VCU Health System Capital Process and Governance Structure

Commission Draft

VCU Health System Capital Process

and Governance Structure

June 5, 2024

JLARC

 Evaluate VCU Health System (VCUHS) capital project

planning, construction, and oversight

 Evaluate VCUHS Board of Directors (BOD) membership,

duties, and authorities

 Evaluate advantages and disadvantages of integrated

relationship between VCUHS and VCU executive staff and

boards

 Compare VCUHS governance structure to other health

systems

Study resolution

*Study resolution approved by JLARC on November 13, 2023.

JLARC

 Interviews with VCUHS and VCU senior leadership

 Interviews with former and current members of VCUHS BOD and VCU

Board of Visitors (BOV)

 Survey of current VCUHS BOD members (100% response rate)

 Review of data and documents for selected VCUHS capital projects

 Review of relevant VCUHS/VCU governance documents (e.g., statute,

BOD meeting packets, BOD bylaws, policies, org charts, etc.)

 Review of literature on health system governance and capital

process best practices

 Review of selected other health systems*

Research activities

*More information about other health system research at the end of briefing in appendix slides.

JLARC

VCUHS improved its capital process following the Clay Street project

but needs to develop a long-term strategic capital plan, strengthen

several policies, and increase staffing to effectively handle capital

projects that are needed to sustain and expand operations.

VCUHS leadership structure should be changed to (i) reduce the

potential for the VCU president position to have too much influence

on VCUHS operations and decisions and (ii) ensure that the VCUHS

CEO’s principal focus is on the health system’s strategic planning

and operations.

VCUHS’s board would benefit from longer member terms, expertise

in additional topics relevant to health system governance, and a

greater number of impartial board members.

In brief

JLARC

VCUHS should retain its “authority” structure and remain

separate from VCU.

Both entities mutually benefit from their strong collaborative

relationship and, concurrent with actions to improve VCUHS’s

leadership and governance, steps should be taken to protect

that collaboration.

In brief (cont’d)

JLARC

Background

VCUHS system structure

Clay Street project & recent improvements

Capital project process

VCUHS executive leadership

VCUHS board

In this presentation

* Appendixes and VCU response letter located at back of briefing

slides.

JLARC

 VCUHS is statutorily responsible for:

▀ Providing health care, including indigent care

▀ Operating and managing hospitals and other health-care

facilities

▀ Serving as a teaching hospital, facilitating and supporting

activities of VCU’s health sciences schools

▀ Providing sites for VCU faculty to conduct medical and

biomedical research

VCUHS provides health care and supports VCU

through medical research and training

Source: Code of Virginia, § 23.1-2401.

JLARC

VCUHS operates multiple inpatient and outpatient

facilities across state, but most are in Central Virginia

Source: JLARC staff analysis of information from VCUHS.

JLARC

 VCUHS had across its health system facilities (FY23)

▀ 974 total licensed beds

▀ 45,788 inpatient discharges

▀ 1.2M outpatient visits

▀ 14,000+ staff

 Leader in multiple high-acuity services – transplant, trauma,

orthopedics, oncology, and general medicine and surgery

 Serves a relatively high proportion of low-income patients,

which affects ability to generate revenue

VCUHS serves large volume of patients, including

indigent population

JLARC

VCUHS generated ~$3B in operating revenue in

FY23

Source: VCUHS net patient service revenue data for FY23.

JLARC

 VCUHS’s primary source of state funding is Medicaid

▀ VCUHS receives enhanced Medicaid payments to pay for

delivering high rate of indigent care and medical education

 Lower portion of commercial payers than other area health

systems, according to VCUHS staff

▀ Reduces profit margin because Medicaid and Medicare

payments do not cover full costs of services

 Despite commercial revenue constraints, VCUHS has strong

bond ratings with stable outlook (Moody’s, S&P as of March

2024)

VCUHS receives state funding through Medicaid

reimbursements

JLARC

Statute establishes VCUHS as an “authority” that is

separate from VCU

*VCU has six health sciences schools (Medicine, Nursing, Dentistry, Pharmacy, Population Health, and

Health Professions). VCUHS works closely with VCU’s health sciences schools, but the schools are

governed by VCU’s Board of Visitors because of their academic mission.

JLARC

Some VCUHS leaders and board members also

have official VCU roles/responsibilities

*VCU BOV rector is typically one of the 5 members who serve on both boards.

JLARC

Background

VCUHS system structure

Clay Street project & recent improvements

Capital project process

VCUHS executive leadership

VCUHS board

In this presentation

* Appendixes and VCU response letter located at back of briefing

slides.

JLARC

There is insufficient evidence for JLARC to recommend

changing VCUHS’s “authority” structure.

Finding

JLARC

 Consultant review of VCUHS governance concluded that

further integrating VCUHS with VCU would be advantageous*

 Greatest advantages appear to be for VCU

▀ Advantages for VCUHS are less clear

 Consultant’s identified improvements at VCUHS could be

addressed without changing VCUHS’s separate “authority”

status

 Review of other academic health systems did not produce a

clear "best" structure

Consultant recommendation for VCUHS to become a

subsidiary of VCU does not appear warranted

*Chartis consultant review of VCUHS governance structure (completed November 2023).

JLARC

 Some overlap between VCU and VCUHS leadership and governance is

beneficial because of shared missions

 Making decisions in the best interest of VCUHS can be challenging

because VCU’s interests are also considered

▀ VCU’s health sciences programs affected by VCUHS decisions

▀ VCU benefits financially from VCUHS in some areas (e.g., staff

compensation, discounted leases, payments for some services)

 VCUHS is a separate entity from VCU, but VCU leadership can

influence VCUHS decisions and operations

▀ Top VCUHS executives are top VCU executives by design

(e.g., VCU president is VCUHS board chair and VCUHS president)

▀ Creates potential for VCU leadership’s priorities to supersede VCUHS’s

priorities

Overlap between VCU and VCUHS leadership and

governance has benefits but creates challenges

JLARC

 JLARC recommendations proposed in later slides would:

▀ Clarify relationship between VCUHS/VCU while preserving

opportunities for VCUHS/VCU collaboration

▀ Help ensure VCU has appropriate input into VCUHS operations

and strategic decisions

▀ Improve VCUHS staffing structure and board structure

▀ Help ensure VCUHS and VCU are aware of strategic and

operational decisions that affect both entities

JLARC recommendations would clarify VCU and

VCUHS roles and responsibilities

JLARC

Background

VCUHS system structure

Clay Street project & recent improvements

Capital project process

VCUHS executive leadership

VCUHS board

In this presentation

* Appendixes and VCU response letter located at back of briefing

slides.

