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THE PENNSYLVANIA STATE UNIVERSITY

T H E S E N A T E R E C O R D

Volume 33-----OCTOBER 26, 1999-----Number 2

The Senate Record is the official publication of the University Faculty Senate of The Pennsylvania State University, as provided for in Article I, Section 9 of the Standing Rules of the Senate and contained in the Constitution, Bylaws, and Standing Rules of the University Faculty Senate, The Pennsylvania State University 1999-00.

The publication is issued by the Senate Office, Birch Cottage, University Park, PA 16802 (Telephone 814-863-0221). The Record is distributed to all Libraries across the Penn State system, and is posted on the Web at http://www.psu.edu/ufs under publications. Copies are made available to faculty and other University personnel on request.

Except for items specified in the applicable Standing Rules, decisions on the responsibility for inclusion of matters in the publication are those of the Chair of the University Faculty Senate.

When existing communication channels seem inappropriate, Senators are encouraged to submit brief letters relevant to the Senate's function as a legislative, advisory and forensic body to the Chair for possible inclusion in The Senate Record.

Reports which have appeared in the Agenda of the Meeting are not included in The Record unless they have been changed substantially during the Meeting or are considered to be of major importance. Remarks and discussion are abbreviated in most instances. A complete transcript and tape of the meeting is on file.

TABLE OF CONTENTS

I. Final Agenda for October 26, 1999

A. Summary of Agenda Actions

B. Minutes and Summaries of Remarks

II. Enumeration of Documents

A. Documents Distributed Prior to October 26, 1999

B. Attached

Attendance

III. Tentative Agenda for December 7, 1999

FINAL AGENDA FOR OCTOBER 26, 1999

A. MINUTES OF THE PRECEDING MEETING -
Minutes of the September 14, 1999, Meeting in The Senate Record 33:1

B. COMMUNICATIONS TO THE SENATE - Senate Curriculum Report
(Blue Sheets) of October 12, 1999

C. REPORT OF SENATE COUNCIL - Meeting of October 5, 1999

D. ANNOUNCEMENTS BY THE CHAIR -

E. COMMENTS BY THE PRESIDENT OF THE UNIVERSITY -

F. FORENSIC BUSINESS -

G. UNFINISHED LEGISLATIVE BUSINESS -

H. LEGISLATIVE REPORTS -

Student Life

Revision of University Policy on Academic Integrity (Senate Policy 49-20)

I. ADVISORY/CONSULTATIVE REPORTS -

Faculty Benefits

Recommendation Regarding Surcharges in the Penn State Dental Plan

J. INFORMATIONAL REPORTS -

University Planning

Budget Report, Process and Outcome for the Academic Year 1999/2000 And Budget Planning
for the Academic Year 2000/2001, Rodney A. Erickson, Executive Vice President and Provost

Senate Council

The Changing Nature of Academic Health Centers, C. McCollister Evarts,
Senior Vice President for Health Affairs and Dean

Undergraduate Education

Summary of Petitions by College, Unit or Location

University Planning

Construction Programs Status Report

K. NEW LEGISLATIVE BUSINESS -

L. COMMENTS AND RECOMMENDATIONS FOR THE GOOD OF THE UNIVERSITY -

M. ADJOURNMENT -

SUMMARY OF AGENDA ACTIONS

The Senate passed one Advisory/Consultative Report:

Faculty Benefits - "Recommendation Regarding Surcharges in the Penn State Dental Plan." The report was a recommendation from the committee not to impose a surcharge for non-network services until such time as the number of dentists affiliated with the PPO network in Centre County more closely approximates the state wide averaged for PSU dental PPO-affiliated dentists.  (See Record, page(s) 9-15 and Agenda Appendix "C.")

The Senate received four Informational Reports:

University Planning - "Budget Report, Process and Outcome for the Academic Year 1999/2000 and Budget Planning for the Academic Year 2000/2001." This was an oral informational report given by Provost Erickson on the budget of the University and its impact.  (See Record, page(s) 16-24.)

Senate Council - "The Changing Nature of Academic Health Centers." Dean Evarts addressed the plight of the academic health centers of the country and indicated that changes must be made in the future for them to survive. (See Record, page(s) 24-35 and Agenda Appendix "D.")

Undergraduate Education - "Summary of Student Petitions by College, Unit or Location." This report examined the petitions submitted, granted and denied for the period of 8/1/97 to 7/31/98.  (See Record, page(s) 36 and Agenda Appendix "E.")

University Planning - "Construction Programs Status Report." This report is a summary of significant developments in the status of construction projects since the last report presented to the Senate in April 1999. (See Record, page(s) 36 and Agenda Appendix "F.")

One report was withdrawn from the Agenda by the committee sponsoring the report:

Student Life - "Revision of University Policy on Academic Integrity (Senate Policy 49-20)." (See Record, page(s) 8-9).

The University Faculty Senate met on Tuesday, October 26, 1999, at 1:30 p.m. in Room 112 Kern Building with Murry R. Nelson, Chair, presiding. One hundred and sixty-nine Senators signed the roster.

Chair Nelson: It is time to begin.

MINUTES OF THE PRECEDING MEETING

Moving to the minutes of the preceding meeting, The Senate Record, providing a full transcription of the proceedings of the September 14, 1999 meeting, was sent to all University Libraries and posted on the University Faculty Senate's web page. Are there any corrections or additions to this document? All those in favor of accepting the minutes, please signify by saying, "aye."

Senators: Aye.

Chair Nelson: Opposed? The minutes are accepted. Thank you.

COMMUNICATIONS TO THE SENATE

You have received the Senate Curriculum Report (Blue Sheet) for October 12, 1999. This document is posted on the University Faculty Senate's web page.

REPORT OF SENATE COUNCIL

Also, you should have received the Report of Senate Council for the meeting of October 5, 1999. This is an attachment in The Senate Agenda for today’s meeting.

ANNOUNCEMENTS BY THE CHAIR

Chair Nelson: I refer you to my remarks to Senate Council contained in the minutes attached to today's Agenda.

From the evening of the last meeting you made me sick. And I've been sick since then. I don't know what that's associated with. I have had pneumonia for the last five or six weeks and it all started in this room so I blame all of you. I'm hoping that there will be a reverse effect by having this meeting today. I will walk out and be miraculously well. So whatever it was please take it back.

The Faculty Advisory Committee to the President met on Thursday, October 7, 1999 and discussed the following agenda items: Update on Searches for various administrative positions; Enrollment Tax vs. the development of Four-year Programs, obviously at non-University Park locations; Campus Specialty Positions; and Alignment of Upper-division Programs for the benefit of students that got caught in the middle of the misalignment. The next FAC meeting is scheduled for November 23, 1999. We now have three or four things already from last night's meeting and this morning's meeting. So if anyone might have any items to be included on the FAC agenda, please contact any of the Senate Officers or one of the three elected FAC members: Peter Deines, Linda Miller or Gordon De Jong.

The Senate Officers visited Penn State Harrisburg and Penn State Schuylkill last week. We thank them for their hospitality. We had a very nice time. Our next visits are scheduled for November 1 and 2 to Penn State Abington and Delaware. Our last visit of the fall will be to Penn State DuBois on November 9. I'll once again remind you that the fall visits are posted on the University Faculty Senate's web page.

COMMENTS BY THE PRESIDENT OF THE UNIVERSITY

Chair Nelson: We move next to comments by the president of the university. President Spanier is here today and does have comments.

Graham B. Spanier, President: I had noticed a reduction in the flow of email this month and only now am I making the connection that it has to do with Murry's illness. So, get well soon I guess.

I just came from the luncheon address at the Penn State Forum. I see a few others here who also attended. We had a marvelous speech today by a Penn State Ph.D. alum named David Morrell who is now an author. He was an English professor for about 16 years. He's written 20 books which have sold over 20 million copies. It was a marvelous speech. I only mention it because I see a lot of you here who I don't usually see there and you are really missing a treat with a lot of these speakers. So I encourage you to do that sometime. It's ten dollars but you get your whole lunch with it and the talk. They keep the price down. So think about that.

Things are going extremely well at the university right now, from almost every perspective. We have one very challenging spot however, and that's in our College of Medicine and the Penn State Geisinger Health System. I know you read about it from time to time and I think you have a report scheduled today from Mac Evarts. Is that right?

Chair Nelson: Yes, we have Mac entertaining us later today.

President Spanier: Oh, he's here, right. I didn't see you Mac. So he will fill you in on what's happening nationally in the academic health care business. It is a very great challenge right now. It is not a Penn State issue alone. It is also a very significant national issue, and as Mac is the expert on that he'll give you a good briefing on it. I hope you'll have some questions for him so he can help put that in perspective because I think you will be hearing a lot more about it over the months to come.

Included among the good things that are going on at the university right now is our overall enrollment picture. I like to comment on enrollments from time to time because it helps give a certain feeling for the pulse and pace of the university and how we're doing in a number of respects. Let me begin by mentioning that last year we had a record number of applications to Penn State. The number of students applying to this university continues to increase every year, which I think is a very good sign of our reputation and overall health. Last year we had 70,781 applications for admission to Penn State. We think that's the largest in the United States. Over 50,000 of those were undergraduate applications for admission, the other 20,000 were for graduate and professional programs, with about 6,500 approximately in the College of Medicine. I also saw the data on the total number of students applying to medical school in the United States, and one out of every six students in the United States applying to medical school, applied to Hershey. A lot of students are interested in Penn State, yet interestingly enough, we enrolled this fall 14,000 freshmen collectively at our campuses. Which I know sounds like a big number, but that's actually slightly fewer freshmen than we had enrolled the year before. So we're following our enrollment plan precisely, which is to level off the number of new freshmen and to see our enrollments grow principally at the upper-division level and principally at campuses other than University Park. And indeed this year, we can see very clearly how this plan is unfolding and the success of the plan--several hundred additional upper-division students at the Commonwealth Campuses, so a slight reduction in the overall enrollment at University Park, with about a hundred student increase at the graduate level, but an overall decrease at the undergraduate level. Also a fairly stable picture at University Park, because we don't think we can grow too much at this campus and in fact, we've reserved most of the remaining growth at this campus for students who will come into the new School of Information Sciences and Technology and the other campuses will continue to do what they are doing, and to keep more students at the campuses who wish to remain at the campuses. Students can still move from one campus to the next. In fact there is some evidence of an increased number of students moving from one of our Commonwealth Campuses to another one of the campuses other than University Park, which we also think is a very healthy sign. So we're very pleased with the overall outcome in enrollments.

