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U. governing boards approve medical school merger

The Board of Governors and Board of Trustees officially approved the transfer of nine University of Medicine Dentistry New Jersey’s schools, centers and institutions to Rutgers University.

The integration will take full effect Jul 1, 2013, said Dudley Rivers, BOT chair.

The University will absorb most UMDNJ schools, with the exception of University Hospital in Newark and the School of Osteopathic Medicine in Stratford, he said. University Hospital will become a freestanding institution and the School of Osteopathic Medicine will transfer to Rowan University.

University President Robert L. Barchi said the integration will yield huge financial and academic advantages.

“The opportunities are immense,” he said.

But Barchi said there are many risks going forward with this multimillion-dollar integration.

The University is expected to spend $45 million to $75 million on physically merging the institutions, he said.

He said he is confident the boards can refinance and restructure that debt and assure that the integration’s benefits outweigh the costs.

“We consider this to be the cost of doing business for a one-time operational opportunity that won’t come again. ... It’s a significant cost ... but insignificant for an opportunity for the future,” Barchi said.

The University will also absorb UMDNJ’s $456 million in debt. This debt may lower Rutgers Aa2 credit rating to a one-notch downgrade, which would make it more expensive for the University when taking loans out, said Daniel Schulman, a BOG member.

“Even with a one-notch downgrade, we’re able to restructure the debt in a tax sufficient manner, save cash flow from that and smooth out our debt surfacing. … We can comfortably smooth out the debt obligations that we have,” Schulman said.

Expenses from the integration should not affect tuition rates, Barchi said.

Barchi said the cost is well worth it as the enterprise of UMDNJ together with the University’s academic powerhouse would attract the finest faculty and students.

The integration brings together schools with overlapping and interlocking missions, which will make programs more efficient across the entire enterprise, he said.

“We can align our research and educational opportunities going forward for opportunities that we don’t even have on the radar now,” Barchi said.

The merger gives the University the opportunity to coordinate the health care delivery engine between North Jersey and South Jersey, he said.

“In the health care business, size and scale matter,” Barchi said. “We now have the opportunity to provide coordination and integration on that scale.”

The public and many board members voiced concerns regarding University Hospital’s $116.9 million in outstanding debt, afraid that the state will push the debt onto the University if it cannot come up with proper funding.

Barchi said the legislation regarding the hospital’s debt is in the hands of the state.

“The law is very explicit that the state intends to establish the University Hospital as an instrumentality of the state, as separate and apart from Rutgers and to fund it in such a way that it can continue its mission to provide health care,” he said.

Barchi said he is confident the risks of the transfer will be handled appropriately and effectively.

“These are precisely the kinds of issues that can tear an institution apart. ... It hasn’t happened because of the folks [in both University boards],” Barchi said. “I, as the new president here, just have to step back in awe at the work that this group has done.”

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