JLARC

 Signed lease with developer in July 2021 for planned building

with office space for VCUHS, parking, and retail space

▀ Original plan for 570,000 square feet of space with 1,660 parking

spaces

▀ Committed to $617M in rent over 25 years

 Project site was old Public Safety Building site owned by City of

Richmond

▀ Longstanding VCU/VCUHS desire to acquire property because of

proximity to campus

 Building would have generated some revenue for VCUHS through

parking and retail space, but revenue would not have covered full

cost of project

▀ VCUHS would have to use other revenue streams

VCUHS pursued $325M “Clay Street” capital project

JLARC

 After lease was signed, developer told VCUHS project couldn’t

be constructed for agreed upon budget

▀ Unsuitable site conditions

▀ Construction cost increases after COVID-19

 Parties involved could not agree on acceptable revision to the

project; VCUHS signed defeasance agreement in February

2023 to stop project before construction began

 Continuing with Clay Street project would have constrained

future revenues and ability to invest in other projects,

according to VCUHS staff

“Clay Street” project was halted in 2022 before

construction began

JLARC

 VCUHS paid ~$80M to stop the project

▀ $73M to developer and investors to cancel project, used

VCUHS reserve funds

▀ $5M for demolition of old building on project site owned by

City of Richmond

 VCUHS also agreed to pay ~$2.5M annually to City of

Richmond because project was tax-exempt

▀ “Payment in lieu of taxes” because city was forgoing

potential tax revenue

▀ Budget language directed VCUHS to stop making payments

Clay Street project cost VCUHS ~$80M upfront,

additional costs expected

JLARC

 Did not hire outside expert to ensure adequate site conditions

 Agreed to triple net lease where VCUHS assumed all financial

obligation and project risk; “hell-or-high-water” clause required rent

to be paid even if project did not advance

 Former CEO shared outside counsel’s risk analysis, which showed

significant risks, with BOD chair and BOD finance committee chair

shortly before lease was signed (but after board approval)

▀ Other VCUHS BOD members had been provided with limited

information about project before approval (e.g., details of lease and

risks)

▀ Despite risks known to at least two BOD members, BOD did not

reconsider approval of the project

Clay Street project highlighted shortcomings in

VCUHS’s capital process and governance

JLARC

 Former VCUHS CEO raised concerns about project risks before signing

the lease

 VCU president (who is also the VCUHS BOD chair and VCUHS president)

directed VCU CFO to analyze project risks and provide VCUHS CEO

advice on next steps for the project

▀ VCUHS and VCU staff knew obtaining parcel was a priority for president;

president had emphasized importance of obtaining the parcel

 VCUHS CEO had authority to decline signing Clay Street lease because

VCUHS is under CEO’s “supervision and direction,”* but CEO sought

direction from the VCU president, and members of the VCU president’s

cabinet strongly advised the CEO to sign the lease despite his concerns

Clay Street project raised questions about VCU

influence over VCUHS decisions

*Code of Virginia, § 23.1-2403.

JLARC

 Consultants hired to review VCUHS’s (1) handling of Clay

Street project and (2) governance structure

 VCUHS made several changes following reviews:

▀ Revised capital project process

(needs assessment, individuals involved, etc.)

▀ Implemented policy requiring more thorough and transparent

risk assessment to ensure due diligence for “significant”

capital projects, including leases

▀ Strengthened VCUHS BOD conflict-of-interest policy/procedures

▀ Expanded VCUHS BOD member training

VCUHS recently improved its capital process and

governance structure, but more changes are needed

JLARC

Background

VCUHS system structure

Clay Street project & recent improvements

Capital project process

VCUHS executive leadership

VCUHS board

In this presentation

* Appendixes and VCU response letter located at back of briefing

slides.

JLARC

 JLARC review focused on major facility capital projects,

including new construction and renovations

 Since 2020, VCUHS has completed several major facility

projects, including

▀ Children’s Tower, 2023 ($423M)

▀ Adult Outpatient Pavilion, 2021 ($384M)

▀ Short Pump Ambulatory Surgery Center, 2021 ($22M)

▀ Main 3 renovation*, 2020 ($50M)

▀ I Lot Parking Deck, 2020 ($30M)

 One major project is ongoing, Main 7 renovation* ($35M)

VCUHS has spent ~$1B on capital projects in last

five years

*Main 3 and Main 7 are clinical care floors in the VCU Medical Center Main Hospital.

JLARC

 Review of project data and materials found that

▀ Major facility projects (Adult Outpatient Pavilion, Children’s Tower)

were completed within established schedules

▀ Some cost escalations occurred during major projects, but projects

typically completed within approved budgets

▀ Several large, complex IT projects were successfully completed

concurrently with major facility projects

 JLARC reviewed budget and timeline information for selected

capital projects over $5M initiated or completed since FY20

▀ Relied on VCUHS-reported summary data, which JLARC staff

validated using BOD materials

Targeted review of data and BOD materials indicated

past capital projects completed on time, on budget

JLARC

VCUHS’s new capital project process incorporates many

capital project best practices recommended for health-care

systems.

Finding

JLARC

 Experts recommend

▀ Requiring in-depth business plans for all capital project

requests above certain cost threshold

▀ Evaluating capital project requests against uniform criteria

for strategic fit, need, and viability

▀ Integrating prioritized capital projects into system’s overall

financial plans

Major capital projects should be evaluated using

a rigorous and standardized process

* See appendix slides for list of sources reviewed by JLARC staff

related to capital project best practices

JLARC

 Inconsistent quality and volume of information was shared

with BOD members across projects

 Information shared was driven by staff member judgments

rather than BOD policies

 At staff level, process for allocating capital and planning

projects lacked rigor, transparency

“Before, I don’t think there was a lot of clarity on how capital decisions

were made and finances were deployed.”

- VCUHS staff

VCUHS historically has lacked standard process

for evaluating past capital project proposals

JLARC

VCUHS implemented new capital project process

in FY23 that is more rigorous and standardized

Source: JLARC analysis of VCUHS documents and staff interviews.

JLARC

 Before VCUHS BOD reviews capital projects, “Significant

Transaction Policy” requires staff to document

▀ legal, financial, business, talent, and reputational risks of the

project;

▀ project’s connection to strategic plan and mission;

▀ underlying assumptions regarding need for project;

▀ financial projections, funding sources, and timeline to positive

cash flow;

▀ any conflicts of interests and steps to mitigate them;

▀ analysis of the right to exit the project;

▀ identification of outside experts consulted and their role; and

▀ a proposed timeline with “go/no go” decision points.