Now I want to spend a few minutes on the main topic of my report, what I think is going to be an important preview of coming attractions. I spoke on the matter of intellectual property to the Senate a year or two ago, and talked about some of the things I saw unfolding nationally. And I want to say a few more words about it now, because I think sometime in the next few months a report will be emerging. I have not seen it yet, but we've had a committee working on this including a lot of Senate folks and some folks knowledgeable in the administration. I think there will either be a forensic session or report or something coming forward on this. And I just wanted to lay a little bit of ground work for that. As I say I haven't seen the report, but I've been participating in a lot of discussions at the national level about this. The most recent one being at the meeting of AAU presidents last week. There was a fascinating discussion there. I have been on panels at national meetings talking about distance education and continuing education and issues of intellectual property, I've been on those panels myself and I have certain points of view about it. It was very interesting to be in the audience for this particular discussion. Some of the enterprises are absolutely determined to take over in a very significant way. I don't mean to run everybody else out of business, but to become a major force in the higher education community of this country, and that includes some for-profit enterprises. And on that panel for example, was the president and CEO of the for-profit Harcort company, which has a lot of seed money and capital, and expects to be a major provider of higher education services in the United States. And in not-for-profit, for example, we had on the panel the CEO/President of the new US Open University, which is being funded by the British Open University which I think is the largest university in the world, and now they want to sort of take over the US market. And these individuals are quite determined to do that, and when they talk about higher education, they do not talk about it the way folks like I do when we go to meetings. You know, when we talk to our colleagues in Pennsylvania higher education we say, "Oh no, we want you to succeed and we want you to have your complement of enrollments, we wouldn't dare take a student away from you," and so on. That is not the nature of discussion with folks from these organizations. They want hundreds of thousands of students in their distance education programs. It's interesting because some of you have written email saying things like, "we are a little worried on our Commonwealth Campus, is the Penn State World Campus going to take away students from us?" I assure you that is not the issue you should be worried about, because anything we do in the World Campus we want to complement and in fact, enhance opportunities to give more flexibility to our folks on your campuses. I mean it's our World Campus, it's a partnership and we want control over our intellectual property so that it can go back and benefit our own faculty on our various campuses. But these other organizations are determined on a nation-wide and indeed international basis, to really capture a significant share of the higher education market. Okay, am I really worried about them, no I'm not really worried about them, because Penn State can compete with anybody, we have a great brand name and our World Campus is going to be successful. So why am I bringing up this issue to you here today? Because one of the things these folks mentioned was that they were lining up 250 faculty members from schools represented around the table to come in and do their courses. In other words, they want you to take your and Penn State's intellectual property from courses you're teaching, after we've paid your employee benefits and your salary and to sort of give it to them for a little honorarium. I mean they would pay you a little extra for it and it would feel good. I mean it might feel like if somebody called you up for consulting and said, "come and consult with us and we'll give you a $1,000, okay why not." This is very different and I would like you all to begin thinking about how you really feel and I hope you'll look at this altruistically and not just from your own personal standpoint. How do you really feel about another enterprise, a for-profit national enterprise that is going to come in on the backs of Penn State faculty and Penn State budget becoming competitors with us? I said to these folks, "now how would you react if I said that coming out of our process we would have new intellectual property procedures that said that a Penn State faculty member can't give away their courses to another university?" In effect what they said is, "You folks are idiots if you don't do that. If I were you, I'd put a stop to it right now, because we are going to kill you if you don't put a stop to it." But he said, "You won't put a stop to it, your faculty won't let you, you don't have the guts to do it and we're going to beat you either way." Now it wasn't said in an unfriendly way...

Senators: Laughter.

President Spanier: ...but that was the unmistakable message. I mean that was the spirit of what they were saying. They are good business people and they have a nice way of saying these terrible things. But I just think you ought to think about that because a lot of times policies like this come through and we say, "oh no, wait a minute. I own everything I do in my course, all the instructional materials I develop--those should be mine, and if I want to sell them to a for-profit company outside the university, I will do that." Well that is very different for example, then you going out and writing a textbook and getting royalties because this is a work for hire. They'll pay you an honorarium and then they own it, they own it and will control it, and will do with it what they want. And every time we have a faculty member that goes and gives away even for a nice honorarium intellectual property that you developed on your time and with Penn State's support in this context, it's probably the first time in my experience in higher education that I see the possibility of it coming back to hurt us. If you were on a campus which is worried about the University of Phoenix or one of these for-profit enterprises coming in to your market place in your part of the state, I would be thinking about these issues. So I'm not saying this to get anybody unduly alarmed, I mean Penn State will be fine. We will cope with this one way or another. But, I do think it's an interesting thing to start thinking about, particularly in the context of the new intellectual property issues that have become more complex in an electronic era. It's not just the simplest thing to say, "oh yea, patents, we know how to deal with those and textbooks". We need to know how to deal with those. There's a whole bunch of stuff now in this gray area in the middle for which there really haven't been any rules. We have to create some rules and how we create those rules could be very important for what happens at Penn State and with individual faculty members in the future. I'll continue to follow and maybe talk about it from time to time. Okay, any questions?

Linda K. Trevino, Smeal College of Business Administration: This is not a question but a comment about your intellectual property issue. This is happening. I personally, and other members of my department in management, have gotten emails from companies asking us to participate. What I did was buck that email to the dean, because I felt it was a real conflict of interest. But they were talking big money, not some little honorarium. If you were going to react in a self-interested manner it would be very appealing to do it. So I'm glad to hear that you raised the issue, I think we have to deal with it and we have to have some rules and guidelines.

President Spanier: In your department and your college that's one of the areas where there is potentially some big money out there. And we really have to think through in our mind what kind of stuff we do, that represents consulting versus what kinds of stuff is benefiting a competitor. We've never had to deal with this in higher education before, but if you were going to work for a company, you'd sign a whole bunch of things on the way in as to who gets what. And we do that now, we have a very good system now when it comes to patents. You come in, you sign something. If you're in engineering or science or some field where you have invented something, we have a very nice policy. You know, we license it, we market it, we get the patents and then the faculty member gets "x" percent of the profits and so on. Everybody comes out ahead on this. But we're really not sure how to deal with this stuff and I do fear that faculty members are going to go off and do something that they are going to be very sorry for later. Because we haven't really said what the rules should be and they may be thinking of it in the same vein as, I just got invited to give a speech at Ohio State. This company is inviting me to go and do such-n-such. But it's much more complicated than that.

Linda K. Trevino: I think if people think of it more like a textbook, I have a book and I don't own the copyrights, the publisher does. So in some ways it's similar, but I agree with you that there's some real important differences. I also saw in the process of having these email conversations that Northwestern I think, has a policy, so we might want to take a look?

President Spanier: Several schools are now evolving policies. The largest number [of schools] are probably right where we are right now--in the process of trying to evolve some new policies that take into account this new type of intellectual property.

David P. Christy, Smeal College of Business Administration: I'd like to echo Linda's concern, and in the formulation of these policies ask that you more carefully show the distinction or the similarity between these kinds of online courses, and writing a textbook. Because in a conversation with several faculty, it is very unclear how constructing and delivering an online course for a provider, versus getting honorarium for a textbook would be fundamentally different. And that same distinction has never been drawn between the patent policy for invention and writing a textbook. So I think that there needs to be some clarity added to that issue.

President Spanier: How many of you here in the room are on one of these committees?

Kevin Berland, Shenango Campus: At the risk of seeming contrary, which is certainly never my style, I'd like to bring up two issues that are connected to this. The first is as you develop this policy, I would beg of you to distinguish between developing courses for other institutions which the individual does not do at the home institution, and might never do because of the teaching assignment or the nature of the contract. That's a very different thing from duplicating already existed services. And the second thing is I'd like you to consider the possibility that particularly under that kind of circumstance where you're developing a teaching instrument, that you do not do and you do not have the chance to do, that the flow of technology transfer could come back to Penn State.

Beno Weiss, College of the Liberal Arts: I have a question that is somehow related. I teach one large section course and my lectures are usually published, or notes of my lectures. By making notes, they are now on the internet and so forth. I feel like it is an infringement on my own property, if you wish. What is the position of the university on this issue?

President Spanier: Well, you know it's interesting, because there's been so much in the news about this, and you're the first person who ever asked me about it and I've been waiting for somebody to ask so I could give my opinion. And it might not surprise you to know that I do have an opinion on this. But first, is there a university policy? John Cahir or Rod Erickson, I don't think we actually have a policy on those notes, do we?

Rodney A. Erickson, Executive Vice President and Provost: It certainly is covered in the sense that if it's your notes, diagrams and verbatim and so on, you have a copyright interest in that. The student that's simply coming in and listening to what you have to say and writing down their rendition of it, they can certainly go off and sell that to some other outside party and get the copyright for that. But we would certainly hope that students would come to you and ask your permission.

President Spanier: So now you've heard the policy, let me tell you what I think. No, I know that's correct but of course it's going on all around the country. It's both local enterprises, but now there are national enterprises you might know, that are sort of setting this up on every campus and doing it nationally. I am a firm believer in the fact that there is something that we ought to think of as the sanctity of the classroom. And so first of all, there is nothing that's ever gone on in any of my classrooms that I wouldn't be happy to do outside the classroom and say to anybody and so on. But I do feel when I'm in a room and it's my classroom, even if it's a big classroom, that what goes on in there is something for the students who are enrolled in the course, or who have my permission to be there, and what I'm doing in that course represents my intellectual property. So first of all, I don't like the idea at all of some outsider who isn't invited coming in, and being in the classroom and there's some of that going on--people just show up in your class and take notes and they're not even in the class--that I think is wrong. Now by the same token I don't think a student who is enrolled in the class should be putting your stuff up for sale or selling it as a work-for-hire. Some of them get seven bucks, and then they are obligated within so many hours to turn it in to one of these services. I don't support that either, unless it has your permission. You know, if you want to do it that's fine so I don't believe in these services. Now I'll say one other thing though, I do believe that if you want to put your stuff up on the web that's great. And in fact, I would encourage more of you to do it but it ought to be your decision, and one of the reasons I think that it could be a very positive thing is, if you decide to do that, it is because the more you can put on the web stuff that you were just going to say, the more you do that, the more it leaves time for interactive learning, collaborative learning, projects, discussion and some of the other things that can really bring a course more to life. But that's kind of a pedagogical issue that has to do with what you're trying to accomplish in your class and how you want to teach, and whether you happen to agree to that in your particular discipline, and in your particular approach if you want more time for that. And so I'd say I don't see stuff being on the web in and of itself as a threat to the learning process. It could be a great resource. I just think the faculty member ought to be the one to make the decision and to have control over it, and not be pulling up some web site and having somebody else interpreting for your class and the rest of the world what your course is all about; what you allegedly said, and what you are trying to do.

Rodney A. Erickson: May I add something to that? First of all you have every right to withhold access to the classroom for someone who's there as a paid note taker, if they're not a tuition paying student in that class, you have every right to withhold that access. I couldn't agree with Graham more about his comment on notes. There are a lot of faculty who put their own notes on the web and view this as part of their teaching style and so forth. And finally, I went downtown once and looked at the notes that were taken on my class and I pity any student... They were awful...

Beno Weiss: I get blamed for it.

Senators: Laughter.

President Spanier: You're going to get blamed anyway, Beno.

John W. Moore, College of the Liberal Arts: The University of California at Berkley has a policy which consists of two steps. One is that Berkley publishes notes and any other agency which publishes students notes is held liable for violating university property and they do that. Secondly, a faculty member selects the student who is the note taker. At any time those two steps are infringed, then Berkley indeed takes legal steps against any other note taking agency.

Chair Nelson: Other questions?

President Spanier: Okay, thank you.

Chair Nelson: Thank you very much. I want to alert you that next month the President will have to be leaving swiftly after he discusses things, so we're going to switch him next meeting--so have your questions ready. We won't have time to have you ponder.

