Emory Report
September 24, 2007
Volume 60, Number 5

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September 24, 2007
Emory endorses call for audit of Grady contract

By ron sauder

Emory has endorsed a call for a state audit of the financial relationship between the Emory and Morehouse schools of medicine and Grady Health System, saying any objective examination will only confirm the extent to which Emory and Morehouse have extended themselves as partners to the financially beleaguered hospital.

“Any claim that the Emory-Grady contract is written to the advantage of Emory and the disadvantage of Grady ignores a great deal of available evidence and does not even pass the test of common sense,” said Michael M.E. Johns, executive vice president for health affairs at Emory. “The contract was freely entered into by both parties years ago and contains a provision allowing either party to withdraw with one year’s notice. Neither we nor Grady have ever exercised that right because to date, we have been able to maintain a productive, effective partnership that has provided high-quality medical care to the entire metro region and the state of Georgia.”

“We would never stand in Grady’s way if the hospital wanted to seek a different partner,” Johns continued. “We would simply require an orderly transition for patients, physicians, and other personnel and, of course, that contractual obligations be met. But the fact is that Emory, along with our partners from the Morehouse School of Medicine, have delivered to Grady a large group of incredibly passionate, committed and hard-working doctors who simply can’t be replaced — and anyone who has spent any time at Grady knows it.”

Emory provides the full time equivalent of approximately 300 faculty physicians and 377 Emory residents and fellows — young physicians continuing their training in medical specialties — who together, deliver 85 percent of the medical care at Grady. The remainder of Grady’s clinical care is provided by physicians from Morehouse.

“Just as a matter of dollars and cents, the medical care delivered by Emory and Morehouse is being provided at a striking discount price,” Johns said. “It is simply impossible for the hospital to buy the huge volume, and the high quality, of health care that Emory delivers at Grady on the open market.

“The 2005 study by Cherry Bekaert & Holland found that although our contract calls for our faculty to be compensated at Veterans Administration rates, Grady is under-paying both Emory and Morehouse by about $60,000 per year for each of our faculty physicians engaged in resident teaching and supervision — requiring subsidies of Grady in the amount of $6 million per year by Emory and $2 million per year by Morehouse for each of the two years studied by the consultant.”

Other substantial contributions made possible by Emory’s presence at Grady include state and federal reimbursements for graduate medical education, patient care grants won by Emory faculty physicians, nearly $25 million per year in uncompensated medical care, and other sources of revenue amounting to about $143 million per year. For a breakdown see http://whsc.emory.edu/emory_grady_budget.cfm.

Currently, Grady owes the two medical schools about $51 million for services rendered at the hospital, an amount that increases by about $5 million a month.

“Emory is a good partner with Grady,” said Emory’s medical school dean, Thomas J. Lawley. “We have acted in good faith and honorably throughout Grady’s growing crisis, and we will continue to act with complete transparency and in accord with our principles. We want to help find the way for Grady to survive and flourish.

“Given Grady’s cash-flow projections, we believe the weeks are growing very short for Grady to embrace the recommendations of the Greater Grady Task Force and agree to the governance changes that will lead to new business models and new sources of funding from government at a number of different levels.”