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INITIAL REPORT AND RECOMMENDATIONS TO THE PRESIDENT FEBRUARY 21, 2002 MEMBERS OF THE MERGER TRANSITION TEAM Carl
(Tobey) Oxholm III, Vice President and General Counsel (Chair) Table of Contents
Appendices:
1. INTRODUCTION On November 20, 2001, Constantine Papadakis, Ph.D., President of Drexel University and MCP Hahnemann University announced the creation of a Merger Transition Team (MTT), and gave it the following charge:
The members of the MTT have met together every week since November 29, 2001. In addition, we have met in smaller groups and with interested constituent groups; we have participated in meetings of the faculty, of the two faculty governing boards and their committees, and of the student government organizations; we have met with the leadership of both universities' alumni/ae organizations; we have received and responded to hundreds of e-mail messages; and we have spoken with countless numbers of staff, students, faculty and alumni. We have also worked with administrative departments to investigate certain issues and empanelled three Subteams (whose members are listed in Tab B) to investigate certain issues in greater depth. Believing that it is of critical importance to keep both university communities aware and informed of our work, we created a website (www.drexel.edu/admin/merger) and updated it regularly (no less than once each week); we prepared and posted minutes of every one of our meetings; and we sent two e-mails to all employees, asking them to comment on our work, our ideas, and our preliminary proposals, and inviting them to share their ideas with us. As a result of these efforts, we believe that we understand and appreciate the interests of all parts of both universities, if not fully then at least well. We have done our very best to consider those interests fairly as we have analyzed the issues that the universities face in preparing for merger, and have struggled to reach consensus on every issue. Succeeding in our effort, each recommendation contained in this Report is made with the unanimous endorsement of all members of the Team. 2. ISSUES AND PRINCIPLES The MTT began by studying the efforts of those task forces and study groups that had preceded us. In particular, we read the reports of the four Task Forces that were created in 1999 to consider merger related issues: Faculty Affairs, Academic Governance, Academic Planning, and Academic Calendar. We also read the two Reports of the Drexel Senate's Ad Hoc Committee on the Merger, including the comments made by respondents to the two surveys that ware distributed to the Drexel faculty. Finally, we considered data provided to Drexel by its consultants on the merger, Accenture. We quickly realized that we would not be able to consider, much less address, by February 21, 2002, every one of the issues that had been identified, so we decided to break our work into three phases: Phase
I: issues to be addressed before the Drexel Trustees vote (February
27) We then identified those issues which we believed ought to be addressed in Phase I. We posted those issues on the web and obtained substantial input on them. As a result, we considered, and will address in this Report, the following issues:
We also thought it was important to be specific about the criteria that we believe should be used to evaluate specific proposals. Reaching agreement, we posted those criteria on the web and, as a result of comments made, modified them. These are the ten principles which we have used, and believe the Administration and Trustees ought to employ, in evaluating any merger-related proposal:
3. SUMMARY OF REPORT AND RECOMMENDATIONS In Parts 4-10 of this Report, we address the seven issues which we agreed should be considered before the Drexel Trustees vote whether or not to merge Drexel with MCPHU. The following summarizes our Report and Recommendations. For each recommendation, we have indicated its likely cost. Structure of the New University
Benefits (Retirement and Health)
Tenure
Faculty Governance
Student Governance
Administrative and support services
Research (indirect costs)
4. STRUCTURE OF THE NEW UNIVERSITY On November 11, 1998, President Papadakis addressed the faculty and staff of MCP Hahnemann University, then only hours old. He shared his vision of creating a new university that was built on the history of excellence of three institution -- Drexel, the Medical College of Pennsylvania, and Hahnemann University -- but operating as one institution emphasizing science and technology, medicine and business. The ease with which that vision can be realized is linked inextricably with the structure of the university post-merger. So, too, is the financial risk associated with today's high-risk world of health care. It is conceivable, for example, that a structure could be created that minimizes risk but inhibits interaction between the health sciences and engineering, technology, economics, public policy and business programs; yet it is the opportunity for such synergies that makes this merger so exciting. Full integration, on the other hand, would expose all parts of the university to the possibility, remote though it is, of financial exigency resulting from a catastrophic loss arising out of the practice of medicine. Thus, the issue of the structure of the university is arguably the most important issue to be faced by the President and the Board of Trustees. At its meeting on November 27, 2001, the Drexel Trustees decided that if a merger were to occur, they would keep intact the current corporate structure -- that is, the corporate entity that is legally named the Philadelphia Health and Education Corporation (PHEC) would continue to exist, but would no longer do business under the name MCP Hahnemann University. To some degree, the issue of what schools should be included in that