FORENSIC BUSINESS

None

UNFINISHED LEGISLATIVE BUSINESS

None

LEGISLATIVE REPORTS

SENATE COMMITTEE ON STUDENT LIFE

Revision of University Policy on Academic Integrity (Senate Policy 49-20)

Joanna Floros, Chair, Senate Committee on Student Life

Chair Nelson: As many of you may know now, and the rest of you will know, the Revision of the University Policy on Academic Integrity report has been withdrawn. I'll make a couple comments on that. It's been withdrawn at the encouragement of the administration and the agreement of the Senate Committee on Student Life and in its place, as it were, a joint committee on academic integrity is being formulated in which there will be approximately nine members. And the Faculty Senate will have five of those members. There will also be four administrators, some of whom may be members of the Senate. There are some advantages to this that I just wanted to annunciate and why it was withdrawn. The report still had some problems it was felt, with clarity, for the faculty to be able to follow through with the recommendations. That was one problem, but what was of more concern is there were some things that the committee could not do that a joint committee can do. One of which is implementation. This committee will deal with implementation and it will build on the substance of what is already in the Student Life report. Thus, that work is the foundation for any other work that is done and we do not, (that is Provost Erickson and I appointing that joint subcommittee), expect that this work will take more than about three months tops, because the work has already been done by the Senate Committee on Student Life. Another issue that is being addressed that was not able to be addressed in the Student Life report is getting the assistance of counsel to represent faculty and university views. The original report and the committee dealt with the assistance of counsel from the Student Affairs Office but there are other affairs that are of just as much import so the staff on this report will have university counsel, as well as counsel or representation from the Office of Student Affairs. In addition, there was formed last year by Provost Brighton, a dean's committee on academic integrity and it seemed to many that these committees were operating in parallel. What will happen now is that committee will be discharged, and this joint committee will take on the full responsibility of all of the work on academic integrity that the Senate Committee on Student Life had initially engaged in and that the dean's committee was going to deal with in some manner. We are hopeful, as I said, that we will have this report back for either the February 29 meeting or the April meeting. The intention is that whatever is recommended will be in place for fall semester, which was the same place we were going to be with this report. That's all I have to say. If there's any questions, I don't want to make this a long discussion, because we usually don't do that when we withdraw a report. But I did want to just tell you that. Okay, next thing is advisory/consultative reports. The Senate Committee on Faculty Benefits has a report Regarding Surcharges in the Penn State Dental Plan; it is listed as Appendix "C" in your Agenda. Before we begin, let me just remind you, that as we begin our discussion of reports, to please stand and identify yourself, and the unit you represent before addressing the Senate. Allen Phillips--Laura Pauley apparently is masquerading as Allen Phillips--Laura is presenting the report either because she forced Allen to let her do this, or because Allen thought this was a much wiser idea and I assume it's the latter, Laura.

ADVISORY/CONSULTATIVE REPORTS

SENATE COMMITTEE ON FACULTY BENEFITS

Recommendation Regarding Surcharges in the Penn State Dental Plan

Allen T. Phillips, Chair, Senate Committee on Faculty Benefits

Laura L. Pauley, College of Engineering: Allen Phillips is coming back at 2:15 which is why I'm here to present this report. It's outlined in the report that you have, in 1999, UCCI was selected as Penn State's new dental plan administrator and agreed to make available a dental preferred provider organization PPO network. While establishment of a network of providers in some parts of the state has gone well, UCCI's efforts to recruit sufficient dentists into their network around University Park has been especially unsuccessful to this point. It was envisioned that when the network was in place, a surcharge would be applied when not using a PPO affiliated provider. The recommendation we ask you to support encourages Employee Benefits not to impose the surcharge until the number of network affiliated dentists serving the University Park area more closely approximates the state-wide average for Penn State dental PPO providers, or until the percentage of University Park employees using the network providers is comparable to that for faculty and staff at other locations. I can answer any questions you have.

Tramble T. Turner, Penn State Abington: Laura, in the last sentence of the recommendation, why is it that the committee chose to vary the recommendation for locations other than UP? I understand that there is fewer service providers here, but why not just make it one recommendation, and leave out the last sentence and make it clear that the no surcharge will apply.

Laura L. Pauley: No surcharge will apply across the entire Penn State region, and the conditions that we are imposing are regarding University Park where there is a problem. But whether the surcharge will be applied or not would be across the entire state.

Tramble T. Turner: Then I'll repeat, why include the last sentence in the recommendation?

Laura L. Pauley: That just includes other regions that may not be supported sufficiently. As it is, University Park is the main problem.

Louis Milakofsky, Penn State Berks-Lehigh Valley: Do you have any record of other counties other than State College, Centre County that would be underserved? And these terms are very...I'm a scientist, and I need specificity here. What would be for example, the time when the dental administrator decides, okay we have enough people signed up across the state now, everybody's in there whether we go to that dentist or not. That's what I'm worried about.

Laura L. Pauley: I have data just for University Park, and then for other locations state-wide. At University Park, 26 percent of the employees were using the plan. At other locations, it averages 58 percent around the state. For the dentists, about 50 percent of dentists state-wide were in this program, but locally at University Park, only 12 percent. So we felt that University Park was the main concern where we had low involvement by the dentists, and fewer employees also participating or using the preferred providers.

Beno Weiss: What do you mean by surcharge? Would there be an increase in premium? How's it going to work?

Laura L. Pauley: Surcharge would be an additional cost added on. Say instead of reimbursing 80 percent of a certain dental procedure as is currently done, you would be reimbursed a lower percentage of that procedure. Or for procedures that are currently reimbursed at a 100 percent for any dentist that you choose, you may have a lower percentage reimbursed for dentists outside of the program. So it's some disincentive.

Philip A. Klein, College of the Liberal Arts: I just wondered if you could tell me whether the university pays any attention to how much the dentists charge the patients in deciding whether they can be accepted into the plan or not? My impression is that a lot of dentists use what the insurance provides sort of like a jumper uses a base of a trampoline...

Laura L. Pauley: That's correct. That's why many dentists at University Park are not in the network, because they do not accept the reimbursement that the network is willing to pay. So if they're not in the network, they're able to charge what they see appropriate and have the employee pick up the rest of that cost.

Philip A. Klein: Is there such a thing as a list of dentists in the area that do settle for what the insurance will pay?

Laura L. Pauley: There is a list of dentists who are in this network locally.

Denise Potosky, Penn State Great Valley: In the Great Valley area I've had to switch dentists twice in the past year because they keep dropping out of this program. As stated by the policy here, until the percentage of University Park employees is comparable to that percentage--it may happen as the percentage outside of University Park goes down.

Laura L. Pauley: I think state-wide that has not been a problem. Billie Willits might comment on that?

Billie S. Willits, Assistant Vice President for Human Resources: Network members come and go, but I'd like to talk to you about that later to find out exactly where you're located.

Patricia A. Book, Outreach and Cooperative Extension: I just want to say I'm really glad to see this recommendation come forward. Being from State College, I'm extremely annoyed with what's going on. I did discover that my dentist wasn't in this plan and I think there is a fair amount of dental phobia among the general population, and it's really cruel to force us to have to change dentists. As I understand, there are only two dental practices who are in the plan in State College, and I am sure Billie will correct me if I'm wrong. I think there's four people but it's two practices--father and son--but anyway it seems like an odd thing to correct this by paying this surcharge as if they were in the system, it seems an odd correction to me but I think something needs to be done because we don't have enough dentists participating in this plan.

Laura L. Pauley: I believe there's currently 12 dentists in the University Park area who are in the network and it has been a difficult situation to remedy--the network and the dentist's expectations and this recommendation is really addressing that. At this point we don't feel that even though the dental plan is in place we don't feel that it is operating as it should, and that the disincentives that we're calling surcharge should not be imposed until there really are good options and many good options for employees to choose from. And we felt that there were two ways to show that the dental plan was working in University Park. One is by the number of dentists who are in the network, and the other is the vote of all the employees that most of the employees are participating within the network and that would show success as well. So we felt either of those would be an indicator.

Dennis G. Shea, College of Health and Human Development: It's clear the network has had some problems getting started in Centre County and I'm not surprised because eight or nine years ago I had a dentist in my neighborhood coming and telling me that they weren't going to allow Penn State to push down their prices. They have undertaken a collaborative activity which probably prevented that from getting started and it's quite clear that they've done this. And yet if we back off on the surcharges, if we back off on trying to get the employees to take into account the cost to the university of using providers who monopolize services in these ways, what other policies do we have to undertake? We can't simply wait for a provider to graduate from dental school and be recruited to this area. What are the effects of policy if we're going to try and propose or try to use to break the monopoly that these guys are using to ratchet up their prices in this area?

Laura L. Pauley: I guess my personal opinion is the economics should drive the situation. If this dental plan is truly offering competitive prices, then the economics will bring other people into this market if it is favorable. If it is not, if these prices from the dental plan are really not competitive in this region, then I think that will also come forward.

David P. Christy: I thought that the philosophy of the Senate Committee on Faculty Benefits with regard to other medical care was to try to equalize the university contribution no matter what plan the employee chose be it Plan A, or HealthAmerica, or Penn State Geisinger, or so forth for medical care. It seems like with this policy you're going the other direction by saying that rather than having an equal contribution by the university per employee for these kinds of things, that there would be a special case. So could you comment on that? Is this a change in philosophy?

Laura L. Pauley: Well, don't get me started on the medical plan because that's a whole other issue. But as far as the dental plan goes, Penn State reimburses all dentists the same amount right now, whether or not they're in the network. There is a $25 deductible if you do not use a dentist within the network, but as far as reimbursement of dentists, all dentists are receiving the same reimbursement. The dentists who are not in the network ask for money from your pocket as well, and that's the difference. They are just taking money from two places instead of accepting the Penn State reimbursement by itself.

Billie S. Willits: Laura's quite correct and I might add just one other clarification. We have a fully insured dental plan now, so Penn State University is paying a percentage of the premium whether you choose to use a dentist inside the network or out, so it's equal, based on your question. And Laura's quite correct that if you choose a dentist outside the network, the dentist is getting the additional dollars from you, the employee.

Louis F. Geschwindner, College of Engineering: So what's the big deal? If the university is paying the same amount whether the dentist is in or outside of the plan and if I go to one outside, I have to pay the difference. Why is there a problem?

Laura L. Pauley: There is no problem right now. The problem is when a surcharge is in place and that's what this recommendation addresses. We feel that a surcharge should not be placed at this point, because we don't see the dental plan as really in place or working properly in this region.

Louis F. Geschwindner: Why should there ever be a surcharge?

Billie S. Willits: There may not ever be a surcharge, but where you'll feel it is in the premium that will go up. I negotiated a three year contract with UCCI. We got a very good rate, but if most of the faculty, staff and their families use dentists outside of the network during this three year period our premium will go up. In fact, I'm already told they will go up substantially. So we can either use more in the network, or use out of the network, in which case the dental premiums for all of us will go up. So that's a rate reaction but that's the potential reaction.

Michael J. Navin, Dickinson School of Law: Now I'm totally confused. I thought I understood it. In my experience in dealing with Billie she knows how to explain things and everything, but I don't understand why we don't just have a flat amount contributed per person by the university and then go do what you want. Of what relevance is it to UCCI whether you're using somebody in the network or out, if the same number of dollars are coming from Penn State for each person? Or do they have side deals on these networks that I don't understand?

Laura L. Pauley: I believe it's the negotiation power that a large network or a provider can supply. That the provider can offer rates that dentists will accept because they are in the network, and others choose to charge more.

Michael J. Navin: But if I go and I pay the difference? That's what I'm having trouble getting a handle on.

Laura L. Pauley: I think it's the negotiation power that a large network and a provider with many employees could offer. When and if you can go anywhere, then that negotiation power has been destroyed.

Philip A. Klein: Didn't you say there's only 12 in the plan?

Laura L. Pauley: Locally at University Park. State wide it averages 50 percent of dentists state wide.

Chair Nelson: Billie do you want to add anything to that?

Billie S. Willits: Well, the side deal that you refer to is that in order to provide dental benefits to faculty and staff the way that we've done it previously, what we caused UCCI to agree to in the contract, is that they would continue to pay to the dentists at the rate that we had been at all along. That's substantially higher than what UCCI paid out to its other patients in the network as Laura described. So basically what we got for us is a three year contract with UCCI, we're paying a flat rate per employee. They, the insurance company, are paying a higher rate for those of us who are not choosing dentists in the network during the life of the contract and that amount they pay. I'll give you an example. If you have a procedure in the plan that pays 80 percent, they're paying 80 percent of that cost that the dentist is charging. That 80 percent dollar wise is much higher than they would pay a dentist in the network for providing this very same dental procedure. And then you're paying the rest even on top of that.