Improved policy requires VCUHS staff to provide

detailed information on proposed capital projects

JLARC

 Most BOD members who responded to JLARC survey reported

they now receive enough information on following topics to

make informed decisions on capital projects:

▀ How proposed projects align with capital needs

▀ How proposed projects align with strategic priorities/mission

▀ Extent to which projects address unmet market demands

▀ Financial projections related to proposed projects

▀ Extent of potential risks related to proposed projects

 New capital process promising but only in effect for short time

Most current VCUHS BOD members are satisfied

with information they receive on capital projects

JLARC

VCUHS will need to undertake numerous major capital

projects in the future to sustain and expand operations but

lacks a documented long-term strategy for prioritizing and

sequencing major capital projects.

Finding

JLARC

 VCUHS has broad mission that could be served by various

major capital projects; for example, VCUHS could:

▀ Expand high acuity, inpatient capacity by renovating or

rebuilding aging downtown hospital

▀ Expand outpatient access in surrounding communities

 Potential projects advance VCUHS’s mission but would be

costly and time intensive and could not be pursued

simultaneously

 Number and complexity of potential capital projects

necessitates long-term capital strategy

VCUHS could pursue a variety of projects that

advance mission and address system needs

JLARC

Long-term

timeframe

System-

wide

perspective

Evaluates

facilities’

capacity/

conditions

Prioritizes

future

facility

needs

Establishes

timeline for

addressing

needs

Quest 2028 Strategic

Plan

Broad, guiding document that

establishes goals and strategies

for organization

2 4 0 0 0

Strategic Growth

Framework

Specifies strategies and tactics to

optimize and grow system’s key

services

1 4 2 2 0

AMC Site Plan*

Addresses health system, health

sciences, and research facility

needs on downtown medical

center campus

2 0 4 4 4

VCUHS does not have a long-term, system-wide

major capital strategy plan

*Academic Medical Center Site Plan is still under development and will be part of broader ONE VCU

Master Plan, which was completed in 2019.

JLARC

 BOD members’ responses to JLARC’s survey show lack of

consensus about system’s major strategic capital priorities

▀ Half of BOD members reported expanding downtown medical

center inpatient capacity as the system’s #1 capital need

▀ Remaining half of BOD members ranked other projects as #1

capital need (e.g., ambulatory centers, dental school*)

 BOD members and VCUHS staff want additional clarity on

system’s capital priorities

“We require more extensive prioritization…more alignment across the

leadership team…” – BOD member

“We need to understand what our top four to five priorities are.”

– VCUHS staff

Lack of long-term capital strategy plan contributes

to competing priorities; board desires clarity

*Dental school would be VCU project, but several VCUHS BOD members identified it as a VCUHS priority.

JLARC

 Best practice is to develop and maintain a multi-year,

strategic facilities plan for major capital projects

▀ Plan should prioritize projects based on system’s mission,

facility needs, financial position, and risk capacities

 Several peer systems have long-term facilities plans

spanning 10+ years (e.g., University of Iowa Health Care,

Oregon Health and Science University, Harris Health)

▀ Plans tie projects to strategic goals and anticipated capacity

needs

Long-term strategic facilities plans can help align

capital projects with system needs and priorities

JLARC

Recommendation

VCUHS staff should develop and propose to the VCUHS BOD

for its consideration and approval a 10-year strategic

capital plan that (i) identifies the system’s major facility

needs, (ii) assigns projected costs and revenue estimates to

each potential major facility project, (iii) describes how each

project advances the missions of VCUHS and VCU, (iv)

prioritizes projects, and (v) identifies a timeline and funding

strategies for completing each project.

VCUHS staff and BOD should review and update the capital

plan at least every two years.

JLARC

VCUHS lacks sufficient leadership and staff capacity in key

functions related to capital projects, including project

planning, procurement, and management.

Finding

JLARC

 VCUHS established new positions to oversee real estate and

capital project function and stopped using contractor

▀ 2021 – Created and filled a chief real estate officer (CREO) position

▀ 2022 – CREO hired an in-house construction manager

▀ 2023 – Terminated project management contractor to reduce costs

 CREO and construction manager have since left, and VCUHS

no longer has access to contract staff

▀ Staff estimated 8–10 contractors previously worked on each major

capital project, significant loss of capacity

VCUHS has recently experienced significant

staffing changes in capital project functions

JLARC

 In 2023, VCU directed VCUHS to collaborate with VCU

facilities and real estate functions; VCU staff filled VCUHS

leadership and staffing gaps for capital projects

 Collaboration with VCU has addressed some short-term

staffing needs, but VCUHS staff report drawbacks

▀ Insufficient knowledge of VCUHS functions from VCU staff

▀ Lack of expertise in health-care construction from VCU staff

▀ Too much hands-on involvement required by VCUHS leadership

▀ Potential legal risks associated with contracts and insurance

VCUHS has relied on VCU staff to fill staffing gaps

but has experienced challenges

JLARC

 Some peer organizations have leadership positions dedicated

to oversight of system’s construction management and real

estate functions

▀ Peers also have robust internal teams for planning, procuring,

and managing capital projects

▀ Examples: Parkland Health (TX), University of Wisconsin Health,

University of Iowa Health Care

 VCUHS staff in multiple functions expressed concerns

regarding capacity to handle anticipated capital project volume

“This team is getting close to the breaking point…there is a need for

additional resources on the health system side.”

- VCUHS staff

VCUHS needs dedicated capital project

leadership and staffing for future projects

JLARC

VCUHS should (i) have director-level positions overseeing

construction and real estate functions that report to a

health system executive and (ii) develop the staffing

capacity necessary within VCUHS to effectively plan,

procure, and manage future capital projects.

Recommendation

Note: VCUHS has recently taken steps that address this recommendation, including filling a vacant

director of construction project management position, and creating a director of real estate position.

These steps partially implement this recommendation, but additional actions are necessary for full

implementation, including filling the director of real estate position and adding staff capacity in

planning, procurement, and project management functions.

