University of C:onnecticut Health C-:enter

O/fi'ceof the VicePresidentfor He/dt/; Affairs

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November 16, 2009
The Honorable Toni Harp
The Honorable John Geragosian
Co-Chairs,Appropriations Committee
LegislativeOffice Building,Room 2700
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Hartford, CT06106

I )j'lIngni,hed I'lOk""r (II RE: UCHCMedical Malpractice Trust Fund FY10 & FY11
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Dear Senator Harp and Representative Geragosian:
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Let me again thank you for your support of the Universityof Connecticut Health Center
(UCHC)during the past regular and special legislative sessions. With the funding of the
full fringe benefit differential and support of our block grant, along with our plans for
aggressive expense management, revenue enhancement, increased productivity and
clinical growth, I am pleased to inform you we are forecasting the UCHCwill end this fiscal
year with a break even budget.

We must caution however that, as you know, the approved biennial budget (June Special
Session, Public Act No. 09-3) transfers $20 million ofthe $25 millioncash balance in the
UCHCMedical Malpractice Trust Fund to the General Fund, leaving UCHCwith only $5
million cash to cover fund expenses and settlements. The $25 million cash balance in
the fund, was determined on an actuarially sound basis and was funded with patient
revenues. It was sized to serve as the self-insurance fund for past, current and potential
future medical malpractice claims against the State for clinicalservices provided at the
John Dempsey Hospital and UConnMedical Group, our multi-specialty practice. As we
shared with you and the administration, leaving the UCHCwith the liability to pay
settlements out of current funds and not from this trust fund, leaves the UCHCin an
extremely precarious situation.

As of September 30, 2009, $4.3 million in settlements were paid out of the existing fund,
leaving the fund with just $700,000 in expendable cash. The approved FYlObudget
includes an additional $3.8 million(average of expenses and payouts over the past 4 years
as the fund is no longer required to be funded on an actuarially sound basis) for medical
malpractice claims. However, should settlements exceed the available cash balance in
the fund, the UCHCcould find itself with a deficiency in FY10. We will have no recourse
other than to request a deficiency appropriation to cover those expenses due to medical
malpractice settlements.

The UCHCBoard of Directors is very concerned with the State's transfer of these funds.
Theybelievethis is not followingsound businesspracticeand potentiallyplacesthe UCHC
11/Frlllit! (J/,/,,,,-lIlIIir)' Flllpl,,)'..,- and the State in an unfavorable and volatile financial position. Actuarial data indicates
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that any clinical program will periodically experience large settlements for medical
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malpractice claims payouts. Under the current arrangement, the State will likelyface such
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settlements of claims that mayunpredictablyand adverselyimpact that year's
operations.

Please be assured that we are doing all we can to meet our budget obligations and
achieve a break even budget for FYlO. We will keep you apprised of our financial
condition and the status of medical malpractice claim payouts throughout the fiscal year.
On behalf of our 5300 employees, we are grateful for your leadership in working to secure
our financial future.

Sinc~"""

Cato T. Laurencin, M.D., Ph.D,

Vice President, Health Affairs, Dean, School of Medicine
Albert & Wilda Van Dusen Distinguished Professor of Orthopaedic Surgery
And Chemical, Materials and Biomedical Engineering

Cc: Senator Dan DeBicelia

Representative Craig Minor
Senator Maryann Handley
Representative Roberta Willis
Representative Pam Sawyer
Senator Jonathon Harris
Representative Betsy Ritter
Representative Jan Giegler
Secretary Robert Genuario
Larry McHugh
Mike Hogan
John Biancamano
Susan Keane
Neil Ayers