Michael J. Navin: And they won't do that in the next cycle?

Billie S. Willits: Well, I think that will come up when it's time to negotiate.

Anthony J. Baratta, College of Engineering: It sounds like it's a case of maybe not negotiating this higher rate. Are you noticing this type of thing...like with the HMO you're finding, too?

Billie S. Willits: For the immediate State College Area, that statement is not as accurate as for the rest of the state. The only correction I think earlier, is that this is a Centre County phenomenon, this is a State College, Pennsylvania phenomenon, in terms of dentists not choosing to join the network.

Jamie M. Myers, College of Education: A clarification and maybe a question then. Did I hear you just say that if I use a dentist outside of the network I have to pay a $25 deductible and if I use a dentist in the network I do not have a $25 deductible?

Laura L. Pauley: That's correct.

Jamie M. Myers: Well that sounds like a surcharge to me, and I wonder why this legislation doesn't address that issue right here in Centre County because that is a big difference?

Laura L. Pauley: The $25 deductible has been in place even before the network was in place. So you can see the network providers as being a bonus, it's a perk that we didn't have before. We've always had the $25 deductible.

Jamie M. Myers: I think that's the bottom line surcharge. We're still being surcharged then $50, because of a family plan means you have to pay two deductibles and if I switch my dentist then I won't have to pay that $50. Is that right? And that information is not in here.

Billie S. Willits: Jamie, that information has been everywhere and as Laura said it has been in place for years and years and years.

Jamie M. Myers: You don't have it here...

Laura L. Pauley: I should have invited Billie down to the microphone. I'm sorry Billie.

Jamie M. Myers: I haven't seen anywhere that if I choose the right dentist I don't have a deductible any more.

Billie S. Willits: It was in the material last year, and in there now and it's on the web now.

Chair Nelson: Other comments or questions for Laura? Are we ready then to vote on this? What are we voting on? You're voting on the recommendation if you'll look on page two of Appendix "C," you're voting on a recommendation for this advisory/consultative report. That is the recommendation, that the surcharge not be put into place until there are certain triggers that would allow the percentages to set that surcharge off, it's a deferral. Are we all set to vote? All those in favor of the recommendation, please signify by saying, "aye."

Senators: Aye.

Chair Nelson: Any opposed, "nay"?

Senators: Nay.

Chair Nelson: Okay the "ayes" have it. Thank you Laura. We have informational reports. First one is the Senate Committee on University Planning, it's a Budget Report, Process and Outcome for the Academic Year 1999/2000 and Budget Planning for the Academic Year 2000/2001. Peter Deines the Chair of the Senate Committee on University Planning is here and he will introduce Rodney Erickson who will present the report.

INFORMATIONAL REPORTS

SENATE COMMITTEE ON UNIVERSITY PLANNING

Budget Report, Process and Outcome for the Academic Year 1999/2000 and Budget Planning for the Academic Year 2000/2001

Peter Deines, Chair, Senate Committee on University Planning

Peter Deines, College of Earth and Mineral Sciences: It is a great pleasure for me to introduce to you the Executive Vice President and Provost Rodney Erickson who will talk to us on the budget of this year and the coming year. Rod, it is all yours.

Rodney A. Erickson: Thank you Peter, and good afternoon. A couple of you asked me if I would relay the story that I shared with the trustees last month in my remarks to the Board of Trustees about provost and budget, and I will do so one last time. For those of you that have heard it before, I promise you this will be the last time. The story is, that the staff assistant walked into the faculty member's office and couldn't help but noticing a letter on the counter and the letter was addressed, "Dear God," and it went on to say, "if I just had $20,000. If I had $20,000 there's no limit to all the good things that I could do." And it went on to relay many of them and closed with, "Dear God $20,000 is all I need." So the staff assistant picked it up and took it into the department head and the department head said, "This is clearly a good faculty member but I don't have $20,000, we'll send it to the dean." And the dean looked at it and said, "This is certainly a worthy request but I don't have $20,000, let's send it to the provost." And the provost looked at it and said, "This is certainly a worthy request," so he called in his financial officer and said, "We've got a request for $20,000 here from a faculty member, it's come through the dean. Can we help out?" And the financial officer said, "Well we certainly don't have $20,000 but if we scraped up in some budgets we could come up with ten." And the provost said, "Well transfer the money over to the faculty member." A few days later the staff assistant was in the faculty members office again and there was another letter on the counter and this one said, "Dear God, thanks a lot for the money. I really appreciate it, but next time don't send it through the provost's office. He kept half of it."

My purpose today is to review the highlights of the university's 1999-2000 budget. I will also share some information about the university's budget plan and appropriation request to the Commonwealth for 2000-2001.

This year's budget reflects an increase of five percent in Commonwealth funding–the largest increase in a decade in the university's state appropriation. The budget supports interdisciplinary academic program initiatives that will expand the university's technology transfer and workforce development efforts. It provides funding for new faculty positions. It enhances information technology. And, it continues the approach of internal budget reductions and reallocations that has been in place for several years, and that helps to concentrate our resources on academic priorities and the university's most critical needs.

This slide summarizes the state appropriation increase for this year. The overall increase we received is just under $15 million, or five percent, as I indicated. This includes a three percent increase for the Education and General line item, or $6.9 million.

The Agricultural Research and Cooperative Extension line items together received an increase of $3.5 million. This includes a three percent increase for Ag Research and a 12.2 percent increase for Cooperative Extension. The College of Medicine and Penn College received increases of 2.5 and 3 percent respectively. And, we received special line item funding in two areas--Workforce Development and Technology Transfer and capital improvements at Penn State Harrisburg.

The total state appropriation for this year is $314.1 million. As I mentioned, this includes an increase from last year of just under $15 million, or five percent. In addition to these direct appropriations, we anticipate receiving $4.5 million to support the new School of Information Sciences and Technology from the Commonwealth's Higher Education Technology Grant Program administered through the Pennsylvania Department of Education. Since these funds provide the base of support for the new school, we will request that they be folded into Penn State's appropriation for 2000-2001.

The university's total budget is over $1.58 billion. This includes general funds from our state appropriation, as well as income from tuition and fees, research grants and contracts, other restricted funds, and auxiliary enterprises.

The state appropriation represents one-third of our general funds budget this year. Student tuition and fees contribute 60 percent. The other seven percent includes income on investments, recovery of indirect costs, and departmental sales and services. The general funds budget is crucial, because it supports most of the university's teaching, research and service activities, as well as the academic and administrative support functions, and maintenance of the physical plant.

This slide summarizes the allocation increases for five categories in the educational and general component of the general funds budget. The largest increase of $16.7 million is budgeted for salary increases and related benefits. The next largest increase of $11.3 million is for program adjustments. These are funds that are used for program needs in the 34 budget units.

Before I discuss program adjustments more fully, I'd like to comment on the increase for salary adjustments. The competitiveness of Penn State's faculty salaries is of special concern, and salary increases are a high priority in this year's budget. We realize that this salary increase plan will at best keep Penn State from slipping further among our counterparts in the Big Ten and the Association of American Universities. The plan is based on a two percent increase for all employees whose performance has exceeded expectations, and another one percent of the total salary base for additional merit, market, equity, and compression considerations. The total cost of this plan is $16.7 million.

To put this in context, remember that Penn State received an increase of three percent in the Education and General Line item in our state appropriation. This totaled $6.9 million dollars. The E & G increase of $6.9 million provided less than half of the $16.7 million required this year for these very modest salary increases.

The University Planning Council, which I chair, recommends distribution of the funds for program adjustments based on the strategic planning process. We are in the third year of a five-year strategic planning process for the years 1997-2002. This year, we developed university-level strategic performance indicators. These are measures such as graduation rates and levels of student satisfaction that will be tracked on an annual basis to chart our progress in meeting the university's goals. As part of this year's strategic planning process, each budgetary unit completed a brief strategic planning update and prepared its own list of strategic performance indicators. Based on a review of the strategic plans, 70 percent of the $11.3 million for program adjustments was allocated to the university's academic colleges and campuses. This shows the importance placed on supporting the university's core academic functions and hiring new faculty. Through internal budget reallocations and the new funding for academic programs, the budget plan supports the addition of approximately 100 new faculty positions.

Sixteen percent of the $11.3 million for program adjustments was allocated to libraries and information technology, and 14 percent was allocated to the other support units.

Here is another way to look at the breakdown of the $11.3 million allocated for Program Adjustments. It is made up of two parts. First, in the cost center budgeting model, all campuses were asked to reallocate internal resources to areas of greatest need. At University Park, the amount that was reallocated is $3.8 million. And second, allocations were made in five categories: Academic Program Initiatives, Colleges and Campuses, Libraries and Information Technology, the President's Excellence Fund, and Other Program Adjustments. I'll explain each of these categories.

The Program Adjustments include an allocation of $3.3 million for the high priority academic program initiatives listed here. These interdisciplinary initiatives will expand the university's contributions related to technology transfer and workforce development. Of the $4.5 million that the university anticipates receiving from the Pennsylvania Higher Education Technology Grant, one million dollars has been budgeted permanently for the hiring of new faculty and support staff for the School of Information Sciences and Technology. The remaining funds from the grant will be used for additional faculty and support staff and for start-up funding for the School, such as faculty recruitment, course development, equipment, and renovations.

$750,000 has been allocated in the fourth year of a multi-year commitment to enhance academic programs in the Life Sciences.

$500,000 has been allocated to the Children, Youth, and Families Consortium and

$400,000 each has been allocated to Environmental Studies and to Materials Science to advance these important areas of education and research.

And, we have allocated $250,000 to deploy successful and critically needed technology programs offered by Penn College to other areas of the Commonwealth via Penn State's campus colleges.

Program allocations of $4.1 million have been made for high priority academic program needs and faculty positions in the colleges at University Park and other campus colleges. These funds come from program enhancements dollars allocated by the University Planning Council, from laboratory and clinical surcharges, and from the final year of the implementation of differential tuition rates. In addition, based on enrollment increases over the past two years, all 10 academic colleges at University Park received some additional funding for instructional workload, for a total of $713,000. The other cost centers also adjust instructional workload funds internally based on available tuition income.

Approximately $2 million has been allocated for libraries and information technology–critical areas which support every part of the university community. Of this amount, $1.3 million will address student needs in computing and information technology through a $10 per semester increase in the student information technology fee. $669,000 will be used for library staff in the new Paterno Library, for general education requirements, and for additional library and information technology needs.

The President's Excellence Fund was established in 1997 to provide additional support for the highest priority needs in each college and administrative area. Use of this fund is determined by the units. Primary emphasis has been placed on enhancing faculty and staff salaries in cases of exceptional merit or for equity, compression, or market adjustments. Funds may also be used for additional faculty or graduate assistant positions or for exceptional department allotment requirements. A total of $3.1 million has been allocated for this fund in 1999-2000.

The other program adjustments of $1.8 million include allocations for major maintenance, for support unit needs, and for student activities. We are providing an additional one-half million dollars for major maintenance projects. Penn State has a backlog of over $192 million in deferred major maintenance, although we have increased funding in this area over the past four years. An allocation of $1.2 million has been made for the critical needs of support units such as Research, Enrollment Management and Administration, and Finance and Business. These allocations were based on individual unit strategic plans and the recommendations of the University Planning Council. In addition, $170,000 will be generated from a $1 per semester increase in the student activities fee. Allocation of these fees is being made at each campus by students on campus activities fee committees.

