Site prep for demolition of the Public Safety Building has ramped up in recent weeks. (BizSense file photo)
Calls for changes to VCU Health’s governance structure in light of a failed and costly downtown development are increasing with the release of a board-commissioned report from a healthcare consulting firm.
The governing boards for Virginia Commonwealth University and the VCU Health System Authority on Tuesday released the report from The Chartis Group, a national firm they hired to review the health system board’s makeup and advise on “the alignment between” the two boards.
The firm’s review, conducted from May to September, followed the demise of the so-called Clay Street project – a $325 million redevelopment of Richmond’s old Public Safety Building that the health system backed out of as the project’s master tenant, at a cost of $73 million and counting.
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The boards received the report Monday in an hours-long closed session, after which they agreed to release the report to the public after submitting it to the governor’s office and the Joint Legislative Audit & Review Commission, the state’s investigative arm that a week earlier committed to studying the health system in light of the aborted development and the controversial exit payment.
At the start of Monday’s meeting, Todd Haymore, rector of the VCU Board of Visitors, acknowledged JLARC’s decision before going into the closed session.
“We fully will cooperate in that process. In fact, we welcome it,” Haymore said, adding that the Chartis Group report “will be helpful to the process.”
In a letter to General Assembly leadership in September, Gov. Glenn Youngkin urged legislators to make changes to VCU Health’s governance structure, including the replacement of VCU President Michael Rao as chairman of the authority’s Board of Directors. Rao has said he supports Youngkin’s thinking on the matter.
The authority’s bylaws currently mandate that the university president serve as the health system board’s chairman. Rao also serves as president of the health system.
The report from Chartis Group agrees with Youngkin’s recommendation that the university president should instead continue serving on the board as an ex officio member, and not be mandated to serve as chair. The board would instead select a chair, with the VCU president eligible for consideration.
The report states that interviews conducted by Chartis Group with about 40 stakeholders across VCU and VCU Health “consistently indicated a preference that the VCU President not also serve as the VCUHS Board Chair.” It also notes “a widely perceived lack of transparency and coordination between the VCU and VCUHS Boards,” adding: “The Clay Street project was the most commonly cited example.”
A rendering of the so-called Clay Street project that would have replaced the Public Safety Building. (BizSense file)
Chartis Group’s other recommendations include exploring the feasibility of structuring VCU Health as a subsidiary of VCU, and increasing health system board member terms from three to four years. The report suggested making other enhancements to the board’s composition “to gain the expertise necessary to govern an academic health system with VCUHS’s scale and complexity,” noting its $3 billion in annual revenue.
Also recommended is a coordinating committee for the two boards “to ensure alignment and communications on strategic direction and key decisions,” and the addition of a senior operating executive for VCU Health, allowing the health system CEO to focus on strategic direction and implementation.
VCU Health’s governance structure was compared to other public universities with academic health enterprises, including: UW Health in Wisconsin, in which the university and health system are independent affiliates similar to VCU’s; UNC Health, in which the health system is a subsidiary of the university; and UVA Health and UM Health in Michigan, both of which structure the health system as an operating division of the university. The UNC Health model is recommended for VCU.
“The key finding is that there is a compelling case for change in the organizational structure and Board composition of VCUHS to better align VCU and VCUHS for long term success,” the report states, adding that such change would likely take several years to achieve with legislation introduced over multiple General Assembly sessions.
The report concludes with a section reiterating that there is “a compelling case” for VCU Health to change its structure to become a subsidiary of VCU and to enhance its board makeup, citing the Clay Street project as a case in point.
“Recent events, such as the Clay Street real estate transaction, have clearly demonstrated a foundational lack of alignment between VCU and VCUHS and has illuminated existing gaps in the Board’s composition with regard to several key areas of expertise,” the report states.
It adds that implementing the recommendations will be contingent on, among other factors, “buy-in from the legislature” and “a shift in culture and communications across VCU and VCUHS at all levels to promote collaboration.”
Chartis Group produced its report on a contract with VCU and VCU Health that allowed payment of up to $456,000, the university and health system said. The report followed an after-action review the boards commissioned from law firm Saul Ewing, which was paid more than $342,000 for its work.