Kelley out as Health System chief

Rodin dismisses UPHS head and Med School dean after two years of massive deficits William Kelley, who aggressively led Penn's Health System and Medical School through a decade of rapid growth, was forced out of his position yesterday after administrators lost confidence in his ability to solve the Health System's lingering financial crisis. The Health System had posted losses of almost $300 million in the last two years under Kelley's leadership. Peter Traber, chairman of the Department of Medicine, will replace Kelley, serving as interim CEO of the Health System and dean of the Medical School until a permanent replacement is found. The announcement came in an e-mail sent to all Health System employees yesterday by University President Judith Rodin and University Board of Trustees Chairman James Riepe. Rodin said in an interview yesterday that the change in leadership is one that top Penn officials have been considering for "quite some time" to take the ailing Health System back to financial stability. "The future is full of different kinds of challenges and requires a different kind of leadership," she said. "We are going to need to be aggressive and nimble." Rodin has asked Kelley to remain with the University as executive vice president for health affairs, a new, loosely defined position focused on improving national health care policies -- an area officials have said played a key role in causing the Health System's financial woes. As of yesterday, Kelley still had not announced whether he would take the position. In a memo to top Health System administrators and all Medical School faculty members, Kelley made clear that it was not his decision to step down and said he will remain a tenured member of the faculty in the Department of Medicine. "I am disappointed not to be able to see my long-term plans to full implementation," he wrote in the somber statement. "But nonetheless, we accomplished a great deal together." Traber, who came to Penn in 1992, began serving in his new capacity right away. As interim dean and CEO, he will report directly to Rodin and Provost Robert Barchi and will exercise the same authority over the Health System's operations that Kelley did. Rodin said Traber has the skills necessary to keep the Health System afloat in Philadelphia's crowded health care market. "He represents a new breed of health care leadership," she explained, necessary for the "significant challenge" the system is facing. The 44-year-old Traber, who was offered the position on Tuesday, said last night that he would consider taking the position permanently if it is offered to him. Rodin said officials have not yet begun the search for a permanent replacement. Also today, Neurology Professor Arthur Asbury, who has previously served as acting executive vice president and acting dean of the Medical School, was named deputy dean of the Medical School. In addition, Rodin said that Penn will retain David Hunter, president and CEO of the Hunter Group, the outside consulting firm responsible for the Health System's aggressive cost-cutting plan. "[The firm] has laid out a blueprint which we can follow to achieve the savings we need to achieve," Rodin explained. "What they are going to do is? guide the leadership in implementing that blueprint." While a number of "senior people" were involved in determining the changes in leadership, Rodin said the ultimate decision was made by herself and Riepe. Rodin denied that the dismissal had anything to do with the recent controversy over a death at the Institute for Human Gene Therapy. Rumors about Kelley's possible dismissal have been circulating around the University community since last fall, as the Health System's deficits continued to spin out of control. Under the Hunter Group's recommendations, the Health System has made massive budget cuts, pledging to eliminate a total of 2,800 positions -- 20 percent of its overall workforce -- over a 14-month span. Through it all, Kelley stated that he was committed to staying on until the crisis was resolved. He blamed most of the problems on factors outside of Penn's control, like the 1997 Balanced Budget Act, which dramatically decreased the amount of federal Medicare funding available to UPHS. While the Health System has begun its road to recovery, officials say new leadership is necessary to take the system the rest of the way. Chief Operating Officer Robert Martin, who will retain his position in the new leadership team, said he thinks the Health System will continue to improve under Traber. "Both [Kelley and Traber] are at the top of their field and both of them are highly focused on patient care and on excellence," Martin said. "This institution is going to continue to be superior." When Kelley came to Penn in 1989, he managed to take the failing center, which lost $28 million over two years, and make it profitable in one year. He went on to spearhead the creation of the sprawling University of Pennsylvania Health System, a $1.9 billion institution that controls 20 percent of the Philadelphia health care market, has four wholly-owned hospitals and is affiliated with several others. It also controls a large primary care network and employs more than 15,000 workers. Although the Medical School's ties with UPHS have increased both federal funding and its academic prestige, many have criticized Kelley, saying the rapid expansion in the mid-1990s played a large role in the Health System's financial difficulties. Under Kelley's leadership, the Medical School climbed in the rankings from No. 10 to No. 3 in the nation, and found its way to being No. 2 in funding from the National Institutes of Health. "Dr. Kelley's record this past decade has been quite significant in terms of moving Penn from a second-tier to a top-tier medical sector," Riepe said. "And that record stands intact in spite of the decision at this time." Daily Pennsylvanian staff writer Eric Dash and editors Catherine Lucey and Eric Tucker contributed to this article.

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