There are two other expense changes in the budget to mention. The first is $2.2 million for the first year of a capital improvement program. Funds will be used to establish an ongoing budget to help address the university's urgent space needs. The second is $1.6 million in support of the transportation plan which implements no fare bus service at the University Park Campus and parking improvements at the other campuses.

The basic tuition rate increase was 4.43 percent. In addition, the tuition increase included $17 per semester to support the capital improvement plan and $14 per semester to support the transportation plan. The budget also incorporates the third and final year of the phased differential tuition plan. Under this plan, upper division students and graduate students pay somewhat more than lower division students at all Penn State locations.

There was a 4.4 percent increase in laboratory and clinical surcharges. We implemented the third and final phase of surcharges for students in science and nursing. A surcharge of $750 per semester was announced for upper division and graduate students in IST and related majors. The IST surcharges will begin in 2001-2002 and are part of the five-year plan to fund the new school. There was also an increase of $1 per semester in the student activities fee and $10 per semester in the information technology fee, as I indicated previously.

In summary, the budget for 1999-2000 supports core academic programs and university priorities while also meeting critical operating needs. It provides funds for new faculty positions, funds new interdisciplinary program initiatives, and enhances information technology. We are moving resources to areas identified as important in the strategic planning process. Now, I’ll move on to the university's budget request to the Commonwealth for 2000-2001.

We have submitted our appropriation request to the Commonwealth for the 2000-2001 budget year. I will share a summary of this budget plan and appropriation request.

The highlights of our planning for next year include, on the expense side:

– Continuation of internal budget reductions and reallocations

– Funding for salary adjustments as a high priority

– A Making Life Better Initiative, which I'll explain further in a moment

– Other cost increases for libraries, computing, and telecommunications; facilities; the President's Excellence Fund; and Student Activities.

On the income side:

– We are requesting that the special line item appropriations received in 1999-2000 be folded into the university's appropriation base.

– An appropriation increase of four percent plus the Making Life Better Initiative

– And a basic tuition rate increase of approximately 4.4 percent and 0.55 percent to support the second year of the university's capital improvement program.

We are seeking $12.5 million in special state funding next year for several areas under the unified theme of Making Life Better. This is also the phrase which we have adopted to communicate Penn State's role in improving the quality of life in the Commonwealth. In the area of workforce development, we are seeking $2 million to support four continuing interdisciplinary areas in the life sciences, materials science, environmental studies, and children, youth and families. We are also seeking $2 million to enhance workforce development efforts at Penn College and $4 million to support new initiatives in workforce and economic development. These funds will be used to hire new faculty, support increased outreach efforts, and enhance the university's technology transfer capabilities. We are requesting $2 million to promote the arts and humanities for the university and for Pennsylvania citizens of all ages. The special funding will be used for new faculty positions and outreach activities. The third component of the Making Life Better initiative is special funding in the amount of $2.5 million for agricultural research and cooperative extension. This is the second year of a two-year plan to restore the agricultural line items to prior funding levels and to provide support for areas of high priority for Pennsylvania's agricultural community.

To summarize Penn State's appropriation request for next year:

– We are asking that the special 1999-2000 appropriation line items be folded into Penn State's base appropriation for 2000-2001.

– We are seeking a four percent basic increase in each of our line items for a total of $12.4 million.

– We are seeking $12.5 million in special funding for the Making Life Better initiative.

– The total increase we have requested is $24.9 million.

And, the total proposed state appropriation for Penn State for 2000-2001 is $343.5 million.

This budget and appropriations request continues Penn State's emphasis on cost containment and budget recycling, while seeking opportunities to improve academic excellence in teaching and learning, research and outreach for all of Pennsylvania. Thank you very much. I'd be happy to entertain any questions.

Wayne R. Curtis, College of Engineering: This focuses primarily on where the money has gone into as opposed to where it has come from. If I've got it right there's basically $3.8 million that came out of the budget reduction and $3.3 that went back into certain initiatives. Along the theme of Making Life Better, it seems that you're making life worse for a significant faction of the faculty. And I was wondering if you'd comment on the rationale of where that money's coming from and that recycling?

Rodney A. Erickson: I think if you come back to my comment about the context of the state appropriation it becomes a lot clearer. You saw that $16.7 million was necessary to fund just the salary increases. That three percent salary increase plus the benefits that are associated with that--I think no one could argue that that's an extraordinary salary increase. But for that three percent it cost $16.7 million. We get $6.9 million from the state, that's the three percent on our base E & G appropriation. We increased tuition, and that of course contributed to it but that certainly doesn't cover all the needs. So yes, it is true that in terms of a one-to-one we were taking $3.8 million out, but there were other initiatives that also represented money flowing back to the colleges. There was $4.8 million that flowed back to the colleges through differential tuition, work-load adjustment, and other kinds of needs. So there was more money, even discounting the salary end that went back to the colleges, than came out of the colleges.

Wayne R. Curtis: I understand that, but is there a rationale for...in other words is this a flat rate tax or is there a rationale as to where that $3.8 million is coming out of? Are we now de-emphasizing specific programs, or is this just a general reduction in everybody's? In other words, what thought process--I agree that it's going to great things, but the question is what's the thought that has gone behind where it's coming from?

Rodney A. Erickson: Well the thought really emanates largely from the units themselves. Most of you will recall that we've had this process of budget recycling that's gone on now for eight years, and if memory serves me correctly we have recycled something like $78 million during that eight year process. Part of that is that reduction in the $78 million has actually been real reductions and it has come out of staff positions. In many cases we're doing work with significantly less staff than some years ago. We reported to the legislature when we took count that Penn State had either merged or eliminated 53 programs over that period of time. So clearly there has been internal changing that's been going on within the 34 budget units. The colleges and each of the academic and administrative support units have either done things more efficiently to reduce costs and very often those costs are staff. I mean, if you think about a university, two-thirds of our total costs are tied up in staff costs so we've reduced staff costs, we've reduced other costs and in the process we're doing things more efficiently and clearly we're not doing some things that we were doing before. I expect that this process of budgetary recycling will continue. You should know that we have taken a lot more money in recycling out of the administrative units than we have in the academic units. There were some years when the administrative units had a higher tax--as it were--that were required to recycle a higher amount and the other part of the equation is what they got back. And in a lot of years the administrative support units in particular received nothing back, so this year we have a one percent across the board and I can assure you that that one percent--it hurts--it's real reductions, there's no question about it. I've been on the anteing up end of that myself for eight of the last eight years and I know that we're often cutting into the bone now. And clearly there's only two ways that you generate income in any significant amount--one of them is state appropriation and the other is tuition.

Charles F. Gunderman, DuBois Campus: I see that we are rolling in Penn College now and maybe I'm out of the loop as to when we started rolling that into our budget. I see a fairly significant increase in appropriation but that budget at one time was separate from the university's, and now it is included in, so that when we look at the increase in request for appropriation percentage wise from the state, it goes up. Is it wise to keep Penn College rolled in or why is that folded into ours?

Rodney A. Erickson: It's been rolled in for a number of years. I suppose it was rolled in when Penn College became a wholly owned subsidiary of Penn State. So it has been in the general funds budget of Penn State I would guess eleven years now or something like that.

Charles F. Gunderman: Was it not separate at one time?

Rodney A. Erickson: It still is separate in the general funds budget. It's separate from our...

Charles F. Gunderman: What I'm pointing out is if when it's rolled into our budget, I don't remember the exact figures, but it certainly inflates our request for the university and not Penn College. Why don't we just leave Penn College out where it was?

Rodney A. Erickson: Well it would simply end up being our appropriation anyway because it is part of Penn State legally. But if I would respond a bit further than that, I would say if anything, having Penn College in our general funds line strengthens Penn State's case. In the current legislative environment, there is tremendous support for the whole issue of work force and economic development, particularly the work force development and Penn College have a very, very high level of support within the legislature. On balance I would say that having the Penn College line in there as part of our general funds request even strengthens Penn State's standing with the legislature in terms of our request. If you notice the other items that we're requesting, there's a very strong orientation toward work force development, technology transfer and asking for these requests on a very targeted basis. But it's there one way or another. We would be asking for it. I happen to think it strengthens the case and also one of the things that very much strengthens the case I might add, is the efforts in work force development that are taking place at the campus colleges. The work that you're doing in that area is noticed very much by local legislatures and a very important part of the Penn State strategy of increasing our appropriation.

Jamie M. Myers: Would those new initiatives have to recycle funds next year?

Rodney A. Erickson: No they won't recycle until we get them... For example, in the life sciences initiative we agreed that we would put $5 million into that initiative. I simply made the decision that it made little sense to recycle one percent of them while we were building them up to a base but, yes at some point they will have to. Remember now that the other part of this is that there's very little money in the life sciences or any of these other kind of virtual organizations or consortia that stays in that unit. Most of the money is actually out in colleges committed on 50/50 funding to add faculty positions or it's committed to graduate students or whatever the case may be. The idea there has been that we would keep those administratively as lean as possible, and rely on the colleges and that's what we've done. I realize this isn't as exciting as the dental benefits plan but...

Senators: Laughter.

Rodney A. Erickson: I would just tell you that a copy of my remarks is going to be up hopefully later today on the Senate's home page. So if you're interested in going back through once more on anything that I said, please do so, and if you have questions don't hesitate to contact me, thank you.

Chair Nelson: Thank you very much Rod. I'm the only one up here for the moment because the next report is something you heard about earlier. The excitement I know has been building for C. McCollister Evarts, Senior Vice President for Health Affairs and Dean who is presenting a report which is coming out of Senate Council. This is very similar to the report that Mac presented to the Board of Trustees this summer. And the officers who were there found it most informative because of the questions that have arisen about Hershey Medical Center, Geisinger, and the flow of funds generally. The notion as President Spanier referred to earlier that this is not an unusual phenomenon unfortunately, it is not unique. It seems to be indigenous at this point to academic health centers. So we asked Dr. Evarts if he would kindly consent to give us a summary of that report. He has agreed to do so, and he just corrected me before the meeting this is his 13th year at Penn State. He has not spoken before the Senate so we are happy to welcome him here at least this year. He has announced his retirement at the end of June, so this is the only chance you will get to torment him.

SENATE COUNCIL

The Changing Nature of Academic Health Centers

C. McCollister Evarts, College of Medicine: Well thank you very much, Murry. I have a couple of things that occurred to me. Number one, I think Murry has the Alaskan Flu, and the treatment for that is to send him to Alaska for a while. Secondly, as I was walking around the medical center the other day I saw a bulletin board and it has to do with a definition and the definition was what do you call a dean with half a brain? And the answer to that is gifted. So I apologize to some of the other deans in the audience, but none the less that's the kind of things that are going on. Now one other thing that's happened and it's a good thing, today and just today, earlier today in Germany, for the very first time the Lion Heart was inserted in a patient and this assist device for those with intractable heart failure and it's for those who can't undergo heart transplants. Unfortunately our Food and Drug Administration would not allow us to do this in the United States, so we picked on the Germans to do this but basically this is a major advancement in the treatment of heart failure. It would be applied just in the United States probably over 300,000 patients per year and may be another significant breakthrough for Penn State.