subsidiary corporation is captured in the question of the new name it will receive: a "Drexel University of the Health Sciences" implies a continued separation from the rest of "Drexel University" that the faculties of both universities do not want to have. Indeed, the faculty of each MCPHU school have expressed their strong preference for becoming a full and equal partner in Drexel University, and they look forward to creating new opportunities for interdisciplinary research and entrepreneurial activities, visibility, and new courses and programs. Any lines that separate must be carefully, and sparingly, drawn. As a matter solely of risk management, the logic for keeping PHEC as a separate corporation applies solely to the School of Medicine: it does not apply to the School of Public Health, or to the College of Nursing and Health Professions. Post merger, there would be no reason to keep those latter two schools within the subsidiary corporation (PHEC). Indeed, moving them into the parent corporation (Drexel) would allow the subsidiary corporation's board of directors to be able to focus its attention on the unique issues facing medical schools. *For ease of reference, and solely for that purpose, the College of Nursing and Health Professions will be abbreviated as "Nursing". If reference is made to it as a "school", it is only to avoid having always to say "college or school" when referring to a MCPHU unit; and when reference is made to it as "Nursing", it is not to suggest any lack of importance of the Health Professions. Such a structure would also be consistent with the way in which academic affairs have come to be managed: the Dean of the School of Medicine now reports directly to the President, and the Deans of Public Health and Nursing report to the Provost. This is a common structure in universities having medical schools, and should continue after the Drexel-MCPHU merger. Transferring the schools of Public Health and Nursing into the parent corporation would also allow the academic and financial systems to be unified: as a result, the budgeting and reporting systems would be the same. Such a structure would also allow there to be clear accountability for the operation of the medical school (MTT Principle No. 6), since only its finances would be part of the subsidiary corporation's financial statements. Logical as this proposal is, it will have immediate financial consequences for Drexel, and create substantial issues of parity for the employees, because employee benefits at Drexel are more generous than at MCPHU. Those consequences are discussed in the next Section (Benefits). As substantial as the additional cost will be*, the Team believes that the worst step the new University could take would be to propose maintaining the health sciences faculty and staff in an inferior employment position, and that the best and the brightest members of the MCPHU staff will leave the University if they are not immediately granted parity in retirement benefits. For all of these reasons, the Team recommends that only the School of Medicine be in the subsidiary corporation (PHEC), with the administration of that School (financial and academic) under the direction of its Dean, fully consistent with and accountable to the President and the Senior Vice Presidents of the University. In all other ways -- employee benefits, administrative and support services, student programs, faculty and student governance structures, and the like -- the School of Medicine should be equivalent to every other college or school within Drexel University; and its faculty, staff and students should not be treated or regarded in any way other than as full members of Drexel University. Recommendations: Only the School of Medicine should be in the subsidiary corporation (PHEC), with the administration of that School (financial and academic) under the direction of its Dean, fully consistent with and accountable to the President and Senior Vice Presidents of the University. The separation between corporations required by law must be ensured; but in all other ways the School of Medicine should be equivalent to every college or school in Drexel University, and its faculty, staff and students should not be treated or regarded in any way other than as full members of Drexel University. No cost. This Recommendation is specifically linked with the recommendation that retirement benefits be immediately equalized (Recommendation No. 2). * Human Resources has projected that if all employees of MCPHU were immediately entered into the Drexel benefit programs, the additional cost would be approximately $7 million. The pro forma financial statements provided to the Drexel Trustees provide for benefits to be equalized over three years -- that is, increases of approximately $2.33 million per year. To achieve full equalization in the first year, the additional cost that would be incurred if the MTT's recommendation were accepted would thus be $4.66 million in the first year, and $2.33 million in the second year. 5. BENEFITS (RETIREMENT AND HEALTH) In the words of one employee who e-mailed the MTT, "Clearly, the single most important issue to most everyone in the University is benefits." It is also clearly the most complicated, and the most expensive. The benefit programs at the two universities include the following components:
