A grant agreement that would have brought the University's Health System $100 million in funding was dissolved in a joint decision between Penn and the Philadelphia Health Care Trust, University officials announced last month. According to a memo from University Board of Trustees Chairman James Riepe that was distributed to the board in December, Penn and the PHCT "mutually agreed" to terminate the plan, which was announced last March. It would have transferred the PHCT's assets -- estimated at the time at $100 million -- to Penn Medicine, the governing body of the University's Health System, by 2009. University President Judith Rodin said that in reviewing the terms of the agreement, there was "a strong sense that over the seven-year period we would run into increasing numbers of potential or real conflicts of interest." Riepe wrote that the original agreement "was contingent on approval by the Philadelphia Orphans' Court within a year which has not yet occurred, and now appears unlikely to occur within the requisite time-frame." The Orphans' Court oversees cases in order to protect the rights of those unable to handle their own litigation. As a trust, the PHCT falls under such jurisdiction. "After careful thought and consideration, we have concluded that the relationship envisioned by the agreement, whether or not approved by the Orphans' Court, does not serve the best interests of Penn Medicine or the Trust," Riepe wrote. With the dissolution, the PHCT will withdraw its petition to the Orphans' Court. Had Penn fully received this grant, it would have been the third largest financial gift in the University's history and significantly aided the Health System, which faced losses of approximately $300 million in the late 1990s. But University spokeswoman Lori Doyle said the dissolution of the agreement "will have no impact on Penn Medicine's financial outlook since the money was never factored into Penn's [five-year] budget planning." Under the agreement, Penn Medicine would have received an increasing percentage of the trust's interest until 2009, when the rest of the funds would have been transferred. These assets were originally estimated at $100 million, but their value has changed over the past year. Despite the termination of the agreement, Penn Medicine will retain the funds that have already been transferred. "We received in grants from the Philadelphia Health Care Trust about $3 million this year, which we are using for various faculty research projects... and we are very appreciative for that," Rodin said. Also under the original agreement, PHCT Chairman Bernard Korman was appointed vice chairman of the Penn Medicine Board and chairman of its Finance Committee. The grant's dissolution specified that Korman would resign from those positions. Over the past year, the grant agreement had faced resistance from community organizations, such as the Philadelphia Unemployment Project and the Action Alliance of Senior Citizens of Greater Philadelphia. These groups claimed that the funds should be distributed to better serve low-income patients rather than be donated to Penn. According to Doyle, the influence of these community organizations was not a factor in the decision to dissolve the grant agreement.
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