University of Louisville officials expressed disappointment on Thursday with KentuckyOne Health’s lengthy response to the university’s demand for $46 million in back payments from the company. Specifically, KentuckyOne questioned UofL’s commitment to their joint operating agreement and the university’s transparency regarding how much of the company’s $524 million in financial contributions have been invested.
The two sides will meet next week to begin a dispute resolution process in the matter, with UofL’s acting executive vice president of health affairs Greg Postel leaving open the possibility of severing their relationship if they cannot come to a favorable outcome for the university.
After Thursday’s UofL Board of Trustees meeting, chairman Larry Benz said the university’s letter last week listing complaints against KentuckyOne was just the initiation of the dispute resolution process, adding that University Hospital and the James Graham Brown Cancer Center “are by far the best-performing hospital system in the KentuckyOne network” and the university “commits to our partnerships 110 percent.”
Asked how secure their relationship with KentuckyOne is going forward, Benz said “it really depends on how that dispute resolution process unfolds. It is a multi-stage process, and from my standpoint it’s a little early to tell, because we have not had the follow-up meeting to that letter.”
Benz said he was “saddened” by KentuckyOne’s “lengthy” statement released Wednesday, which he felt was “a very inappropriate response.”
“We will not escalate any kind of public relations or media war with KentuckyOne,” said Benz. “We are going to follow up on our commitment of the joint operating agreement, which is clearly outlined in the dispute resolution process.”
Dr. Postel told reporters that the letter to KentuckyOne was necessary to begin a formal dialogue about the university’s concerns for a resolution of the dispute, the points of which they will bring up in the meetings next week and “hope to have a fruitful discussion.”
Discussions with KentuckyOne will last through Nov. 13, Postel said, and when asked whether a dissolution of their operating agreement was possible if those talks did not bring a favorable outcome, he said “we’d have to vote on appropriate next steps. That is one option.”
Acting UofL President Neville Pinto said his goal is the well-being of the university in all aspects of its mission — clinical care, research and education — and “we’ll make a decision based on the totality of the information. So if we are in a situation where we cannot reach a resolution in this based on our contractual agreement, then we will make a decision that will ensure the well-being of the University of Louisville.”
Trustees approve $655,000 salary for Pinto, but none of predecessor’s large ‘perks’
At Thursday’s board meeting, the trustees unanimously approved a resolution formally appointing Neville Pinto to his position as the acting president of the university, setting the terms of his service and compensation.
Pinto will receive a total salary of $655,000, comprised of a base salary of $480,000 and a presidential stipend of $175,000. Although he also will receive a country club membership and use of the UofL Foundation’s Amelia Place for university business, as well as travel expenses for his wife, the appointment letter stated that his “compensation will not include any additional bonus, deferred compensation, leased automobile or car allowance.”
This provision appears in stark contrast with the often-maligned deferred compensation and tax gross-ups that former President James Ramsey received from the UofL Foundation, which amounted to roughly $2 million annually in his last few years in office — placing his total compensation well above presidents at other peer schools. Pinto said he did not seek such perks.
Benz told reporters that he hopes excluding such perks sends a message, as “the culture change that has to happen here is we have to have no spin zone, no illusions.”
“(Pinto’s) compensation is very straightforward, we looked at national and regional survey data to set it, and it is explicitly stated: There is nothing behind the scenes,” said Benz. “And that’s the kind of information that we have to get accustomed to and be accountable to the public for. We can’t have these behind the scenes or behind the documents, unauthorized approval of various complex transactions and compensation ever again at the University of Louisville.”
The agreement passed by the trustees said that when the university finds a permanent president, Pinto will be offered his old position as dean of the Speed School of Engineering, where his base salary will remain at least $480,000, with an administrative dean stipend of at least $60,000.
Threat of university suing its own foundation has passed
The trustees also unanimously voted for a motion rescinding the resolution they passed last month threatening to sue the foundation if it did not take certain steps to improve its transparency and an independent forensic audit of its finances.
Benz told reporters after the meeting that the foundation’s new board chair Brucie Moore “has demonstrated exemplary leadership” by addressing those concerns, as the foundation brought on new board members, removed two officers (Ramsey and his aide Kathleen Smith, who is now on paid administrative leave), has dramatically improved its responses to open records requests, and created a governance committee to examine best practices and a joint audit oversight committee to select a firm to examine the foundation.
“The fact of the matter is, we are working hand in glove with the foundation,” said Benz. “We believe wholeheartedly that not only were the terms met and were delivered upon, but that we are now completely aligned with the foundation.”
Joint Audit Oversight Committee has first meeting
Shortly after Thursday’s board of trustees meeting concluded, the recently created joint committee of the trustees and foundation held its first meeting, during which they discussed the selection process of a forensic auditor going forward. The committee is chaired by the foundation’s new board member Diane Medley, a noted local CPA.
Committee member and UofL CFO Harlan Sands said they received 10 bids for their RFP that closed on Tuesday, which sought a firm to assess the foundation’s internal accounting controls and fraud risks. The committee members will review the firms’ bids, scoring them with a 30 percent emphasis on their experience and qualifications, 30 percent on their timeline, method and approach, 25 percent on cost, and 15 percent on their references.
Medley said she was pleased with the responses they received, as “it looks like we have received some very prestigious names.” She noted that one bidder was among the national “Big Four” accounting firms, along with a few other national accounting firms that have a good reputation and several expert forensic firms “that specialize in engagements such as this.”
The committee schedule going forward has them scoring and selecting finalists by next week, and inviting those finalists to give presentations to the committee in the following week. They hope to select the firm in early November and have the firm commence the forensic audit in the middle of that month, which Medley called a “very ambitious” schedule with “a very short time frame.”
Medley said she doesn’t yet see any specific evidence of wrongdoing at the foundation, but this audit “is what we need to do to determine the truth, and we’ll deal with it as it comes.” She added that the audit is needed not only to restore confidence in the foundation and find the truth, but ensure that is has “best practices in place from accounting, finance and overall management.”
“I’m a graduate of the university, and I as much as anybody wants to know that things are run well and we’re doing a good job,” said Medley.