There is virtually no component of either benefits program that is the same. Indeed, the philosophies of the two universities are quite different: Drexel focuses on the individual employee and provides no family benefits, while MCPHU has benefit plans that help pay for both the individual and his families. Whether a benefits plan is "good" or "bad" depends on a variety of lifestyle issues, including such issues as how close the person is to retirement, whether the person has a spouse or children, how often the person (or family member) requires medical care. Thus, there is virtually no way to predict what a good, uniform health benefits plan might be or what it would cost. As long as there are two corporate entities, each corporate entity may have its own benefits plan; but the goal is to equalize them. The equalization of benefits is a very complicated matter. The Administration's current intention is to reach parity over three years, assuming the finances of PHEC generate the requisite additional dollars, and that is what is indicated in the pro forma financial statements that have been provided to the Drexel Trustees. The Administration's preference would be to eliminate the differences in shorter order, but in fact it might take longer. This is not simply a "money issue" (though the financial consequences are substantial): it is a core issue in determining whether there is a unified university. The longer there are differences, the longer there will be lines that divide. Because of their importance to both communities, the MTT decided to focus on two kind of benefits: retirement and health (including disability and life insurance). A. RETIREMENT As noted below, it is difficult to know whether the Drexel health benefits cost more or less than the MCPHU health benefits because the University's financial obligations will depend upon choices yet to be made at the individual level. For that same reason, one plan cannot be said to be "better" or "worse" than another except at the personal level, where some like their current programs and others hate them. The difference in retirement benefits, however, is clear, and because the difference is in the amount that the University contributes, there is clearly a "better program" (Drexel's)*. After twelve weeks of service, it is absolutely clear to the Merger Transition Team that the single most important issue to the success of the merger is the immediate equalization of retirement benefits between Drexel and MCPHU employees. The probability is almost certain that if MCPHU employees are required to continue to wait for parity in this key benefit, the best and brightest employees at all levels -- those whom the University most wants to stay and retire at the end of productive careers -- will leave MCPHU, and the opportunity to attract new employees of excellence, especially faculty members, will be virtually eliminated. This is due to the intense competition for such talent at the region's several other academic medical centers. The Human Resources Department advises that if all MCPHU employees were to be permitted to enroll in Drexel's retirement plan, the annual cost would be approximately $7,000,000, based on 2001 contribution limits. If Public Health and Nursing employees alone were to be made part of the parent corporation, the annual additional cost of the retirement benefit would be more "manageable" -- $745,000 -- but it would create a huge division between employees who have struggled together as colleagues for the past three years, and be regarded as rewarding some while penalizing many. We believe such a decision would engender hostility to the University that would not only be voiced but expressed in the shared workplace, at exactly the time that the University most needs to be inspiring common activities and capitalizing on the many positive benefits of merger. Fore these reasons, the Team strongly recommends that all employees of MCPHU be granted parity in retirement benefits as of the merger date (July 1, 2002). * Drexel offers a voluntary plan to employees between ages 25 and 34, with the employer matching contributions 3%-7% based on level of employee contribution. For employees 35 years of age and older, Drexel's plan is mandatory, requiring at least a 2% contribution by the employee, with Drexel providing a 7% match at age 35-39, 9% match at age 40-49, and 11% match at age 50 and above. At MCPHU, there is only a voluntary plan, with the University matching contributions between 1% and 3% depending on the level of the employee's contribution. At present, neither university has a Supplemental Executive Retirement Plan (SERP). Since such plans can be offered without cost to employers and provide IRS-approved income-sheltering methods for high-income employees, the MTT recommends that the University offer a SERP to its employees as soon as possible. B. HEALTH Having considered the many factors that must be considered in shaping any new plan, the Team recommends that there be three different health plans starting July 1, 2002. The third would be the "unified plan": technically offered separately to both Drexel and MCPHU, its terms and conditions should be the same for both. All employees hired on and after July 1 ("future employees") should be enrolled in this new plan. It should also be offered as an option to all employees of either University who had been employed before July 1 ("current employees"). It should offer "cafeteria style benefits", allowing each employee to select those benefits that are most appropriate for him/her (e.g., prescription drug, eye care, dental). The amount of the benefit should be set at the average dollar amount being spent in FY02 for all employees in both universities, with an appropriate cost of living adjustment for FY03. The unified plan should include the three health benefit options currently available - HMO, Point Of Service, and Personal Choice -- and the specific components of those plans will be a mixture of what is currently offered at the two universities. It should also include the "Tenet HMO" plan as an option, which is currently offered only to MCPHU employees, which eliminates entirely all co-pays when using Tenet facilities or MCPHU doctors. One of its features should be to make sure that no employee will have to obtain health care for his or her family from CHIPS (the government program), as is the case now for