JLARC

Finding

VCUHS’s new capital project policies do not

(i) specify when outside experts should be used to help

plan, assess, or implement capital projects, which may

result in unknown or unnecessary project risks

(ii) ensure that sufficient information is provided to the

BOD to help it determine whether the costs of capital

projects are reasonable

JLARC

 Capital projects are complex and present substantial

financial, operational, legal, and reputational risks

 Best practices for mitigating capital project risks include

using outside experts to

▀ supplement staff expertise

▀ validate key staff assumptions and projections

 Health systems commonly use outside legal counsel,

environmental consultants/civil engineers, financial

consultants, brokers, and planning consultants

Outside experts can help mitigate capital project

risks

JLARC

 VCUHS has not always used outside experts when

needed

▀ Example – No site consultant used on failed Clay Street

project; outside legal counsel hired after BOD approval of

the project

 New policy requires staff to use outside experts if

directed by the BOD but does not establish guidelines for

when and what types of experts should be used

VCUHS uses outside experts but on an ad hoc basis

JLARC

 BOD policy does not specify the extent to which results of

outside experts’ work should be shared with BOD

 About half of VCUHS BOD members who responded to

JLARC’s survey did not feel they receive enough

information about the results of third-party evaluations of

staff’s financial projections and/or project risks

“Thorough third-party assessments from experienced and successful

reviewers in the case of capital projects, especially those types new to

the institution, would prove valuable.”

– VCUHS BOD member

VCUHS BOD members report desire for

additional information from outside experts

JLARC

 Project budgets can be compared to similar projects’

costs and common benchmarks (e.g., average cost per

square foot or per patient bed, ratio of construction cost

to total project)

 Staff presented comparative cost information to VCUHS

BOD for some recent projects, but have not always

▀ Example – Comparative costs not included in BOD

materials on Children’s Tower proposal (total cost =

$423M) or Adult Outpatient Pavilion (total cost = $384M)

Comparing projects’ costs to similar projects and

benchmarks can reduce risk of overpayment

JLARC

The VCUHS BOD should amend the Significant Transaction

Policy to

(i) clarify which projects or circumstances require use of

outside experts (e.g., projects with high costs or

substantial risks), when in the project planning and

implementation process experts should be engaged,

and what information should be shared with the BOD

about the work completed by these experts; and

(ii) require staff to share with the BOD comparisons of the

estimated costs of proposed major capital projects to

the costs of similar projects and industry benchmarks,

such as cost per square foot.

Recommendation

JLARC

Background

VCUHS system structure

Clay Street project & recent improvements

Capital project process

VCUHS executive leadership

VCUHS board

In this presentation

* Appendixes and VCU response letter located at back of briefing

slides.

JLARC

VCU president holds several key VCUHS

leadership roles

Note: Current and former VCU president chaired VCUHS BOD and held VCUHS president position.

Requirement for VCU president to chair VCUHS BOD and be tiebreaker for VCUHS CEO employment

decisions was codified in 2014 (SB 341). VCUHS president position is established in VCUHS bylaws.

JLARC

VCU input into VCUHS’s strategic planning and operations is

important given shared mission and mutual interests, but VCU

president’s VCUHS leadership roles create the potential for

that position to have too much influence on VCUHS operations

and decisions.

Finding

JLARC

 VCU president is permanent VCUHS BOD chair

▀ Part of evaluation and compensation committee that evaluates

VCUHS CEO performance and recommends compensation

▀ Can convene executive committee meetings

▀ Can modify order of business in BOD meetings

 VCU president is VCUHS president

▀ Facilitates communication, coordination, and compatible decision

making between VCUHS and VCU

▀ Is not supposed to supersede CEO in overseeing VCUHS

operations

VCU president’s leadership roles at VCUHS are

influential

Source: VCUHS bylaws.

JLARC

 CEO has statutory authority to oversee and manage VCUHS

operations but doing so independently of the VCU president is

difficult in practice

▀ CEO reports to the BOD chair/VCUHS president; both positions are

filled by the VCU president

▀ CEO is also the SVP of Health Sciences and reports to the VCU

president in this role

 VCU president’s roles at VCUHS can result in decisions about

VCUHS operations and strategies being influenced by VCU

interests

▀ Example: Former VCUHS CEO signed Clay Street lease after being

strongly advised by members of VCU president’s cabinet who

believed they were carrying out VCU president’s priorities

VCU president’s leadership roles at VCUHS have

enabled VCU to have too much influence over VCUHS

JLARC

 Majority of BOD members who responded to a JLARC survey agree

that:

▀ VCU president should not be VCUHS BOD chair

▀ VCU president should not be voting BOD member

▀ VCUHS should eliminate position of VCUHS president

 VCU president has publicly supported idea of no longer serving as

VCUHS BOD chair or VCUHS president

 Multiple VCUHS staff expressed concerns that VCU president in

VCUHS leadership position creates risk of president influencing

VCUHS to take actions that disproportionately benefit VCU

▀ Concerns about current structure, not individual in president position

Multiple stakeholders think VCU president should no

longer be VCUHS BOD chairman or VCUHS president

JLARC

The General Assembly may wish to consider amending

§ 23.1-2402 of the Code of Virginia to limit the role of the

VCU president on the VCUHS BOD to being a non-voting

member who is ineligible to serve as the BOD chair.

The General Assembly may wish to consider amending

§ 23.1-2402 of the Code of Virginia to require the VCUHS

BOD to elect a chair every two years who must (i) be a

citizen member and not a VCUHS employee, VCU employee,

or VCU or Board of Visitors member and (ii) have served at

least one full term on the VCUHS BOD.

Recommendations

JLARC

VCUHS should amend its bylaws to eliminate the VCUHS

president position, making the VCUHS CEO the top health

system executive who reports to the VCUHS BOD.

Recommendation

JLARC

 VCUHS CEO hiring, firing, and salary decisions are made jointly by

VCUHS BOD and VCU BOV

VCU president should also no longer be “tie breaker”

for VCUHS CEO employment decisions

*Tiebreaker has never

been used

Source: Code of Virginia, § 23.1-2403.

Note: Members who are on VCUHS BOD and VCU BOD vote twice during initial joint meeting.

JLARC

The General Assembly may wish to consider amending

§ 23.1-2403 of the Code of Virginia to remove language

giving the VCU president the authority to decide on the

selection, removal, or conditions of appointment (including

salary) of the VCUHS CEO when committees appointed by

the VCUHS BOD and VCU BOV cannot reach agreement.

Recommendation

JLARC

Having the same individual serve as the VCUHS CEO and

the VCU SVP for health sciences assigns a large number of

responsibilities to one role, makes the position difficult to

fill, and creates the potential for VCU to have too much

influence over VCUHS operations and decisions.

Finding

JLARC

 Facilitates collaboration between VCUHS and VCU on

areas of mutual interest, for example

▀ Physicians dually employed as faculty/researchers

▀ Students participating in patient care

▀ Clinical research involving patients

 Can reduce risk of “turf wars” for funding and space

Combined CEO/SVP of health sciences role is

intended to support VCUHS/VCU coordination

JLARC

 Combined position oversees 18 positions (10 at VCUHS, 8 at VCU);

creates risk not all areas receive necessary attention

 Different skillsets needed for CEO and SVP of health sciences roles

▀ CEO role = experience running large organization, finance, HR,

strategic planning, etc.

