The document recommends that the University of Toledo pursue a primary academic affiliation agreement with ProMedica. Key elements of the proposed agreement include ProMedica providing $250 million to rebuild the College of Medicine, $50 million annually in academic support, clinical training sites for UT students, and access to an electronic medical records system. The recommendation is made due to challenges of maintaining UT's academic missions with its small hospital and class size that is larger than its clinical opportunities. Approving a non-binding letter of intent would allow exclusive negotiations over the next 90 days to establish definitive agreements between UT and ProMedica.

1. 0
The University of Toledo
College of Medicine
Recommendation for a Primary Affiliation
Agreement
May 11, 2015

2. 1
Perspective:
• Community leaders thoughtfully created the College of
Medicine and supported our community hospitals
expecting to:
– Advance patient care
– Train the next generation of healthcare professionals for our
region
– Create meaningful knowledge through biomedical research.
• We have the responsibility to deliver to our community
on these expectations.
• Question: How do we take our community’s
resources and aggregate them to best achieve
these expectations?
An Academic Affiliation

3. 2
What we will discuss:
• Background
• Context: challenges and opportunities
in academic healthcare
• Process: how we evaluated options
• Recommendation
• Conclusion

4. 3
In academic medicine a critical,
intertwined relationship exists
between a college of medicine,
a hospital, and
a physician group practice.
Each part relies on the
the other to achieve
its mission.
How Academic Medicine Works

5. 4
The Tripartite Mission of Academic Medical Centers
• Academic Medical Centers (AMC) have three simultaneous core
missions:
1. Research
2. Education
3. Patient Care
• Balancing these missions is critical for AMC success.
• A hospital provides these things related to the academic mission:
1. Clinical learning opportunities for students and residents
2. Material for research
3. Cash flow to support the academic mission
These two are often referred to as the
“academic mission.”
The Missions and Hospital Role

6. 5
Wall Street Journal, April, 2015
“Smaller, mid-market academic medical
centers are among the most distressed types
of hospitals nationwide.”
“[I]n recent years revenue from medical
services has served as a lifeline for some
schools that have struggled.”
“[T]he marriages between universities and
their cash-cow clinical operations are starting
to fray as changes stemming from the 2010
health-care law threaten to make university
hospitals less profitable.”
“[Moody’s] has mentioned school’s growing
reliance on hospital operations, and the
potential for shrinking margins in those
businesses, as both credit strengths and
challenges.”
“The best way to stay healthy is to be
preventative.”
-- Geoff Chatas, CFO, SVP of Business and
Finance at Ohio State University

7. 6
Distribution of UT Health Science Learners
UTMC ProMedica Mercy Other
≈ 45% ≈ 30% ≈ 10% ≈ 15%
• We have a large medical school class and a small hospital (next
slide).
• The teaching and patient care missions may conflict when UT
students (teaching mission) are placed at sites that compete with
UTMC for business (patient care mission.)
• This creates mission vulnerability for UT.
Context: Where our learners are educated.

8. 7
CoM Class Size
70th Percentile Research
25th Percentile
Hospital
2nd PercentileFaculty Size
15th Percentile
Imbalance in UT’s Academic Medical Missions
Source: AAMC and COTH
Context
Our clinical mission
provides resources for our
academic mission.
Our clinical mission is
grossly undersized relative
to the academic mission.
This is unsustainable.
And it cannot be resolved
through organic growth.
UT needs to partner with a
larger health system.

9. 8
Physical Condition of UT’s College of Medicine
• The College of Medicine occupies 455,000
square feet of space in 12 buildings.
• Some of the college’s facilities, that date back to
the 1970s, are in need of capital improvements.
• Other newer areas (IISC) are state-of-the-art.
• The projected capital needs to remain
competitive are in excess of $150M over the
next decade.
Context

10. 9
The Healthcare Marketplace is Quickly Changing
• Healthcare’s business model is shifting to value-based population health
management from fee-for-service.
– This shifts insurance risk onto providers, which requires significant
investment in IT systems and greater balance sheet strength to absorb
that risk.
• Healthcare systems in a population management environment have strong
incentives to keep patients within their systems, reducing referrals and use
of AMCs for many services.
• IT plays a large part in care delivery via electronic medical records and data
analytics. This technology is expensive, and not readily financed with tax-
exempt bond debt.
• New actors in the healthcare marketplace (e.g. Wal-Mart) are creating a
retail aspect to the distribution channel for care delivery.
• These changes require significant investment and scale by providers
in order to remain viable.
Context

11. 10
• Maintaining UT’s ability to achieve our academic mission is of
utmost importance. We must remain guided by our academic
mission… Our learners’ needs are the overarching issue.
• UT cannot adequately run UTMC at its current low capital level.
Doing so will accelerate a downward spiral that will drive away
patients, physicians, and staff.
• Additionally, the College of Medicine needs significant capital over
the next decade, but has no planned, sustainable funding source.
• UT seeks an alliance with a partner to commit capital to the College
of Medicine as well as ongoing funding for our academic mission.
• The consequences of not doing this will be an inability to
achieve our academic mission.
A Practical Reality
Context: Challenges to Academic Missions

