Another Fast Shuffle at the University of Minnesota? "Driven to M Health"

Driven to M Health?

On October 9, 2015 the Regents approved a non-binding letter of intent to explore combining University of Minnesota Physicians and Fairview Health Systems into an integrated health system to be called M Health.  The letter of intent provides for Definitive Agreements to be reached by March 2016.  See pp. 63-64 of the Dec 2015 AUD Docket. 

On November 3, 2015 President Kaler sent a letter to four Regents requesting emergency approval to retain Deloitte & Touche LLP to provide consulting services for the proposed integration.  The fees and expenses are estimated at $1,500,000.  The rate is apparently three times the normal rate charged by Deloitte for its separate services as the external auditor for the U of M. The contract with Deloitte will be executed by the U of M General Counsel in order to "preserve attorney client privilege for the work product."  See pp. 61, 63-64 of the Dec 2015 AUD Docket. 

On November 3, 2015 Kaler also sent a letter to three Regents requesting emergency approval to retain Clifton Larson Allen LLP to "facilitate" the process necessary to effectively reach the Definitive Agreements by March 2016.  The fees and expenses are estimated at $425,000.  See p. 67 of the Dec 2015 AUD Docket. 

 
On November 12, 2015 Brian Steeves, the executive director of the Board of Regents, informed Kaler by letter that emergency approval had been granted.  See pp. 60, 66 of the Dec 2015 AUD Docket 

University policy authorizes emergency approval when delay in obtaining approval poses a significant health, safety or financial risk to the University.  See p. 61 of the Dec 2015 AUD Docket. 

This process raises several questions: 

(1)  Is there an emergency regarding the proposed integration?  If so, was the emergency created by the administration itself in setting March 2016 as the date to execute the Definitive Agreements?  Is this yet another example of the failure of the Regents to provide effective oversight of significant decisions of the administration? 

(2)  Has the process been engineered to produce the result desired by the administration?  If so, why spend $1.9 million on consulting services?  If not, why has the administration already launched an advertising blitz on local television stations and newspapers for M Health?  And how much is the administration spending on the advertising campaign? 

(3)  How can Deloitte maintain independence when it serves as both an external auditor and as a consultant for multi-million dollar University projects?  How effective will Deloitte be as a watchdog (external auditor) of the decisions of the administration when at the same time it seeks large fees from the administration for consulting services?  How many questions  will Deloitte raise as a consultant about the proposed integration when it wants to maintain a lucrative contract to serve as the external auditor and when the administration has already given clear signals that it wants the integration to be accomplished as soon as possible?           

(4)  Why is the administration apparently attempting to prevent disclosure of the terms of the contract with Deloitte by having the General Counsel execute the contract?  How does the administration think that the attorney client privilege prevents disclosure of the terms of the contract (as opposed to any advice it may receive from the General Counsel)?  How does the administration think that the work product doctrine prevents disclosure of the terms of the contract?  (The work product doctrine protects material that has been prepared by the attorney or the client in anticipation of litigation.) 

(5)  Is spending by the U of M administration on outside consultants out of control?  In fiscal year 2015 the administration spent $66,123,000 on administrative consulting and professional services.  Why is this necessary when the U of M has well qualified professors in virtually every field of endeavor and highly paid senior administrators? 

Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974

University of Minnesota Alumni Association life member