▀ SVP role = experience with academic leadership, research, etc.

 Creates potential for VCU to have too much influence over VCUHS

operations and decisions because SVP reports to VCU president

 Majority of BOD members think CEO/SVP position should be split

into two separate positions; opinions split among key VCUHS

leadership staff

Combined CEO/SVP of health sciences role has

several disadvantages

JLARC

 Statute allows the VCUHS CEO to be the same individual who holds

the VCU SVP of health sciences position

 Statute requires VCU SVP of health sciences to serve on the

VCUHS BOD as ex-officio voting member, but does not separately

require the CEO to serve on the VCUHS BOD

 Change in statute will be needed to ensure CEO retains seat on

VCUHS BOD

▀ CEO should be a voting member of the BOD to ensure VCUHS

leadership is represented

▀ CEOs of health systems commonly serve as voting members of

their boards

Code change should accompany new structure to

require CEO to serve on VCUHS BOD

JLARC

VCUHS and VCU should separate the VCUHS CEO role from

the VCU SVP of health sciences role so that they are two

different positions.

The General Assembly may wish to consider amending

§ 23.1-2402 of the Code of Virginia to require the VCUHS

CEO to be an ex-officio member of the VCUHS BOD with

voting privileges.

Recommendations

JLARC

 If CEO/SVP positions are split, separate individuals will fill each role

 VCUHS and VCU have mutual interest in positive working relationship

between CEO and SVP

▀ Poor relationship would hurt ability to attract top talent (e.g., faculty,

researchers, clinicians) and could reduce financial strength/bond ratings

 Individuals recruited to fill CEO and SVP positions need to be able to

work collaboratively and resolve conflicts

▀ In defining responsibilities for these positions, VCU and VCUHS should

require the individuals in them to collaborate with one another and factor

collaboration into job performance evaluations

▀ When evaluating applicants for these positions, VCU and VCUHS should

consider candidates’ collaborative abilities

Essential for VCUHS CEO and VCU SVP to work

together to support mutual interests

JLARC

 VCU SVP would report to VCU’s president, who would serve as the

primary supervisor (“solid line” report)

 A "dotted line" relationship between the CEO and SVP* would help

ensure VCUHS and VCU communicate and collaborate on key issues

▀ CEO/SVP relationship would be informative; involve frequent updates on

key strategic, operational, and financial matters of both entities

VCUHS CEO and VCU SVP should have “dotted line”

relationship with one another to help collaboration

*See recommended VCUHS organizational structure in appendix slides, which shows VCUHS CEO as

highest position in VCUHS reporting to the VCUHS BOD, and VCU SVP of health sciences reporting to the

VCU president.

JLARC

 Statute lists several of VCUHS’s purposes that involve

supporting VCU health sciences programs, but there is no

language emphasizing the importance of collaboration

between the leaders of the health sciences programs and

the health system

 If the CEO and SVP positions are split, statute could be

modified to require the VCUHS CEO and VCU SVP of

health sciences to regularly communicate and

collaborate to support their mutual interests and success

Statutory language would further ensure VCUHS

CEO/VCU SVP communication and collaboration

JLARC

The General Assembly may wish to consider amending

§ 23.1-2403 of the Code of Virginia to require the VCUHS CEO

and VCU SVP of health sciences to regularly communicate and

collaborate to support the mutual interests and success of

VCUHS and VCU.

VCUHS and VCU should agree to establish a “dotted line”

relationship between the VCUHS CEO and the VCU SVP of health

sciences when the CEO and SVP positions are split into two

positions to ensure they meet regularly to discuss ways that

VCU’s health sciences programs, VCU’s research, and VCUHS’s

patient care can coordinate to benefit VCUHS and VCU.

Recommendations

JLARC

 VCUHS CEO would benefit from more executive-level staff

support to oversee key operational and administrative

functions

 VCUHS leadership recently made some organizational changes

to reduce CEO’s direct reports, but additional staff could

report to positions other than CEO

 Current organizational structure is inefficient; should not be

based on individual preferences

▀ Near-term concern about low staff morale because some

employees prefer reporting to CEO

Number of VCUHS CEO’s direct reports should be

reduced

JLARC

VCUHS should adjust its current organizational structure to

reduce the number of individuals who report directly to the

VCUHS CEO.

Recommendation

JLARC

 Current COO position could oversee all operational

functions (e.g., medical center and hospitals)

 New CAO position could be created to oversee all

administrative functions (e.g., finance, HR, IT, strategy)

 Ultimate number of direct reports to CEO depends on

whether CEO/SVP position are split or remain combined

▀ If positions split, number of CEO direct reports could be

reduced to as few as 5 individuals*

Example – Revised VCUHS organizational

structure with fewer direct reports to CEO

*Five individuals include VCU SVP of health sciences having “dotted line” relationship with VCUHS CEO.

JLARC

Current VCUHS organizational structure has 10

direct reports to CEO on VCUHS side

Notes: Chief legal officer has dotted line because position also reports to the VCUHS BOD.

Chief operating officer currently oversees ambulatory services, information security, enterprise

portfolio and project management, healthcare transformation, and health equity.

JLARC

Example revised structure would reduce CEO reports

to five individuals and consolidate similar functions

Notes: Revised structure includes VCU SVP of health sciences having “dotted line” relationship with VCUHS CEO.

Revised structure would significantly alter several current leadership positions. VCUHS leadership would need to

consider whether individuals in existing roles have skillsets needed for revised positions.

JLARC

Background

VCUHS system structure

Clay Street project & recent improvements

Capital project process

VCUHS executive leadership

VCUHS board

In this presentation

* Appendixes and VCU response letter located at back of briefing

slides.

JLARC

VCUHS BOD has 21 members with varied

expertise, most appointed by political entities

Source: Code of Virginia, § 23.1-2402.

Note: Statute does not require legislators to be on the VCUHS BOD, but some members are

permitted to be legislators. The BOD typically has one legislator from each chamber.

JLARC

Three-year terms make it difficult for VCUHS BOD to

maintain knowledgeable and engaged BOD members.

Finding

JLARC

“The VCUHS is a complex organization. While many board

members immediately and positively impact the quality of the

discussions, it still often takes two years to reach a mature

understanding of the organization.”