certain Drexel employees. It should also offer less expensive coverage for families than is currently available to Drexel employees. The two different plans that now exist for current employees should be phased out over the next three years, and disappear on June 30, 2005. Between that end date and this July, the two current plans should be modified, moving both toward the unified plan so that the change between a current plan and the unified plan will be gradual and not abrupt. Because of the difficulty (additional costs) in administering three plans, and because the unified University does want to have one plan, the University should consider offering financial incentives (e.g., cash) in the first year to certain employees so that they move to the unified plan -- sharing with them any reduction in cost that the University could achieve when the employees opt into the unified plan. This will allow every employee the opportunity to do his or her own planning and increase the choices all have. Recommendations: While the Administration has planned to equalize all benefits over three years, retirement benefits should be equalized at the Drexel level in the first year. Because it believes this is the single most important issue threatening the success of the merger, the Merger Transition Team strongly urges the Trustees and Administration to find a way to accomplish this result. Projected cost above those in the pro forma financial statements previously supplied to the Board: $4.66 million in year one and $2.33 million in year two. (Parity is already planned for year three.) The University should create a new health benefits plan for all employees hired on and after July 1 and any current employees who wish to opt into this plan. It should offer "cafeteria style benefits", with the amount of the benefit set at the average dollar amount being spent in FY02 for all employees in both universities (with an appropriate cost of living adjustment for FY03). The two different plans that now exist for current employees should be phased out over the next three years, and disappear on July 1, 2005. Between July 1, 2002 and July 1, 2005, the two current plans should be modified, moving both toward the unified plan so that the change between a current plan and the unified plan will be gradual and not abrupt. Costs are administrative only, as the result of offering a third plan that must be administered. The University should offer a Supplemental Executive Retirement Plan to its employees. No cost. 6. TENURE There should be tenure at the new, unified university. That said, five key issues relating to tenure must be addressed if the two universities merge:
All faculty in both Universities need to understand what tenure will mean, and the process by which it is earned. Because it is core to the academy, issues relating to tenure must be clarified at the earliest possible moment. The Team did consider whether the objectives of tenure could be satisfied at MCPHU in other ways (for example, multi-year contacts which have been used at other medical schools). While it is possible to create a new "style" of tenure that might be considered more "appropriate" for a faculty of a medical school, the MTT concluded that such arrangements are not suitable for the MCPHU School of Medicine at this time, for the following reasons: using 5-year contracts might imply a lack of confidence in the School's long-term future; the School must have something to offer faculty to distinguish it (or, at a minimum, keep it competitive with) the other area medical schools; and the dollar amount of the contractual guarantees that would be required to attract the best faculty might in fact exceed the financial obligation that the University would undertake by offering tenure. A. What should "tenure" mean at the merged university? A burning issue for the faculties of both universities is, quite understandably, what tenure will come to mean when the two universities merge. For three years, the faculty at MCPHU have not known precisely what tenure means, and they are awaiting some clear statement on that question. At Drexel, however, as at the vast majorities of universities and colleges, there is no such clear statement: it is only tradition that defines what tenures means. Thus, by writing a report and recommendations on this topic, the MTT is writing on a slate that many universities have left blank. The MTT recommends that Drexel acknowledge that a financial obligation results from the granting of tenure. This will have the result of realizing an obligation for Drexel that MCPHU does not now recognize. It is, nonetheless, a critically important step in the unification of the university and its faculty. At the same time, the merger provides the University with the opportunity to confirm its requirements in terms of a faculty member's workload, contributions to the field, expected growth, and contributions to the University. The University should make explicit the financial commitment it is willing to make to its tenured faculty who meet those expectations. The University's expectations cannot be deemed satisfied for all time upon the granting of tenure, and the tenured faculty do not have such an expectation. The University should have the right to expect that each tenured faculty member will ordinarily be responsible and accountable for satisfying its stated expectations, and each tenured faculty member satisfying those expectations should ordinarily have the right to expect that his or her base compensation will not be adversely affected. Thus, the term "guarantee" must be understood as meaning the expectation, common to both the University administration and professors alike, that each professor will continue to receive his or her prior year's base compensation each year, without fail, in the absence of any material deviation from performance expectations, nonfeasance or malfeasance by the professor, or program discontinuance, financial exigency, or similarly extreme situation encountered by the University. Tenure guarantees among members of a merged faculty must be both equitable and fiscally sound. By this the Team means:
Despite the goals of unity, there are, and will remain, differences among the faculty. Because clinical faculty have the capacity (and the responsibility as part of their job requirements) to engage in clinical practice that results in additional earned income, they cannot have the same limitations on them that academic faculty do (whose additional funding from grants is limited at approximately 40% of their nine-month academic salaries). Clinical faculty must work year-round, not on nine-month academic cycles as is typical for academic faculty. The "academic portion" of their salary must be established each year by the Dean and President. And finally, because academic accomplishment is so core to tenure, it is not generally expected that clinical faculty become tenured. The clinical faculty at the School of Medicine are accustomed to having their academic salary component set with reference to the salaries of basic scientists, which are established with regard to the fiftieth percentile. Currently, those salaries for a full-time effort are $77,000 for Associate Professors and $102,000 for full Professors. This benchmarking should continue. With these considerations in mind, the Team proposes the following tenure policy:
The guaranteeing of salary is not, per se, an "added cost" to Drexel; rather, the costs are already reflected in the salaries that MCPHU is paying. The difference is that the cost, now only set for a limited term (nine months or one year), would become permanent. B. Should tenured faculty at MCPHU automatically be granted tenure when merger occurs? There is some risk to Drexel in acknowledging and undertaking these new financial obligations for MCPHU faculty, but it is not substantial. There are only 43 academic members of the MCPHU faculty who are tenured -- 25 basic scientists in Medicine, 15 in Nursing, and 3 in Public Health. There are 50 clinicians in the School of Medicine who have tenure; but the salaries currently set for the clinical faculty rely heavily on patient care revenues and performance bonuses (called the "y" and "z" components, respectively, of the Faculty Compensation Incentive Plan), and the academic percentage of those salaries (the "x" component) is small. The modest academic base that the clinicians receive ensures that the financial obligation of tenure that is incurred by the University is minimal. Finally, because all of the MCPHU faculty were reviewed when AHERF went into bankruptcy (which resulted in 33 faculty members being fired, including 6 tenured faculty), there is little risk that granting tenure to all faculty tenured at MCPHU will result in Drexel taking on any significant number of non-productive faculty. For these reasons, the Team recommends that the Drexel Board confirm that, as of July 1, 2002, PHEC will have new Bylaws regarding tenure that will make explicit the University's financial commitments to its tenured faculty in the School of Medicine. The Team also recommends that, after July 1, the new PHEC Board promptly schedule consideration of all proposals for tenure within the School of Medicine that are ready for consideration by the Board. For those tenured faculty in the School of Public Health and College of Nursing and Allied Health Professions, the Team recommends that they be granted tenure at Drexel automatically upon the merger date. The Team recommends that the Provost promptly review all pending proposals for tenure within the College of Nursing and Allied Health Professions and School of Public Health, so that the Drexel Board may consider those presentations as soon after merger as possible. While there is no additional cost to the University as such, the annual obligation that the University would be explicitly assuming would be approximately $6,124,212 ($7,900,233 with benefits at the Drexel level). These projections are detailed at Tab B. C. What Process Should Be Followed To Award Tenure? The two universities employ very different tenure-granting systems. At MCPHU, there is a university-wide committee that reviews candidates recommended by each school; at Drexel, there is no such committee. The Team deferred until Phase II consideration of which process best suits the needs and interests of a merged university. However, the Team recommends that the University establish written university-wide requirements for tenure that must be met by all faculty proposed for tenure, and that each unit (college or school) have the right to set additional requirements beyond those established by the University. As part of the tenure review process, each unit proposing faculty for tenure should have to consider the programmatic and budgetary implications of granting tenure, consistent with the principles of responsibility and accountability. D. Should Tenure Be "Up Or Out"? At Drexel, members of the faculty are considered for tenure in their sixth year. Those denied tenure are given one year in which to find alternative employment, and then are required to leave the University ("up or out"). At MCPHU, a faculty member may be considered twice for tenure, with the final time occurring no later than the tenth year. Those denied tenure are allowed to continue receiving one-year appointment letters until the unit decides it does not want to renew that contractual relationship. At other universities, if a professor is not granted tenure, he or she must leave the tenure track but is permitted to be appointed to the faculty in another position. This is typically at a reduction in salary, and will most likely prevent the unit from filling the tenure track faculty line. The