By CHERYL BAACKE
Heading one of the University's most
prestigious schools and two years into'
the construction of a $285 million
ospital, University medical ad-
ministrators are worried that a new
Medicare payment system may pull the
)rug out from under them.
The new payment system could leave
the University hospital, and especially
the medical school, seriously shor-
tchanged, hospital officials said.
"WE ARE PART of an industry that
is literally seething with change," said
Jeptha Dalston, director of the Univer-
sity hospital. No one is sure what those
,changes will mean for the future of the
hospital industry, he said.
But medical school Dean Peter Ward
said the predictions haven't been good.
"At the present time, the large
teaching-type hospitals are very
gravely concerned," he said. "The
predictions are that large institutions
will not be able to operate on a break-
THE CONFUSION started this Mar-
ch when Congress passed legislation
which will radically change the way
hospitals are paid under Medicare.
Over the next four years, hospitals
will classify their services into 467
diagnosis categories, called Diagnostic
Related Groups (DRGs). Hospitals will
then be paid a fixed rate for service in
each related group.
Because those rates will be set by the
federal government, and not by the
hospitals as they are now, the system
could mean a major revenue loss for
the University hospital and the medical
UNDER THE current system, the
University hospital is able to set its own
fee rate under Medicare, and much of
that fee is used to subsidize the medical
school's teaching and research
programs. With the new system most of
that money might be gone, said Peter
Ward, dean of the School of Medicine.
Ward said that the University
medical school could be severely affec-
ted by the new rates because they
probably will not be enough to cover the
extra costs an instructional hospital has
for its educational prgrams.
HOSPITAL and Medical school of-
ficials have come up with three alter-
native strategies to deal with the new
" Entering an all-out race for patients,
which would hurt the teaching
programs but possibly keep the hospital
* Concentrating on extremely
specialized and difficult practices at
the expense of more routine
* Maintaining the existing operations at
the hospital and asking the government
to provide teaching hospitals with a
subsidy on top of the fixed rates for
DESPITE THE uncertainty,
however, administrators say they have
no plans to alter the construction of the
"I don't think there was any alter-
native," said Ward. "The present The University's $285 mill
hospital simply is not viable." hasadministrators worry
The Michigan Daily - Thursday, September 8, 1983 - Page 21-A
leaves hosuital in flux
Daily Photo by JEFF SCHRIER
lion Replacement Hospital Project has been under
ing if they will be able to fill its beds.
construction for two years, but recently a new Medicare payment system
r _ _ _ - _ . _ _
(Continued from Page1)
the University's investments is to raise
money for the University.
The second is an unwritten policy that
the University should not invest in
companies if it is dissatisfied with the
r "As long as we own stock in the com-
pany, we vote with the management,"
said Regent Gerald Dunn (D-Garden
City). "If you don't like the
mranagement's view you sell stock."
REGENT ROBERT Nederlander (D--
Detroit) also said the University'sl
policy was to "vote with management1
of sell the stock."
That policy could get the University
tn'trouble if it frequently disagreed withl
management on shareholder
resolutions. Selling stocks in too many
companies would shrink the Univer-
sity's portfolio to the point where
making money would be almost im-
possible, Regents said.
>When asked why the University
could not retain the stocks and still vote
against management, some Regents
said it was possible.I
'I THINK it has been something that1
has been the policy and nobody has1
bdthered to change it," said RegentI
Paul Brown (D-Petoskey). "I would
rather be a little more selective in our
He said, however, that he would
"have to look into it a little further
before I would put it on the agenda."
But most Regents agreed with
Roach's statement that "once you get
the bandwagon rolling (divestment is)
where you end up."
MEANWHILE, the University con-
tinues to vote on resolutions without
regard to social consequences.
A resolution at American Telephone
and Telegraph Company (University
holdings $771,000) asked the company
to stop managing a laboratory in New
Mexico which researches and develops
nuclear weapons systems for the U.S.
Department of Energy.
In voting against the resolution, the
University rejected the proponents
argument that the company's arms
production is contributing to a world
arms race that is "threatening world
"FOR THIS REASON," the
resolution reads, "the time has long
passed when shareholders and
management may simply leave nuclear
policy in the hands of elected officials.
to do so not only is an evasion of our
moral responsibilities as individuals
and corporations, but also risks the
nuclear weapons production
destruction of ourselves and our com-
Instead, the University backed the
management's position that the
resolution would not be effective
because it is directed at a company,
when it is the federal government that
sets defense policy.