I thought we ought to have some good news at the beginning of this conversation because you'll find that the next few things are fairly sobering. I think maybe the slide is on, there we go. I probably should have titled this "The Survival of the Academic Health Center" or "Perilous Times for Academic Health Centers". But by way of review, I think I would simply like to point out--what is health care reform? What does that really mean? What are we talking about here and why did it happen? Well it was driven almost totally by the corporate world. The corporate world in the United States simply said, "we're paying too much for health care and this has got to stop," and so the answer has been to move towards what is called managed care and we can define that in a good many different ways. And it was fascinating for me to hear the dental discussion because I participated in discussions like that 20 years ago, 15 years ago when people were talking about how would we manage medical costs and it's the same thing the physicians at that time united and said, "we're not going to provide services unless you pay our charges" and that's what's happening now in dentistry, so it's fascinating. Then there was the threat of government intervention and you all know the Hillary Clinton story and Ira Magaziner, and finally public dissatisfaction really focused on things. So the thing that happened was that there has been a radical change in the delivery system for health care and it is truly radical. We've gone from unmanaged fee for service to managed care which simply means in some instances a discounted fee for service. Our charges resemble nothing as to what we're paid. In other words, our charges now don't bear the slightest resemblance as to what's paid by the insurance companies. And then of course, this all impacted on this group of physicians throughout the United States and in academic health centers by really limiting their autonomy. Well, what's been the impact on academic health centers? Not just Hershey Medical Center or Penn State's College of Medicine, but the academic health centers throughout the United States. First of all, academic health centers in this country, whether they be private or public, depend to varying degrees on the clinical income to subsidize their educational and research efforts. Let me say that again. There is a cross subsidization that occurs that is absolute in all centers. Now it varies if you have a state like Texas that provides over $100 million per year per medical school. That's a little different than Pennsylvania that provides the least to any public school in the country which is $4.5 million to the College of Medicine. The other difference of course, is the result of massive endowments for some of the private schools that have been in existence for many, many years. We were faced in the academic health centers and at Hershey with this decrease in our clinical income because of the delivery system being changed and the discounted fee for service. Right now in a discounted fee for service we're collecting about 38 cents on every dollar of charges. Now that's the hospital as well and the physicians' practices. So that's a pretty sobering fact when you add that up and you come out at the end of the year.

Well the core mission of any academic health center and certainly ours, Penn State's is that of patient care, teaching and research. That's the core mission. That's what distinguishes an academic health center from a community hospital. These are the factors and of course, in the patient care you have the highest kind of patient care, the kind of care that I just described at the outset this new heart-assist device. In teaching, of course, it's the education of health professionals, not just physicians and in research it is both basic and applied research. That's the core mission and without preservation of the core mission then you're going to lose the academic health center. It will no longer occupy the prominence that it does in the nation and in the world today. The core business has been totally destabilized. For one thing there has been in the past payments that have come from external sources, partly the federal government to pay for uncompensated care and I'll go into that a little bit more as we move along. But you can see that with this decrease from collections on charges to collections very, very low that the whole business of medicine has really been destabilized.

There have been drastic changes that have occurred in the economic and organizational aspects of clinical medicine. Doctors are being asked to do certain things, to work harder just to stay in place. As you can imagine if you were once collecting 80 percent on your charges and now collect 30 percent, or 33 or 35 or whatever, you have to do two or three things just to stay even with the past. That doesn't even comment on the contributions that are made by the physicians that work in academic health centers and the hospitals towards education and research. This has been a remarkable time of change. As you can tell by the various lines around my face and other parts of my anatomy which I won't reveal, I've aged in this process and I've been around long enough to tell you that I've never witnessed as much change that has occurred in the last few years. This parallels I think, the change in the automotive industry and some of the other industries that we've had in this country. Tom Peters perhaps captured it when he said, "If you can't live in a chaotic state..." then probably this is the only prerequisite for survival that I'm aware of.

Well, there have been headlines that appeared. Anybody who reads the papers now just this week the papers Seattle, Boston Globe, Chicago Tribune came out with headlines. The headlines read something like this--almost all of them are starting to pick up on the same theme, and I think President Spanier is really hoping to have a comment in The New York Times fairly soon. Hospitals in crisis, teaching hospitals say Medicare cuts have them bleeding red ink, talking about hemorrhage and bleeding you see when you're in the medical profession. Dr. Erickson talked about cutting into the bone, I wondered if he'd ever really done that. As an orthopedic surgeon I've done that and it's actually relatively bloodless when you get to the bone...

Senators: Laughter.

C. McCollister Evarts: Now the operating losses are staggering. We're talking about our budgets here at Penn State, look at the operating losses just in the last year or so and look at yesterday's or the day before operation losses. How would you like that? University of Pennsylvania $150 million, actually it's $198 million Penn lost in fiscal year 1999--$198 million. It takes a fairly generous endowment to make up for that and of course, obviously what happens here is heads roll and they will at Penn and other places including a work force reduction of about 2800 employees and faculty and staff at Penn. The other victim of all this was the so-called merged entity between Stanford and the University of California at San Francisco which is now de-merging. And they have brought in a consultant group called the Hunter Group, aptly named because on a Sunday about a month ago both CEOs, both at Stanford and University of California at San Francisco were fired. And now David Hunter, who shuns any kind of academic credentials, is running the Stanford and University of California at San Francisco academic health centers. So things have gotten a little scary for us, that's an understatement. We're approaching Halloween, maybe this is appropriate.

Now I mentioned the balanced budget act without going into detail, it's quite clear the trend on this graph and you can see the prediction by the year 2001 that the net income from these university hospitals will be below the line. I think that's a take home message. And if we look at these last few quarters, of the most recent fiscal quarters this is the percent of negative operating margins that these university hospitals are running. It's very, very difficult then to support an educational or research mission with this kind of financial problem facing one. The balanced budget act has taken billions of dollars away from medicine. No other profession has been hit like this, it's quite clearly coming on the backs of medicine both hospitals and physicians. There has been some federal legislation suggested but I doubt very much whether that will pass in the next year or so. One is to make some adjustments and of course this is being driven by the New York academic health centers and there are things like disproportionate share payments and so on that are being suggested on a federal level, but nothing so far has emerged as an actual bill to relieve this balanced budget act. The impact on just the Penn State Geisinger Health System of the balanced budget act is $55 million from the bottom line in the next couple of years. Now that's in face of all the other things that I've shown you so these are difficult times.

Now let me give you a sense of what I'm talking about when I'm talking about university hospitals or teaching hospitals. There are about 5,000 hospitals in the United States, about five percent of those are teaching hospitals affiliated or owned by universities that have colleges of medicine and are called academic health centers. Those 250 hospitals provide 53 percent of the pediatric intensive care for the whole nation and they provide 44 percent of the care of the vulnerable population. Now what do I mean by vulnerable population. I mean someone that doesn't have insurance, can't pay. Someone pays for them and 44 percent of the population in the United States go to these 250 academic university hospitals. The community hospitals have what is referred to in the trade as a dumping syndrome. You have no insurance, you arrive at the front door of one of the hospitals and they say, "what is your insurance plan or do you have money in your wallet?" And if you don't you're put back in the ambulance and sent off to the university hospital. That's what's happening right now in this country. Well what are some of the strategies? You'd think we ought to do something about this and obviously there are a lot of things that people are trying to work on. Do academic health centers have unique strengths, of course they do. The unique strengths are their education and their research as well as their tertiary and cortinary patient care, so they provide the highest level of care, research and education. I think academic leadership in academic health centers is a very critical ingredient. Also, I think an academic health center needs to have participative management, shared governance, strategic thinking and then we have to pay attention to our core business, because that's really the engine that's driving our research and educational mission. There needs to be an environment that is interdisciplinary, we can no longer afford in an academic center silos of various interests or interested people. We can't have parochialism in an academic health center anymore and the faculty must be empowered because within the faculty lies the answer to some of our problems. It's the initiatives and the collective intellect of the faculty that really does bring forward the innovations and education, research and in-patient care. We have to preserve this person called the clinician/scientist. Many physicians or some physicians, certainly a significant number who enter an academic health center are there because of the academic milieu that surrounds them. And these individuals need time for their research, for their academic pursuits so they can't spend a 60 or 70 hour week in the patient care arena, and we have to protect their time. We also have to recognize in our promotion and tenure process the clinician/scholar. This is the individual who is a very valuable member of the team, taking care of patients and also is an excellent teacher but necessarily needs to participate in research or for that matter significant applied research. For many years medicine has really been a cottage industry, there's no question about that. And a cottage industry means that people sort of did what they wanted to, it was the golden era of medicine, there was lots of money coming, funding from the NIH (National Institute of Health) and other funding streams and we could charge and were paid for what we charged. So those were the days where there wasn't any need for mission based budgeting. Right now today we can tell you at the Hershey Medical Center, exactly how much money we're spending on a monthly basis for our research enterprise, for what it's costing us for our educational enterprise, and what those funding streams are to support both of those and obviously we know our patient care or clinical enterprise, too. So that's mission based budgeting, accountability and fiscal transparency I think are the by-words if you will, of academic strategies for the future.

Well what about the future? It's baseball time I think, that's about where it is. I've been around a long time I don't know what the future is going to hold. If I did I wouldn't be here. We're trying very hard to create an environment. I think the environment will continue the growth of so called managed care. Now I don't want you to leave here thinking that managed care is bad. What is bad is the way it's being managed. Managing care is a different thing. We should in medicine manage the care of the patient appropriately so that each patient then has the benefit of the expertise of many and that their care is based on significant outcome studies. That's not been done in the past. We can have significant opportunities for population research out of large managed care organizations and the academic health centers can no longer behave as they used to. No longer can they do that. It is absolutely imperative that their attitudes change and that the faculty accept change. A very favorite quote of mine is from Darwin and I think it's self evident. This is quite clear that we're not going to survive as the Hershey Medical Center or the Penn State College of Medicine if we're not willing to change and I would say the same for my other 124 colleagues in the country who are now managing or running or whatever you want to say academic health centers.

I like to call this the collective intellect paradigm. That's what we have in an academic setting. That's what you have here in your various units, colleges, that's what Penn State's all about in part. That's what an academic center is about is using the collective intellect and I think we're going to have to have systems in the future that are so called provider lead in meaning the physician leads them, they're not for profit. Because when you get into the for profit arena, and despite the fact that I was born and raised an American and subscribe to the for profit sector, in medicine we don't want the profits to go to the shareholder, we want them to be reinvested in education and research and that's what the cross-subsidization has always been about. Is the reinvestment of that in research and education.

The academic health center of the future is going to have for its education, we're going to be educating very small groups. We've begun that curriculum change, it is a combination of both lecture and small group educational experiences. A magnificent experience, I taught one of those groups, it was a reaffirmation for me about education and teaching. The problem with it is, it's very faculty intensive, and you need lots of faculty to do this. Obviously everything will be computer assisted and we're getting into virtual learning through some of the mechanisms where we can create an environment that looks like an operating room or we can create something by virtual robotics that feels like your cutting into bone or tissue or whatever. So those are the things that are happening that are very, very exciting going forward in the future. In research it has to be collaborative; we can no longer afford silos of individualism in our research efforts, it just won't work they have to be interdisciplinary and both basic and applied and I think that's pretty generic throughout the country. As far as patient care we'll probably be moving more to patient lines, what I mean by that is product lines more than patient lines. You may have a cardiovascular problem and that ranges all the way from something wrong with your heart muscle to perhaps something wrong with your heart valves or previous infection or whatever so it stretches all the way from basic science to the clinical lab to the clinician and to the hospital itself. The patient will become a partner, they're already becoming a partner. How many of you have gone to the web site to look up something? Murry's going to look up Alaskan Flu when he leaves here, I'm sure he will if he doesn't I'll wonder why he hasn't. And the patients are now coming in to us or emailing us as physician providers what they've gathered off the web site. That's a wonderfully refreshing thing and that's what we're trying to teach our students now. View your patient as a partner because they deserve to know what's happening and they want to know and they should know what's going on. And I don't have to tell anyone that the central role of information sciences and technology is going to be critical to our survival. I could spend the rest of the afternoon talking about that. Paul Ginsburg has stated it best, "if we can control the information technology we'll control the future," and we'll control the market place.