Team recommends that if a school desires a faculty member to remain despite a negative tenure vote, it be allowed to offer that person employment in a non-tenure-track position, as long as there are no legal ramifications for doing so (e.g., "deemed" or "de facto" tenure). Finally, the Team recommends that the University consider creating a non-tenure clinical track, which would allow schools like Nursing and Medicine to retain qualified clinicians on its faculty who either decide they do not wish to pursue tenure, or have been denied tenure. The Team proposes to examine the creation of such a track and the related issue of "auxiliary faculty" in Phase II. E. Should There Be "Post Tenure Review"? The question of whether there ought to be post-tenure review (i.e., whether tenure could be revoked for poor performance) was deferred by the Team for later consideration. Annual reviews of all faculty (including the specification of goals and expectations for the new year) should be the norm; but formal evaluations are very expensive and time-consuming, and should occur only at reasonable intervals (e.g., five years). Faculty who are identified as needing assistance in the pursuit of personal scholarly growth or in maintaining a level of teaching consistent with current norms should be given access to such resources for stated periods of time before any process of tenure revocation is pursued. Recommendations: The merged university should have tenure. The University should explicitly define the obligations that come with tenure, and explicitly extend financial guarantees to those who satisfy those obligations. The term "guarantee" must be understood as meaning the expectation, common to both the University administration and professors alike, that each professor will continue to receive his or her prior year's compensation each year, without fail, in the absence of any material nonfeasance or malfeasance by the professor, or program discontinuance, financial exigency, or similarly extreme situation encountered by the University. Tenured faculty who are identified as needing assistance in the pursuit of personal scholarly growth or in maintaining a level of teaching consistent with current norms should be given access to such resources for a specified period of time before any process of tenure revocation is pursued. No cost. All tenured faculty (except clinical faculty in the School of Medicine) should be guaranteed 100% of the salaries they earned in the preceding year. Tenured clinical faculty in the School of Medicine should be guaranteed salaries equal to their academic base, as determined by the Dean and approved by the President of the University; provided that such guarantee not be more than the salary paid to a basic scientist of comparable rank at the fiftieth percentile nor less than fifty percent of such salary, at the same percentage of the professor's academic base. Cost: no additional annual expense, but current salaries become permanent obligations. The Trustees should approve university-wide requirements for tenure that must be met by all faculty proposed for tenure. Each unit (college or school) should set specific requirements in addition to those approved by the Trustees. As part of the tenure review process, each unit proposing faculty for tenure should consider the programmatic and budgetary implications of granting tenure. No cost. Drexel's "up or out" policy for tenure-track faculty should be modified to allow transfer of an unsuccessful tenure candidate to a non-tenured position in appropriate circumstances. The University should also consider creating a new clinical appointment that would not be tenure-track. No cost. 7. FACULTY GOVERNANCE The Merger Transition Team itself spent three meetings discussing the issues relating to faculty governance. Among the Team's earliest conclusions was that whatever the form of governance adopted for a unified university, that form must be governed by the Charter of Faculty Governance that has been regulating the affairs of the faculty at Drexel University since 1989. The Charter has been the subject of favorable reviews by Middle States Association during its visits, and has been approved in concept by the MCPHU faculty. That said, the Charter will have to be amended if the two universities merge. While the Drexel Trustees will ultimately have to approve any changes to the Charter, the changes also have to be approved by the faculty of both universities. Because of the many complicated issues that are involved in faculty governance, the Team empanelled a Subteam to consider those issues. The Subteam met several times and issued its Report to the Team on February 7. The Team concurs with its proposal, which follows:
Two principles that must define this Senate are:
The Subteam recommended that the current structures be continued for another year. During that one year period, amendments to the Charter will be drafted and approved, and the role of its Committees will be examined. Elections to the new Senate will occur in May 2003. The justification for the delay in implementation is that, during the first year of a merged institution, the work of the Senate needs to continue even as its new operations are being undertaken. While the MTT would have preferred the creation of a new unified structure as of July 1, it was persuaded that a more deliberate merger of the two institutions would be appropriate, and therefore recommends that the transition to a unified faculty governance structure occur over a one-year period. During that period, however, a joint "umbrella" committee - appointed equally by the Drexel Senate and the MPCHU University Council - must be created and authorized to act on behalf of the two governing bodies. The Team recommends that the Faculty Governance Subteam be that body, because it will have worked so closely together for so