- VCUHS BOD member

VCUHS BOD members typically need some time to

understand VCUHS complexities

 BOD members receive 8 hours of orientation training on

VCUHS and ongoing education at annual retreat and

meetings

▀ VCUHS plans to implement self-paced ongoing training

(Summer 2024)

 Despite training, it can take BOD members multiple years to

develop full understanding of VCUHS

JLARC

 Longer terms would enable VCUHS BOD members to serve

effectively for longer portion of their terms

 Most VCUHS BOD members who responded to JLARC

survey agreed 4-year terms would be beneficial

 Average length of board member term for health system

boards nationally is 4 years*

Most BOD members indicated 4-year BOD

member terms would be beneficial

* 2022 National Health Care Governance Survey Report, AHA Trustee Services.

See appendix slides for more information.

JLARC

The General Assembly may wish to consider amending

§ 23.1-2402 of the Code of Virginia to establish 4-year

terms for VCUHS BOD members.

Recommendation

Note: Statute currently specifies a term limit of two consecutive terms for VCUHS BOD members.

JLARC

VCUHS BOD members need expertise in areas that are not

specified by current statutory requirements to provide

meaningful input on capital projects and other key strategic

and financial decisions.

Finding

JLARC

 BOD members are required to have expertise in “business,

healthcare management, or legal affairs” (§ 23.1-2402)*

 Broad categories cover a range of skillsets

▀ Example – “Business” can cover executive management, HR,

commercial real estate, finance, etc.

▀ Example – “Healthcare management” can cover physicians, health

insurance experts, leaders of health systems, etc.

 Required categories of expertise are important (e.g., business),

but more specific skillsets within categories would help ensure

that BOD members have the most relevant expertise

Expertise requirements for VCUHS BOD members are

too broad; necessary skillsets not guaranteed

*VCU BOV members appointed to the BOD are excluded from expertise requirements.

JLARC

 Commercial real estate and finance expertise are not

currently required, but they are needed

▀ VCUHS expansion plans will require land acquisition, leases,

and construction

▀ VCUHS is $3B+ entity with complicated finances and certain

requirements to retain Aa3/AA bond rating

 Most BOD members who responded to JLARC survey agreed

specifying and requiring additional expertise in statute

would be beneficial

 Some BOD members currently have real estate and finance

expertise

Real estate and finance expertise on BOD essential to

effectively govern VCUHS, achieve strategic objectives

JLARC

The General Assembly may wish to consider amending

§ 23.1-2402 of the Code of Virginia to (i) add “commercial

real estate” and “finance” to the existing list of expertise

requirements for VCUHS Board of Directors (BOD) members

and (ii) require appointing entities to ensure that each area

of prescribed expertise is represented on the BOD.

Recommendation

JLARC

 VCUHS staff emphasize importance of having BOD members

with expertise leading large, complex health systems

▀ One (out of 21) BOD member has this type of experience

 Difficult to attract these individuals because

▀ Large time commitment to serve on BOD

▀ Individuals should not be from competing health system

▀ BOD members currently unpaid

 VCUHS should hire expert to study ways to attract this expertise

▀ Study could assess whether compensating some or all BOD

members would be effective (permitted in statute § 23.1-2402)

VCUHS should study ways to attract individuals with

experience leading large health systems

JLARC

VCUHS should hire an outside expert to examine strategies

VCUHS could use to attract individuals with experience

leading large health systems to serve on the BOD, such as

whether some or all BOD members should be

compensated.

Recommendation

JLARC

Board membership requirements result in a majority of

members holding professional roles at VCU or VCUHS,

which (i) challenges members’ ability to act in the best

interests of VCUHS and (ii) results in an unnecessarily large

board.

Finding

JLARC

 Fiduciary duty of “loyalty” requires BOD members to act “in a manner

designed to benefit only the hospital or health system… [and] avoid

competition with the organization”*

▀ VCU-affiliated BOD members statutorily prohibited from voting on

“matters that require them to breach their fiduciary duties to [VCU] or

[VCUHS]” (§ 23.1-2402)

 BOD members are subject to VCUHS’s conflict-of-interest policy

▀ “Conflict” occurs when “outside interests or relationships…create a risk

that professional judgment or actions regarding [VCUHS’s] interests will

be unduly influenced by such outside interests or relationships.”

▀ BOD member has potential conflict when “he/she serves in a fiduciary

capacity for another institution which may be impacted by an action of

the BOD.”

Statute and bylaws establish restrictions and

expectations for addressing BOD conflicts of interest

*Board member expectations for VCUHS BOD.

JLARC

 Majority of BOD members have roles at VCU and/or VCUHS,

which is intended to ensure that key stakeholders at VCU

and VCUHS have input into BOD strategies and decisions

▀ VCU president, VCU SVP health sciences, and 5 VCU BOV

members bring VCU perspective

▀ 5 VCUHS physicians bring departmental perspective

 Historically, BOD members did not always recuse

themselves when there were potential conflicts of interest

▀ All BOD members voted on Clay Street project

▀ Seems to have improved; JLARC staff observed several recusals

at recent BOD meetings

BOD makeup creates possibility that some members

do not adequately prioritize broader VCUHS interests

JLARC

 Comprehensively identifying all BOD matters that present a

potential conflict of interest is impractical; all have financial

or strategic implications for one entity or the other

 BOD members selected for their expertise do not have

professional ties to VCU or specific VCUHS departments

 Some VCU and VCUHS physician representation is beneficial

for coordination and collaboration, but should not make up a

majority of the BOD

General Assembly could better safeguard VCUHS

interests if majority of BOD unaffiliated with VCU/VCUHS

JLARC

 VCUHS BOD size (21 members) creates challenges,

according to several VCUHS BOD members and staff

▀ Engagement of BOD members is mixed

▀ BOD member outreach is time consuming; staff frequently

brief members one-on-one ahead of BOD meetings

 Smaller board could increase BOD member engagement

and improve efficiency of BOD operations

 Average health system board size is 16 members*

Large number of VCU- and VCUHS-affiliated BOD

members make BOD unnecessarily large

* 2022 National Health Care Governance Survey Report, AHA Trustee Services.

JLARC

The General Assembly may wish to consider amending

§ 23.1-2402 of the Code of Virginia to reduce the size of the

VCUHS BOD and ensure the majority of VCUHS BOD

members do not have professional roles at VCU and/or

VCUHS. To ensure input from VCU and VCUHS physicians, the

VCUHS BOD should still have voting members who represent

VCU and VCUHS physicians.

Recommendation

JLARC

 Revised VCUHS BOD = 16 members

▀ 9 members selected based on expertise* (1 added)**

▀ 3 VCUHS physician members (2 removed)

▀ 1 VCU BOV member*** (4 removed)

▀ 2 ex-officio members, voting

VCUHS CEO**** (added)

VCU SVP for health sciences*****

▀ 1 ex-officio member, non-voting (VCU president)

Example – Revised BOD membership with majority

of members not affiliated with VCU and/or VCUHS

* VCUHS BOD has historically had one legislative member from each chamber.

