects not included in the number. Also, the ability of the hospital to absorb the current record amounts of charity care going forward under potential University control is suspect.

Cash reserves are considered a critical aspect of a hospital's bond rating. Strong operating performance and improvement in cash reserves have allowed the hospital to quickly and cost effectively invest in equipment, technology and facilities. This investment has been essential in the hospital's ability to grow its patient base, to facilitate research and education opportunities, to facilitate the recruitment and retention of faculty and to fulfill its mission to provide patient care and specialized services not widely available in the State of Kansas.

7) What are the cash reserves of the hospital?

The hospital seeks to have cash reserves sufficient to maintain an *A* rated bond status or above for a hospital of its size. Currently this is in the range of 185 - 200 days of cash on hand. While the hospital has significantly increased its position to having 120 days of cash, it is still below its A-rated peer institutions in terms of cash and liquidity.

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