many months by the time the merger occurs on July 1, and because it will therefore have the requisite appreciation for both Universities, their faculties, traditions and interests; but the issue of composition needs to be decided by each governing body. The Administration and the Trustees should not act upon these issues at this time; rather, the MTT believes that this proposal for a unified faculty governance structure should first be presented to each university's faculty and their governing organizations for their consideration. It therefore recommends that a special University Assembly be scheduled on this single topic, to be chaired jointly by the Chair of the Drexel Faculty Senate and the President of the MCPHU Faculty Council, with both faculties invited to attend. Finally, the Team recommends that, after due deliberation and time for comment by the two governing bodies, this proposal be submitted to both universities' faculties for combined vote of the faculty, on the same day or days, and that the vote occur in late Spring. If approved by the faulty, then the Charter can be amended through appropriate action by the Drexel Faculty Senate, and approved by the Drexel Board of Trustees and PHEC Board of Trustees. Recommendations The Drexel Charter on Faculty Governance should be the operative document upon which faculty governance for a unified faculty should be based, and should remain as the merged university's statement of and commitment to shared governance. No cost. A single Faculty Senate should be formed, in which the three MCPHU schools and the eight Drexel schools can be evenly represented. This new Senate should be made operational in one year, with a jointly-appointed umbrella committee created to speak for the combined faculty during that transitional year. The Administration and Board of Trustees should not act upon this recommendation until it has been approved by the faculty, after which time the Charter on Faculty Governance can be amended both by the Drexel Senate and the Trustees. No cost. 8. STUDENT GOVERNANCE The demographics of the student bodies at Drexel and MCPHU are very different. Most of the students at MCPHU are graduate students; most of the students at Drexel are undergraduates. In round numbers, there are 10,000 undergraduates at Drexel, and only 560 at MCPHU. The number of graduate students at the two institutions are more similar -- approximately 2000 in each university -- but the nature of the programs offered have spawned different student organizations. The result is that there are currently seven student governance organizations: At MCPHU
At Drexel
Because of their different interests, it is a challenge to envision a structure that encourages a linkage of, and collaborative effort from, all constituencies of the "new" University, while at the same time preserving for those constituencies a mechanism by which special attention can be given to their own unique needs. To address these challenges, a Subteam comprised principally of students recommended the following structures, with which the MTT concurs:
The four organizations at MCPHU have created a University Council where they, joined by a representative of the University Administration (Student Life), have benefited from regular meetings to discuss issues of concern to MCPHU students (e.g., condition of MCPHU housing, which, unlike Drexel's student housing, is not owned or operated by MCPHU). The Team recommends that this Council continue during the transition to one university, but that its jurisdiction be limited and that its continued existence be reviewed in one year to determine whether its continued existence is necessary. A critical issue related to student governance is student activity fees. There are good reasons for there to be differences in the fees charged to students and different mechanisms employed to allocate those fees to events and services of interest to the students being charged the fees. At MCPHU, for example, the fees are charged by school, and allocated by school; and the fees charged to medical students are different than those charged to nursing, health professions, and public health students. There are 125 student organizations at Drexel, as compared with 12 at MCPHU. At the same time, it is of critical importance that students at MCPHU know that they are welcome to participate fully and without charge at Drexel-campus events, and vice versa. Because the demographics of the student bodies are so different -- the average age of a CNHP student, for example, is 32 -- it is reasonable to assume that the costs of any increase in participation/demand resulting from inclusion of additional students will be marginal. This assumption ought to be tested by the Administration at the end of the fall quarter, so that if any changes in fees need to be made, they can be advertised in the admissions materials for the second year. The Team recommends that there be no change in the manner of charging, collecting, or allocating students fees at least for the first year of the merger. If any organization incurs material cost increases as a result of the merger, then redress should be available at the University level. Recommendations There should be one student governance organization for undergraduate students and one for graduate students; and a third to represent all students (undergraduate, graduate, and the College of Evening and Professional Studies) in regular meetings (no less than semi-annual) with the University's senior management to consider matters affecting the whole university. The need for the MCPHU University Council should be reviewed after one year. No cost. All student organizations and events at MCPHU should be open to all students at Drexel, and vice versa. The current method of charging, collecting and allocating student fees should not be changed for at least one year, pending review by the Administration after the merger has occurred, and the University should cover any marginal costs incurred as a result of such integration. Cost: uncertain, marginal, and likely not material. 