So I would end by simply saying that in my view the next millennium the challenge for us at Hershey Medical Center and all academic health centers is to ensure that we can transform our biomedical research efforts and our educational research, the discovery of new things into the art and science and remember medicine is still an art as well as science, of patient care. Will we survive, yes we'll survive. Will everyone survive, no everyone will not survive. There have been some centers who have sold part of their enterprise to for profit organizations and they have forever changed their character and that will happen if that happens to us and I hope it will not and I don't think it will.

Chair Nelson: Dr. Evarts has willingly agreed to answer questions about any of this, are there questions?

Adrian J. Wanner, College of the Liberal Arts: Your presentation included several figures for operating losses of other hospitals but you're not giving any figures for Penn State. I was just wondering if you would have something for Penn State?

C. McCollister Evarts: Sure, well our operating losses for the Penn State Geisinger Health System last year was $24 million and that does not include non-operating income. Now non-operating income is the income that comes in from reserves, the interest generated in the investments and so that was about $12 million last year. So the total loss for the system was about $12 million last year. Now when you look at that, you can't just break even in this world we live in because in the research intensive and technology intensive academic health centers you need capital reinvestments. And our capital reinvestments estimated for the whole Penn State Geisinger Health System should be around $30 to $35 million per year, so we need to make up $12 million plus $35 million just to stay even.

Gordon F. De Jong, College of the Liberal Arts: I'd like to ask you about fire walls. Particularly between three units--Penn State Geisinger, Penn State Medical Center and the balance of Penn State's budgets. What if one of those three is vulnerable and are the other two vulnerable? Are the other two liable? What if two of the three become vulnerable, is the third unit liable? Could you talk about that?

C. McCollister Evarts: Yes I certainly can. When we went into the merger which was a merger not of the College of Medicine with the former Geisinger, but it was really the clinical enterprise. Several things were done. One was to create a significant fire wall so that if indeed the system fails, say the operating losses really continue to rise and we can't stem those. By the way, I should point out that the only part of the Penn State Geisinger Health System that made money last year if you will, was the Hershey Medical Center and that returned about $7.5 million. The term of agreement was to make certain that the university would not be responsible for those losses and the bond rating agents actually increased the bond rating of Penn State after we merged. So Penn State's bond rating went up, which of course translates to less money in interest for all of the debt that Penn State has as a university, so there is a fire wall there. There's also the protective mechanism that Penn State University is the trustee for this system, for the Penn State Geisinger Health System Foundation. As trustee they could step in and say you are not fulfilling your role in supporting the College of Medicine and therefore, we're going to have to change this arrangement so that's another protective mechanism that I think is a very serious one, and it's a very significant protective mechanism. So there are really things in place that you could call fire walls that do keep us one from the other. The College of Medicine is under the aegis and the total control of The Pennsylvania State University, I report to the president of the university. The academic enterprise if you will, education and research is all under the aegis of The Pennsylvania State University. Does that help?

Jamie M. Myers: Mine is somewhat related and I was hoping you would address it. Why did Penn State merge or acquire the Geisinger system and could you explain that?

C. McCollister Evarts: Yes, I certainly can. I can try. When we took a look three or four years ago at our downward trend, remember I tried to portray this, and I didn't bring a lot of the things because Murry told me I had a very short time and that your attention span was short...

Chair Nelson: That was my attention span that I was referring to.

C. McCollister Evarts: It's between cost. But basically if the trend line is downward for our income we felt that there would be a crossing and there has almost occurred the crossing of our expenses exceeding our revenue, at that point in time where would we turn? Not to the budget that Rod presented you because the university does not contribute to the College of Medicine. The College of Medicine has always been asked to float totally on its own bottom. So we looked at that and you know that research costs money no matter how well funded it is so we knew we couldn't get it there. We could raise money in philanthropy. And I've been unsuccessful in 13 appearances before the Senate budget committee and the house budget committee to increase significantly the funding of the College of Medicine in the state of Pennsylvania. So we looked around to say what made sense for a partner. Could we find a partner that was a not-for-profit partner that could contribute dollars, millions of dollars to sustain the College of Medicine. And in this arrangement there is an academic support formula where the Penn State Geisinger Health System provides close to $40 million annually to the College of Medicine. Now you might say, "oh my gosh what a windfall." Well, it wasn't a windfall because prior to the merger we were operating at the College of Medicine at about a 14 percent return on investment. That's the best in the country that I'm aware of. That returned around $45 million a year to the academic enterprise. That's the cross-subsidization. We saw that decreasing and we thought it would make sense to distribute this over...instead of distributing it over a $450 million enterprise if we distributed this $40 million over a billion dollar enterprise it was less of a return on an investment. It's four percent of a billion dollar enterprise, so that was the reason...one of the significant reasons for merging. A second reason was to tap into an increase in faculty of 500 physicians looking at sites for primary care, education of students, looking for a growth of residency programs, the training programs. And the other reason was really to say from the clinical research standpoint, now in this system I'm an orthopedic surgeon. And say I wanted to study ligament injuries of the knee or something like that, I would double or triple my case load to study from a research perspective even a prospective study looking at outcomes. Those were the three main reasons for the merger.

Sabih I. Hayek, College of Engineering: I was wondering one of the numbers that you put up here is 43 percent of non-insured. Were they accepted by you while community hospitals and for profit won't accept them?

C. McCollister Evarts: Well, they accept some, I don't want to overstate that and so...

Sabih I. Hayek: Why do we not recoup that part from the state and federal agencies?

C. McCollister Evarts: Oh, you do and this is...prior to the balanced budget act there were payments which was called disproportionate share payments that came through Medicare to the hospitals to help make up that deficit. It never totally made up the deficit but it helped, that's all gone away with the balanced budget act. The $70 billion plus that the balanced budget act represents has taken this away from the academic health centers.

Sabih I. Hayek: There would be pressure on the government to give service to these people and say, "well you take care of them".

C. McCollister Evarts: We certainly are trying to do that and there's a lot of that going on right now but there's some true skepticism partly deserved. We've never made a case for what academic health centers represent to this country. We've never made a case that the fact that you all have good medical care is because there is an academic health center that educated the physician that you go to and the care that you get is the result of the research and education that goes on in those centers. We've never made a case so there are cynical legislators at both federal and state who say, "Well, we'll just let a few of these places fail. Doctors are paid too much anyway, hospitals get too much money, the costs are too great, never mind. They'll get through it they've always managed in the past." Right now we are down to the bone and when Penn and these other places say they are hemorrhaging they really are hemorrhaging and the changes will be profound. Because what happens is where do you get the money? You take out a program. One of the programs at greatest risk at our center might not even get on your radar scope is the Poison Control Center. We're the Poison Control Center for here, for this community for all of central Pennsylvania, that means one call can save you an emergency room visit and we save millions of dollars every year for the state of Pennsylvania. We go to the legislature and ask for another $500,000 to support that and they laugh at us so that's the kind of thing that you're dealing with now. That's just one little program we're going to have to cut that out perhaps. Other things will all impact. Can we afford to have a major burn unit, no probably not. Should we do lung transplants, probably not we can't afford that. How much of the robotic heart surgery should we do in the future, it's very costly but very effective if you have it.

Sabih I. Hayek: NIH used to support fellowships and research, has that funding gone down for students and clinical scientists?

C. McCollister Evarts: I think the NIH under Harold Varmus has really turned around and come back to support now the clinical scientist more than they ever have before at least in my experience. And there is more funding available but when you take a very hard look and right in front of you is sitting Ernie Johnson who is head of our Research Affairs Office, Ernie came from the NIH and he will tell you that no matter how well funded you are--we have $100 million in research funding--it's going to cost us somewhere between $10 and $12 million to support that. It's a 10 to 12 percent increase overhead that we can't recover from anywhere.

John S. Nichols, College of Communications: I have a couple of questions that may or may not be related. Among the many troubling things that you told us in your presentation one of the most troubling seems to be...as best I understood you that the financial pressures on the clinical side have the potential or perhaps already are diluting the core academic mission of teaching and research. I'd like to know what is being done to prevent that from happening or prevent it from continuing. And if you could give the Senate your best advice on what we could do to help protect the core academic mission of the College of Medicine. The second question may or may not be related. You said in your presentation that it was necessary to have an environment that's interdisciplinary, collaborative, trusting, with the faculty being empowered and accountable leading to innovation. And you also showed on a slide the importance of shared governance in your plan. Would you put a little flesh on that bone as well, of what can be done along that line as we move to the future?

C. McCollister Evarts: Ever since I've been an academician (which has been most of my life) in an academic health center, there's always been the struggle and an inherent tension between the academic mission and the clinical enterprise, I mean its there if you're a clinician. In a sense there's some tension in the basic sciences side of the house between the research and the education. So there's always been the challenge to the leadership of an academic health center to maintain a balance between the academic mission and the clinical enterprise. Because if you don't watch out, the clinical enterprise will eat someone up. In other words they'll just be all consuming and the person will lose the time. So what we're trying to do is say, "all right we have to draw the line and we'll have a department let's just say there are 20 people in the department we will say we'll consider those say maybe 12.5 full-time equivalence". And so we're going to protect the time for that other so even though we have a faculty of 20 we are only delivering the services clinically for 12.5 full-time equivalence. Now that may be all we need in that arena. The problem now is that to get that balance we're having trouble funding that extra gap between being totally involved in clinical care and having protected time, so that's one challenge for us. Another challenge is to be able to say and have our faculty understand that the income that comes in from the College of Medicine to the individual departments are specifically there for their academic endeavor. In other words, we want to reward people for teaching, we think it's part of their mission but we need to develop and we have we think developed a relatively refined academic compensation plan that will help address some of these things. And that includes an incentive component to that plan both for research and for the clinician if they perform in an exemplary manner so those are a couple of things that we're trying to do to preserve this balance. But it's not easy and when I use the example that people are having to run twice as fast simply to stay in place. And I don't know where that bottom is going to drop out. I mean I don't know how much more we're going to cut as far as reimbursement. I think we may have reached somewhat near the bottom. Your second comment was...remind me again I didn't get it written down.

John S. Nichols: Your statement about that it was necessary to have an environment that's interdisciplinary, collaborative, trusting, with the faculty being empowered and accountable leading to innovation.

C. McCollister Evarts: My sense is and remember it's only my sense is, that if you're in these difficult times the leadership which I consider comes down to all of the faculty ranks--there are leaders at every level of our faculty at the College of Medicine--if they don't trust the persons that they're working with and particularly the administration if you will, then we're not going to get on with what the tasks are. We need to be very innovative in how we're going to deliver patient care. We need to know how we're going to operate in the market place in south central Pennsylvania, it's got to be different. Before people came to us, now we're going to have to go out and get patients to come to us. We're going to have to behave differently in the way we treat patients and the way we treat referring physicians. That all takes a trust and a collaboration between all those who are working in that setting. So that's what I meant in part by that, not totally but part. Participative management means we value your opinion, we value your participation. We value you as an individual in an organization, you are not just somebody working there but you are a valued member of that particular unit or institution or whatever.

Margaret B. Goldman, College of Medicine: After listening to all the changes that you said, doctors may take a greater role in actually seeing patients. Do we have anything in our medical school curriculum that sort of prepares the students on their way up to assuming this more proactive role in patient care when they graduate? Or is that something they should learn after medical school?

C. McCollister Evarts: I think Margaret brings up a wonderful point and I think we need to do that earlier and we really need to do it in the clinical years. One of the hopes was that as we expanded our base of teachers throughout the whole system that our medical students would be rotating out to those sites, working in doctor's offices and learning more about this under those circumstances. But we haven't formalized it. I know Bob Aver is thinking about it and working with the curriculum committee to work on some of it.

