On June 30, 2000, Georgetown University and MedStar Health finalized a clinical partnership agreement under which MedStar owns, operates, and has financial responsibility for Georgetown University's clinical enterprise, which includes Georgetown University Hospital, a faculty practice group, and a network of community physician practices. Georgetown University Hospital also has responsibility for continuing medical education (CME) and graduate medical education (i.e., the education of residents, interns, and fellows).

Georgetown University continues to own, operate, and have financial responsibility for undergraduate medical education and research—including the School of Medicine, the School of Nursing & Health Studies, and the medical research enterprise. These units continue to be known collectively as Georgetown University Medical Center (GUMC).

The decision to explore a partnership was made by the University's Board of Directors in May 1998. At that time, in light of severe financial hardships that faced the University as a result of mounting clinical losses at the Medical Center, the Board authorized the administration to seek an arrangement in which another entity would assume full responsibility for the clinical enterprise. From 1996 through the year 2000, the Medical Center lost approximately $250 million, most of which occurred in the clinical enterprise.

Among the factors that led to the Board's decision were major changes in the local health care market, the rise of managed care and attendant reductions in patient care volume and reimbursements, and the documented oversupply of hospital beds in the city. Also influential was growing evidence that leading academic medical centers nationwide were experiencing unprecedented financial stress as a result of revolutionary changes in the American health care economy.

Key Provisions of the Agreement

The University's basic principles for a partnership were that it must protect the University against future clinical losses, promote academic excellence, and support the University's Catholic and Jesuit identity. The Georgetown-MedStar partnership serves these objectives in critical ways:

• Financial benefits. MedStar assumes full responsibility for the operations and financial performance of the clinical enterprise. This is the key financial provision of the partnership. Georgetown is now protected in the short- and long-term against the risk of severe clinically-related financial losses.

  Georgetown received an up-front payment of $80 million, plus an additional $15 million negotiated separately for the rights to certain clinical facilities. These funds allowed Georgetown to meet immediate financial obligations of retiring the debt on the clinical enterprise and addressing costs of the transaction. In the future, if the Washington, D.C., components of the MedStar system reach certain annual financial targets, Georgetown will share in those net revenues.

• Academic benefits. Georgetown continues to have full responsibility for the education and research enterprises. Medical, pre-medical, nursing, health studies, and graduate students will continue to be educated at Georgetown University Hospital, while also having access to new learning opportunities at other hospitals in the MedStar system. The agreements establishing the partnership ensure that MedStar will continue to supply Georgetown Medical School with access to first-class facilities. By relieving Georgetown of responsibility for the provision of clinical care, the partnership frees the University to focus exclusively on improving the quality, breadth, and financial soundness of the Medical Center's teaching and research missions.

  The academic work of the clinical departments continues to be overseen by Georgetown University, while their clinical operations are the responsibility of MedStar. Department chairs report dually to (and will be recruited dually by) the leadership of the Medical Center and the Hospital. This structure enables the diverse faculty to pursue their various professional activities — patient care, teaching, and research — in a well-coordinated fashion. Research space in facilities operated by MedStar is being leased back to the University.

• Religious Identity. MedStar, which has proven experience in sustaining Catholic commitments, will preserve Georgetown's strict adherence to the Ethical and Religious Directives for Catholic Health Care Services. Georgetown University Hospital's outstanding pastoral services and charity care programs will be maintained.

• Continuity. The transition in operations from Georgetown to MedStar proceeded smoothly over the summer of 2000. Virtually all 3800 clinical staff and faculty were offered and have accepted positions at Georgetown University Hospital (GUH). All clinical department chairs elected to continue leading their departments. Patients have continued to see the same physicians and other caregivers. Over the past two years we have worked to integrate clinical activities managed by MedStar with Georgetown's educational and research activities. Because both Georgetown and MedStar are viewed in the city as good non-profit citizens, there is continuity as well in our interactions with local leaders in the public and private sectors.

Additional Background on MedStar Health

For additional background information on MedStar Health, visit www.medstarhealth.org.

For additional information on the Georgetown-MedStar partnership, call the Medical Center's Office of Communications at (202) 687-5100.