12. 11
Opportunity:
We believe that a strong and durable
primary affiliation with a health system
partner will allow us to:
1. Expand training opportunities for healthcare
professionals.
2. Increase regional biomedical research.
3. Improve community health.
Context

13. 12
• Support, placement, and funding to meet the
learning needs of students, residents and fellows of
the UT Health Sciences Colleges
• Long-term, durable agreement
• Annual academic support payments to the College of
Medicine
• Capital commitment to rebuild the College of Medicine
• Meaningful control of the academic mission delivered in
a partner’s health enterprise
What UT Seeks from a Partner
Context

14. 13
• An Electronic Medical Record to allow for free flow of
patient care information for metropolitan Toledo
citizens
• Subject to legal review, the alignment and integration,
in some form, of the healthcare enterprise’s
employed physician group with the University of
Toledo Physicians (UTP) that would strengthen the
community’s ability to achieve academic and clinical
excellence
• UTP ambulatory care / medical office building with
multi-specialty clinical space and faculty offices
Context
What UT Seeks from a Partner, Continued

15. 14
Process steps to date
• Initial kick-off meeting with UT leadership, external
advisors, and lawyers in December 2013
– 18 months of work so far
• Phase 1: Environmental scan combined with internal
analysis to determine our situation and begin to frame
options
• Phase 2: Outreach to several possible partners across
the State of Ohio and upper Midwest
• We have engaged in meetings, negotiations, and due
diligence with possible partners for the last 6 months
• Three meetings with Ohio Attorney General’s office
Process

16. 15
Process
1. Clinical sites for substantially all of our
learners
2. Shared governance of missions delivered in
the partner’s facilities
3. Ability to reach an agreement
4. Economic support to advance missions.
– Money matters however the other elements
matter more.
Criteria for Evaluating Proposals

17. 16
Recommendation:
UT management recommends that
we pursue a primary academic
affiliation agreement with
ProMedica

18. 17
– 50-year affiliation with the College of Medicine
– Durable agreement with few “outs” on either side
– UT continues to own and independently operate UTMC
– UT Physicians remain a separate legal entity and
interface with ProMedica in a clinically integrated
network
• Joint payer contracting is excluded from this agreement
– Subject to regulatory approval, ProMedica gets right of
first refusal on certain transactions involving UTMC in
future years
Recommendation
Key elements that we have agreed to thus far
with ProMedica include:

19. 18
– Residency slots aggregated into ProMedica facilities, but the UT CoM
maintains ownership of the residency programs from an accreditation
perspective
– ProMedica will accommodate substantially all UT health science campus
learners at ProMedica sites in NW Ohio (note, this maintains and grows the
current arrangement where 70 UT residents already train at ProMedica)
– Affiliation would be governed by an Academic Affiliation Operations Council,
chaired by the Dean of UT CoM. And because ProMedica is locally owned,
this creates synergy with UT that benefits the community.
– UT and ProMedica will collaborate in the selection of clinical service chiefs
at ProMedica, clinical department chairs at UT, and residency program
directors.
– UT will have non-voting representation on the Toledo Hospital board, and
ProMedica will have non-voting representation on the UT Academic Affairs
committee
Recommendation
Key elements that we have agreed to thus far with
ProMedica: continued

20. 19
Key elements that we have agreed to thus far with
ProMedica: continued
– ProMedica will provide $250M in capital to rebuild CoM, in a location to
be mutually agreed upon at a later date
– ProMedica will provide at least $50M per year in academic support
payments
– ProMedica will provide access to an electronic medical record
– ProMedica will provide access to clinic and office space
Recommendation

21. 20
From the Antitrust Section of the AG’s office
Dated May 6, 2015
No significant competitive concerns with the proposal
Final definitive agreements will need to be carefully
structured and reviewed for competitive issues
Letter from Ohio’s Attorney General
Recommendation

22. 21
What we are asking you to do today
• Approve a non-binding letter of intent (LOI) between the University
of Toledo and ProMedica.
• The LOI provides for 90-days of exclusive negotiations
between UT and ProMedica.
• This time period can be extended by mutual agreement.
• Permit UT management to negotiate definitive agreements with
ProMedica, adding additional details to the broad terms already
agreed upon by UT and ProMedica (outlined previously)
• UT will not be obligated under this agreement unless and until
definitive agreements are consummated. The full board must
approve those agreements in order to consummate them.
 Action Item:

23. 22
Conclusion: It’s About the Mission
• This partnership is guided by our shared interests:
• Train the next generation of Healthcare Professionals
• Create knowledge through biomedical research
• Provide high-quality patient care
• The proposed partnership with ProMedica builds on the
foundation created by the leaders who preceded us, and
creates a stronger community.
• This partnership, we believe, will create for the next
generation of patients, healthcare professionals and
scientists, a legacy we will all be proud of.