Wayne R. Curtis: In the face of this scenario can you comment on the definition of faculty and the definition of tenure in this setting?

C. McCollister Evarts: I suspect that going forward in the future there will be a different definition of faculty at least at the academic health center. My sense is that we will not have a closed faculty anymore as much as we've had in the past, we can't afford that. We will invite community physicians and others in to participate in the affairs of the academic health center. So in the olden days before you were born we used to call those people part-time or geographic non-full time or whatever and I think that we'll have to do that at least at Hershey. I know there's a model at the University of Rochester that does that very, very successfully and it works. These people want to come in, they want to participate, they want the milieu and so they do that so that's what we're going to have to do.

Wayne R. Curtis: How does it relate to tenure?

C. McCollister Evarts: Well then that gets into the point of...interestingly enough I think tenure in the next century will probably be linked to funding extremes and more than before. And without getting into having the president think I incited a riot here I would say that probably our clinical faculty many fewer clinical faculty, now are on the tenure track, they're in the non-tenure track. We don't put an asterisk after their name or anything you can't identify them in their publications or anything. They are still absolutely valuable citizens for the school but they're on the non-tenure track.

Patricia A. Book: I just wanted to say that this is a pretty scary picture. I think if the terms of the impact of this on the quality of health care, the extent of which there is frailty of the investigations, the application of that quality health care and I see a future of much more dominance of commercial interest where there are conflicts of interest. In my eight years at Penn State I've had the opportunity to interact with a number of faculty in your college. Perhaps we never get a better sense of the power of the dissemination of faculty knowledge that occurs at the end of a clinical relationship with a faculty member at Hershey and who is applying that knowledge and helping to teach us about the situations that we're facing. So I've been extremely happy with the faculty and I hope that we can all look beyond our individual interests and think about what the impact of this is going to be on the quality of care in the long run. It's very scary.

C. McCollister Evarts: Well, you're right about that. That's not the reason I'm retiring, quite the contrary. But on the other hand I think there are a couple things I'll comment on then we'll obviously end, but our medical students are bright as you know. They're just wonderful and one of the first things they ask is, "look I'm in a managed care program and they're saying don't treat that patient because it costs something and I think that patient ought to be treated". This is really germane to the core of what we're talking about isn't it? In other words we're in the business of providing quality health care and quality education and research of course, but our students have to learn this and we can't for one minute relinquish the responsibility of making certain that they don't see us compromise health care. And so the things that are so frightening is what do we cut out rather than do badly. There are some things that we're simply not going to be able to do given this environment. And I know my colleague at Penn has talked about this a great deal, we just talked last week in Washington about this and he's talking about eliminating some pretty major programs because he said, "we're not going to compromise the quality, therefore, someone else is going to have to do this". Now if it gets to the point where no one can afford it then we're really...I'm basically an optimist and think that the pendulum has swung way over here and it's going to start to swing back. There are going to be some casualties along the way and I really don't mean it necessarily in patient care but I think...there are a few people that I'd like to eliminate too but we're developing a selective virus for some but... Nonetheless, as we come back we'll recover from this and probably let me tell you it will be a better health care system because we will then be able to develop or deliver quality of care based on outcomes that we clearly have studied and understand and then the patient care level will increase for the whole nation. That's what will happen but there are going to be some tough times. If you think you're having problems over your dental benefits...this whole think is really a mess.

Chair Nelson: Thank you very much, Mac...

C. McCollister Evarts: Thank you very much.

Chair Nelson: We appreciate your time and your presentation. We have just a couple more things. I don't know how long they will go but we'll see in a moment. We have the Senate Committee on Undergraduate Education informational report Summary of Student Petitions by College, Unit or Location. It's Appendix "E" in your Agenda. Bob Ricketts, Vice-Chair of the Senate Committee on Undergraduate Education, will present the report.

SENATE COMMITTEE ON UNDERGRADUATE EDUCATION

Summary of Student Petitions by College, Unit or Location

Jamie M. Myers, Chair, Senate Committee on Undergraduate Education

Robert D. Ricketts, College of Health and Human Development: Okay, thank you. There's the summary of student petitions for 1997-1998, 1998-1999 in the packet you can take a look at it. No major shift in the numbers between the two years, we don't foresee any major shifts in the numbers for 1999-2000 coming up. I just started reviewing all these petitions and there really are a thousand plus of them, so it makes my weekends very interesting to review these. The only thing we have going on is we're going to take a look and hopefully we'll have an informational report for you in the spring. Taking a look at how when we grant these withdrawals do the students actually make a comeback or are we just prolonging the inevitable, so that's one of the questions I had when I first took on this job in August and we're going to take a look at the data and hopefully provide an informational report to you in the spring. Any questions?

Chair Nelson: Seeing none, thank you, Bob. The Senate Committee on University Planning has a Construction Programs Status Report, which is Appendix "F," in your Agenda. Peter Deines will answer any questions you might have regarding the report.

SENATE COMMITTEE ON UNIVERSITY PLANNING

Construction Programs Status Report

Peter Deines, Chair, Senate Committee on University Planning

Peter Deines: If I can. This is a mandated report. You've had it to look at if there are any particular questions let me have them. I cannot probably answer them right now but if you send me an email I will find out the details of any project that you'd like to ask questions about.

Chair Nelson: Thank you. Seeing none, thank you, Peter.

NEW LEGISLATIVE BUSINESS

None

COMMENTS AND RECOMMENDATIONS FOR THE GOOD OF THE UNIVERSITY

None

ADJOURNMENT

May I have a motion to adjourn? The October 26, 1999 meeting of the University Faculty Senate adjourned at 3:55 PM.

DOCUMENTS DISTRIBUTED PRIOR TO OCTOBER 26, 1999

Student Life -Revision of University Policy on Academic Integrity (Senate Policy 49-20) (Legislative)

Faculty Benefits - Recommendation Regarding Surcharges in the Penn State Dental Plan (Advisory/Consultative)

Senate Council - The Changing Nature of Academic Health Centers (Informational)

Curricular Affairs - Curriculum Report (Blue Sheets) of October 12, 1999

Undergraduate Education - Summary of Student Petitions by College, Unit or Location (Informational)

University Planning - Construction Programs Status Report (Informational)

THE FOLLOWING SENATORS WERE IN ATTENDANCE AT THE
OCTOBER 26, 1999 SENATE MEETING

Achterberg, Cheryl L.
Alexander, Shelton S.
Althouse, P. Richard
Andaleeb, Syed Saad
Aydin, Kultegin
Bagby, John W.
Baggett, Connie D.
Baratta, Anthony J.
Barbato, Guy F.
Bardi, John F.
Barshinger, Richard
Beaupied, Aida M.
Berkowitz, Leonard J.
Berland, Kevin
Bise, Christopher J.
Bittner, Edward W.
Blood, Ingrid M.
Blumberg, Melvin
Book, Patricia A.
Borzellino, Joseph E.
Bridges, K. Robert
Browning, Barton W.
Burchard, Charles
Cahir, John J.
Caldwell, Linda L.
Cardamone, Michael J.
Carey, J. Christopher
Carpenter, Lynn A.
Carter, Arthur W.
Carter, Nicholas
Casteel, Mark A.
Cecere, Joseph J.
Carr-Chellman, Alison A.
Chirico, JoAnn
Christy, David P.
Clariana, Roy B.
Clark, Paul F.
Crane, Robert G.
Crowe, Mary Beth
Curtis, Wayne R.
Deines, Peter
De Jong, Gordon F.
DeRooy, Jacob
Dong, Cheng
Donovan, James M.
Drafall, Lynn Ellen
Eckhardt, Caroline D.
Elder, James T.
Ellis, Todd D.
Engel, Renata S.
Engelder, Terry
Englund, Richard B.
Erickson, Rodney A.
Evensen, Dorothy H.
Exley, Ellyn
Fahnline, Donald E.
Floros, Joanna
Fosmire, Gary J.
Frank, William M.
Franz, George W.
Fullerton, Erika R.
Galligan, M. Margaret
Gapinski, Andrzej J.
Georgopulos, Peter D.
Geschwindner, Louis F.
Goldman, Margaret B.
Goldschmidt, Arthur E.
Green, David J.
Gunderman, Charles F.
Gutgold, Nichola
Hampp, Timothy J.
Hanley, Elizabeth A.
Harrison, Terry P.
Hatcher, Lisa C.
Hayek, Sabih I.
Hewitt, Julia C.
Hill, Charles W.
Holt, Frieda M.
Hufnagel, Pamela
Hunt, Brandon B.
Hurson, Ali R.
Irwin, Zachary T.
Jackson, Thomas N.
Jago, Deidre E.
Johnson, Ernest W.
Jurs, Peter C.
Kissick, John D.
Klein, Philip A.
Kunze, Donald E.
LaPorte, Robert
Lasher, William C.
Lesieutre, George A.
Lilley, John M.
Lippert, John R.
Lukezic, Felix L.
Lyday, Margaret M.
Marshall, J. Daniel
Marsico, Salvatore A.
Mayer, Jeffrey S.
McCarty, Ronald L.
McCorkle, Sallie M.
Milakofsky, Louis
Miller, Arthur C.
Miller, Linda P.
Mitchell, Robert B.
Mookerjee, Rajen
Moore, John W.
Myers, Jamie M.
Navin, Michael J.
Nelson, Murry R.
Nichols, John S.
Olson, Jon
Ozment, Judy P.
Pangborn, Robert N.
Paster, Amy L.
Patterson, Henry O.
Pauley, Laura L.
Peavler, Terry J.
Phillips, Allen T.
Porterfield, Neil H.
Potosky, Denise
Pytel, Jean Landa
Rebane, P. Peter
Richards, David R.
Richards, Robert D.
Richards, Winston A.
Richman, Irwin
Richman, M. Susan
Ricketts, Robert D.
Romberger, Andrew B.
Romero, Victor C.
Rowe, William A.
Sandler, Karen W.
Scaroni, Alan W.
Schengrund, Cara-Lynne
Schott, Adam
Schuelein, Derek R.
Secor, Robert
Seybert, Thomas A.
Shea, Dennis G.
Shifrin, Dennis
Slobounov, Semyon
Smith, Carol A.
Smith, James F.
Smith, Sandra R.
Snavely, Loanne L.
Spanier, Graham B.
Stace, Stephen W.
Stoffels, Shelley M.
Strasser, Gerhard F.
Strasser, Joseph C.
Stratton, Valerie N.
Sutton, Jane S.
Sznaier, Mario
Thomson, Joan S.
Trevino, Linda Klebe
Turner, Tramble T.
Urenko, John B.
Varadan, Vasundara V.
Vickers, Anita M.
Wager, J. James
Walters, Robert A.
Wanner, Adrian J.
Weiss, Beno
White, Eric R.
Willits, Billie S.
Wyatt, Nancy J.
Zelis, Robert
Ziegenfus, Theodore T.
OTHERS ATTENDING
FROM SENATE OFFICE
Bugyi, George J.
Hockenberry, Betsy S.
Price, Vickie R.
Simpson, Linda A.
Walk, Sherry F.

152 Total Elected
6 Total Ex Officio,
11 Total Appointed
169 Total Attending

TENTATIVE AGENDA FOR DECEMBER 7, 1999

Faculty Affairs - Recommendation to Add the Rank of Senior Instructor (Advisory/Consultative)

Admissions, Records, Scheduling and Student Aid - Reserved Spaces Program (Informational)

Outreach Activities - Courses on the World Campus, Elizabeth Hawthorne, Director of Academic Programs, World Campus (Informational)