A resolution at General Telephone
and Electronics corporation (Univer-
sity holdings $1.4 million) asked the
company to assess the status of the MX
missile project and determine the
potential effects on employees and
'nearby communities if the project were
dropped. The company develops con-
trol and communications system for the
MX missile, according to a report by
the Investor Responsibility Research
THE UNIVERSITY voted in favor of
the management's position that
"GTE 's employees, shareholders and
the communities affected are well ser-
ved if GTE continues its participation
in the MX programs as well as other
national defense programs."
A resolution at Bristol Meyers Com-
pany (University holdings $1.8 million)
asked the company to endorse a world
health code which restricts the
marketing of infant formula as a breast
Supporters of the resolution cite
studies showing that mothers in Third
World countries are forced to dilute the
formula, and often use water that is
contaminated, contributing to sickness
and starvation in the babies.
THE UNIVERSITY supported
management's position that a narrow
emphasis on infant formula marketing
practices draws attention away from
more important causes of infant mor-
tality and morbidity.
Although most of the resolutions
come from the left of the politicial spec-
trum, the University is politically in-
discriminate in its backing of
This year, the University voted again-
st a resolution asking Gulf Oil Cor-
poration to stop all business dealings
with communist countries.
MANY UNIVERSITIES with sizable
endowment portfolios appoint a stan-
ding committe to research proxy
resolutions and advise the university
on which way to vote.
At Yale University, which has a por-
tfolio of just over $1 billion, a group of
faculty, staff, students, and alumni
called the Advisory Committee on In-
vestor Responsibility make recom-
mendations to the University.
This year Yale's board of trustees
agreed with all of the committee's
recommendations on shareholder
issues, according to David Storrs, the
university's investment officer.
IN ACCORDANCE with a policy
developed by the committee, Yale ab-
stained on the resolutions before ATT
and GE. Because the committee feels
that the issue of nuclear proliferation is
still being debated, Yale abstains on
any resolutions where there is a
"request to stop involvement in nuclear
weapons production," Storrs said.
Yale supported all resolutions ban-
ning sales to the South African gover-
nment, he said.
The investment office at Yale even
carries the committees work one step
further, he said.
"IN EVERY CASE where we vote
against management we write to the
chief executive at the company and
almost in every case we get a letter
back," he said. "A program of regular
encouragement is more effective than
say divestment where we lose control
over the corporation or more public ac-
tion on our part.
"Many of the positions we have taken
have changed corporate behavior in a
significant way, not just because we did
it but because many others did too," he
With its endowment of $1.7 billion,
Harvard University operates a similar
committee called the Advisory Com-
mittee on Shareholder Responsibility.
HARVARD ALSO abstained on the
ATT and GE resolutions because the
proposals asked the companies to take
action on issues the committee felt were
still being debated.
Harvard supported the resolution
asking Motorola Company to stop
selling oil to the South African Gover-
nment, and the resolution asking
Bristol Meyer Company to endorse the
World Health Code.
Stanford University has a similar
committee, as does the University of
Minnesota, where the vice president for
finance can also research social
resolutions independently of the com-
mittee, officials at those schools said.
ALTHOUGH THE Regents discussed
forming such a committee in 1978, no
committee has been formed.
As part of the 1978 resolution on proxy
voting, however, the Regents did ap-
prove a provision to appoint temporary
committees to examine specific in-
vestment issues. But since that meeting
four years ago, no issue has inspired
implementation of such a committee.
In February of 1981, 250 students and
other members protested the addition
of several defense-oriented cor-
porations to the University's list of
potential investments. Despite the
protests, no committee was formed at
THE REGENTS appoint only ad hoc
committees because consideration of
social issues in investments should be
"the exception," Roach said.
"The place to fight social issues is not
through the invested portfolio," he said.
Regent Sarah Power (D-Ann Arbor)
also said that the Regents have a policy
against forming official committees
because it tends to involve the Regents
too closely in the day-to-day operation
of the University.
"Because the place is so big and so
complex, if we set up a lot of commit-
tees we would get into a whole lot of
busy work, day-to-day operation, and to
me that would be a grave mistake," she
"I'm not my old lovable
self when I'm around
cigarettes. I get real
cranky. So I want all you
smokers to quit onceya
and for all. And who
knows? You might even
put a smile on my face"
American Cancer Society r,
This space contributed as a public service
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