** One member selected based on expertise could be appointed by VCU BOV rector.

*** VCU BOV member could be VCU BOV rector.

**** VCUHS CEO would need to be added to BOD once CEO and SVP are two separate positions.

***** SVP of health sciences is already statutorily required to be on BOD.

JLARC

Intentional, thoughtful, and regular communication and

collaboration between VCUHS and VCU contributes to

VCUHS’s strong financial position and can be supported by

the VCUHS BOD and VCU BOV.

Finding

JLARC

 VCU/VCUHS leadership have worked to ensure strong communication

and collaboration

▀ “One VCU” strategic planning and campus planning

▀ Shared services (e.g., security, marketing, development)

▀ Regular cross-organizational updates among leaders and boards

▀ Marketing campaign to have same “VCU” name at both entities

 Maintaining strong communication and collaboration is in best interest

of both entities

▀ Positive working relationship contributes to favorable bond ratings

▀ Strong collaboration is key to successful downtown campus renovations

 Recommended changes to staff organization and governance

structure should not negatively affect VCUHS/VCU collaboration

VCUHS/VCU currently have effective communication

and collaboration, which is important for both entities

JLARC

 VCUHS BOD and VCU BOV currently have one joint meeting per year,

but members report meeting is not substantive

 Temporary joint BOD/BOV taskforces created after Clay Street

project to assess shortcomings and potential governance changes

 Permanent joint BOD/BOV committee could be created to facilitate

regular communication between VCUHS and VCU

▀ Meetings could be held at least 4x annually; provide updates on key

strategic, operational, and financial matters of both entities

▀ Membership could include key VCUHS and VCU executives and subset of

BOD and BOV members

 Establishing committee in statute would underscore its importance

and visibility

Joint VCUHS/VCU board committee could help

ensure continued communication and collaboration

JLARC

The General Assembly may wish to consider amending

§ 23.1-2402 of the Code of Virginia to create a standing

joint committee of the VCUHS BOD and VCU BOV that is

responsible for ensuring effective communication and

collaboration between VCUHS and VCU. The joint committee

should meet at least as often as the VCUHS BOD and

provide updates on key strategic, operational, and financial

matters that could directly or indirectly affect both entities.

Recommendation

JLARC

 Significant facility renovations needed to ensure quality of clinical

and research facilities downtown

▀ Beneficial to operations and services of both VCUHS and VCU

 VCUHS/VCU will likely have competing interests

▀ Some capital projects may benefit one entity more than the other

▀ Some properties are owned by one entity but used by the other

 Success will be facilitated by

▀ Improved capital planning

▀ Reduced potential for VCU to have too much influence over VCUHS

decisions

▀ Improved BOD composition

▀ Continued VCUHS/VCU communication and collaboration

Success of downtown campus renovations will be

helped by changes

JLARC

Tracey Smith, Associate Director

Lauren Axselle, Chief Legislative Analyst

Dillon Wild, Senior Legislative Analyst

100

JLARC staff for this report

JLARC

Appendixes

101

JLARC

102

VCUHS organizational structure (current)

*Positions with dual roles at VCUHS and VCU.

Note: Figure only shows top level of VCUHS and VCU health sciences organizational structures.

JLARC

103

VCUHS organizational structure (recommended)

Note: Figure only shows top level of VCUHS and VCU health sciences organizational structures.

JLARC

 Reviewed data for completed or ongoing VCUHS capital projects

exceeding $5M from FY20–FY24 (29 total projects)

▀ Budget and timeline data reviewed for projects in planning and

execution (22 of 29 total projects)

 Reviewed detailed materials shared with VCUHS BOD for several

major recently completed and ongoing projects

▀ Adult Outpatient Pavilion, Children’s Tower, Main 7 renovation

 Reviewed documents for VCUHS projects evaluated through new

prioritization process (15 projects)

104

JLARC review of VCUHS capital project data and

documents

JLARC

 Publications related to best practices in health-care capital allocation

and capital project planning, construction, and oversight, including

▀ Managing Capital Project Risks in a Challenging Environment: What Health

Care Boards and Executives Need to Know, American Hospital Association’s

Center for Healthcare Governance

▀ The Healthcare Executive's Guide to Allocating Capital, Sussman, Jason H.

▀ The Art and Science of Healthcare Capital Allocation, CBRE staff

▀ Managing Capital Project Risk, Glenn Boardman.

▀ Capital Budgeting for Healthcare Organizations, Syntellis Performance

Solutions

▀ Various publications from the Healthcare Financial Management

Association’s hfm Magazine.

105

JLARC review of industry best practices for

capital projects

JLARC

106

JLARC review of other health-care systems

Interviews with selected health systems

 Systems were selected if they

▀ had similar characteristics to VCUHS (e.g., public ownership, major

teaching hospital, indigent care provider, similar amount of patient

revenue, or similar “authority” status);

▀ were cited as having an effective governance structure; or

▀ were located in Virginia

 Systems interviewed = University of Virginia Health (VA); Sentara (VA);

Parkland Health (TX); University of Iowa Health Care (IA); Oregon Health

and Science University (OR); University of Wisconsin Health (WI); and

Temple Health (PA).

 Additional programs interviewed = Virginia Tech Carilion School of

Medicine; Eastern Virginia Medical School/Old Dominion University

health sciences center

JLARC

107

JLARC review of other health care systems, cont.

2022 National health care governance survey

▀ Administered by American Hospital Association

▀ 933 responses from hospital/health system CEOs (17.8%)

▀ Public, not-for-profit, and investor-owned

Study Resolution

Virginia Commonwealth University Health System governance

Authorized by the Commission on November 13, 2023

WHEREAS, the Virginia Commonwealth University Health System Authority was established as a

political subdivision to “provide for the health, welfare, convenience, knowledge, benefit, and

prosperity of the residents of the Commonwealth;” and

WHEREAS, the VCU Health System is the medical and health care affiliate of Virginia

Commonwealth University (VCU) and is required by law to “facilitate and support the health

education, research, and public services activities of the Health Sciences Schools of the University”

and serve as the university’s principal teaching and training hospital;” and

WHEREAS, the VCU Health System is required by law to engage in “specialized management and

operational practices to remain economically viable, earning revenues necessary for operations, and

participating in arrangements with public and private entities;” and

WHEREAS, VCU and the VCU Health System have integrated governance and leadership

structures such that, for example, the selection and removal of the health system’s CEO is the joint

responsibility of the university’s Board of Visitors and the authority’s board of directors, and the

university’s president also serves as the chair of the Health System’s board of directors; and

WHEREAS, the VCU Health System’s decision to cancel a significant construction project obligated

it to pay at least $73 million in penalties to the developer; now, therefore, be it

RESOLVED by the Joint Legislative Audit and Review Commission that staff be directed to review

the Virginia Commonwealth University Health System Authority. In conducting its study staff shall

(i) evaluate the membership, duties, and authorities of the VCU Health System board of directors,

(ii) evaluate the advantages and disadvantages of the integrated relationship between the Health

System’s board and executive staff and the university’s board and executive staff; (iii) compare the

relationship between the Health System and the university to other Virginia teaching hospitals and

their university affiliates; (iv) evaluate the Health System’s procurement function, in particular capital

planning and construction; and (v) evaluate the Health System’s oversight of capital projects.

JLARC may make recommendations as necessary and may review other issues as warranted.

All agencies of the Commonwealth, including the VCU Health System Authority Board of Directors,

VCU Health System, VCU Board of Visitors, Virginia Commonwealth University, and the

Department of General Services shall provide assistance, information, and data to JLARC for this

study, upon request. JLARC staff shall have access to all information in the possession of agencies

pursuant to § 30-59 and § 30-69 of the Code of Virginia. No provision of the Code of Virginia shall

be interpreted as limiting or restricting the access of JLARC staff to information pursuant to its

statutory authority.

Recommendations: VCU Health System Capital

Process and Governance Structure

Recommendations

RECOMMENDATION 1

VCUHS staff should develop and propose to the VCUHS BOD for its consideration

and approval a 10-year strategic capital plan that (i) identifies the system’s major facility

needs, (ii) assigns projected costs and revenue estimates to each potential major facility

project, (iii) describes how each project advances the missions of VCUHS and VCU,

(iv) prioritizes projects, and (v) identifies a timeline and funding strategies for com-

pleting each project. VCUHS staff and BOD should review and update the capital

plan at least every two years.

RECOMMENDATION 2

VCUHS should (i) have director-level positions overseeing construction and real estate

functions that report to a health system executive and (ii) develop the staffing capacity

necessary within VCUHS to effectively plan, procure, and manage future capital pro-

jects.

RECOMMENDATION 3

The VCUHS BOD should amend the Significant Transaction Policy to (i) clarify which

projects or circumstances require use of outside experts (e.g., projects with high costs

or substantial risks), when in the project planning and implementation process experts

should be engaged, and what information should be shared with the BOD about the

work completed by these experts; and (ii) require staff to share with the BOD com-

parisons of the estimated costs of proposed major capital projects to the costs of

similar projects and industry benchmarks, such as cost per square foot..

RECOMMENDATION 4

The General Assembly may wish to consider amending § 23.1-2402 of the Code of

Virginia to limit the role of the VCU president on the VCUHS BOD to being a non-

voting member who is ineligible to serve as the BOD chair.

RECOMMENDATION 5

The General Assembly may wish to consider amending § 23.1-2402 of the Code of

Virginia to require the VCUHS BOD to elect a chair every two years who must (i) be

a citizen member and not a VCUHS employee, VCU employee, or VCU or Board of

Visitors member and (ii) have served at least one full term on the VCUHS BOD.

RECOMMENDATION 6

VCUHS should amend its bylaws to eliminate the VCUHS president position, making

the VCUHS CEO the top health system executive who reports to the VCUHS BOD.

Recommendations: VCU Health System Capital Process and Governance Structure

RECOMMENDATION 7

The General Assembly may wish to consider amending § 23.1-2403 of the Code of

Virginia to remove language giving the VCU president the authority to decide on the

selection, removal, or conditions of appointment (including salary) of the VCUHS

CEO when committees appointed by the VCUHS BOD and VCU BOV cannot reach

agreement.

RECOMMENDATION 8

VCUHS and VCU should separate the VCUHS CEO role from the VCU SVP of

health sciences role so that they are two different positions.

RECOMMENDATION 9

The General Assembly may wish to consider amending § 23.1-2402 of the Code of

Virginia to require the VCUHS CEO to be an ex-officio member of the VCUHS BOD

with voting privileges.

RECOMMENDATION 10

The General Assembly may wish to consider amending § 23.1-2403 of the Code of

Virginia to require the VCUHS CEO and VCU SVP of health sciences to regularly

communicate and collaborate to support the mutual interests and success of

VCUHS and VCU.

RECOMMENDATION 11

VCUHS and VCU should agree to establish a “dotted line” relationship between the

VCUHS CEO and the VCU SVP of health sciences when the CEO and SVP positions

are split into two positions to ensure they meet regularly to discuss ways that VCU’s

health sciences programs, VCU’s research, and VCUHS’s patient care can coordinate

to benefit VCUHS and VCU.

RECOMMENDATION 12

VCUHS should adjust its current organizational structure to reduce the number of

individuals who report directly to the VCUHS CEO.

RECOMMENDATION 13

The General Assembly may wish to consider amending § 23.1-2402 of the Code of

Virginia to establish 4-year terms for VCUHS BOD members.

RECOMMENDATION 14

The General Assembly may wish to consider amending § 23.1-2402 of the Code of

Virginia to (i) add “commercial real estate” and “finance” to the existing list of exper-

tise requirements for VCUHS BOD members and (ii) require appointing entities to

ensure that each area of prescribed expertise is represented on the BOD.

Recommendations: VCU Health System Capital Process and Governance Structure

Commission draft

RECOMMENDATION 15

VCUHS should hire an outside expert to recommend strategies VCUHS could use to

attract individuals with experience leading large health systems to serve on the BOD,

such as whether some or all BOD members should be compensated.

RECOMMENDATION 16

The General Assembly may wish to consider amending § 23.1-2402 of the Code of

Virginia to reduce the size of the VCUHS BOD and ensure the majority of VCUHS

BOD members do not have professional roles at VCU and/or VCUHS. To ensure

input from VCU and VCUHS physicians, the VCUHS BOD should still have voting

members who represent VCU and VCUHS physicians.

RECOMMENDATION 17

The General Assembly may wish to consider amending § 23.1-2402 of the Code of

Virginia to create a standing joint committee of the VCUHS BOD and VCU BOV

that is responsible for ensuring effective communication and collaboration between

VCUHS and VCU. The joint committee should meet at least as often as the VCUHS

BOD and provide updates on key strategic, operational, and financial matters that

could directly or indirectly affect both entities.