9. ADMINISTRATIVE AND SUPPORT SERVICES Three years after the Trustees announced their intent to merge with MCPHU if certain financial terms were met, there is only one merged department -- the result of the merger of the departments of Psychology at Drexel and MCPHU. It is administered by one head (who is a MCPHU faculty member), and it has an agreed-upon, joint tenure process. That structural change in the departments was itself a long and complex process; but "corporate integration" was only the beginning, and was probably the easiest part. What the departments found are lessons that will be learned in all such future integrative efforts. Most departments do not have any concrete plans for accomplishing any academic synergies in Fiscal Year 2003. Therefore, the potential synergies have not been specifically identified or costed out. Now, as the budgeting process for FY03 is in full swing, the MTT believes that no department or college is adequately identifying or budgeting for the costs that will be incurred to realize academic synergies in FY03. A. Accreditation Issues The merger presents opportunities, but it also imposes deadlines. To be accredited on July 1, the University must obtain approval from Middle States Association; and MSA has requested that a draft plan be submitted by April 1. In that document, Drexel must address how the proposed merger will affect each accreditation standard and how compliance with the standards will be assured. MSA has asked Drexel University to address the new accreditation standards from the perspective of the effect of the change on the entire institution, and not solely on the programs and students to be acquired. That requires an examination of the operational aspects of each institution, the integrity and quality of the academic programs, student life and services, faculty workload, promotion and tenure, faculty development, faculty hiring, governance, strategic planning, budgeting and resource allocation, and outcomes assessment at the merged institution. President Papadakis recently asked the Deans and Directors at Drexel to submit reports to him on what academic synergies they believe will be accomplished as a result of the merger. With the exception of research synergies, most of the proposals remain in the category of "preliminary planning." As a result, at least at the present time, Drexel will not be able to be very specific when describing its plans to MSA. B. Financial Support of Integrative Efforts Creating synergies is not the only goal: beyond that lies the very difficult challenge of combining two Universities with very different cultures. That integration will not occur without planning, effort and cost; and the University needs to address those issues as soon as possible. The evolution of the merged Psychology Department provides a case study of what departments can expect when they look to find synergies. At MCPHU, psychology is almost exclusively a graduate program, and there are few undergraduates; at Drexel, the reverse is true. All agreed that there is significant value to linking undergraduate students with graduate students; and the faculty of each school looked forward to working with the other's students. But they experienced significant impediments on the road to merger, and after several years of effort, the Department still has not achieved its potential. At Drexel, there are approximately 175 psychology majors, and approximately 3,000 students took psychology courses, numbers far in excess of the total number of students at MCPHU taking psychology courses; but most of the available laboratories are at MCPHU, where they are new, well-equipped and available. The issue of lab space relates to more than just teaching: research occurs 24/7. If we are to offer access by Drexel students to MCPHU labs and faculty performing state-of-the-art research, we need to make sure they can get there (and back) safely. At MCPHU the classrooms are generally small; at Drexel, many class-rooms are in need of upgrades or modernization. Contiguous office space for faculty could not be found. The Psychology faculty personally paid the costs of transportation to the other campus to teach or to participate in departmental meetings. Videoconferencing will alleviate some of these issues, but cannot eliminate all. The academic integration issues are also very significant and need attention. The different calendars at the two universities -- quarters at Drexel, semesters at MCPHU, and different start and end dates of each -- make it very difficult to coordinate classes. If a MCPHU student were to take a course in abnormal psychology at Drexel, she would receive 2 credits; but if taken at MCPHU, it would be 4 credits. There is no understanding whether the two courses, as currently offered, cover the same topics. In trying to address these issues, the Department is looking at the academic issues first, which will then determine the decision of whether the courses should be offered on a quarter or semester basis. The universities also approach graduate students differently: at MCPHU, the typical Ph.D. student would expect stipends and tuition wavers, which are always covered by grant moneys after the first two years; at Drexel, there are the same expectations at the research-focused programs, but the stipends vary, just as salaries do for faculty depending upon the discipline. In working through these issues, as they have, the Psychology Department's faculty have run into the inevitable "turf issues", with each "side" beginning with the assumption that the other "side" will "just have to change". The Department has admirably managed to overcome those issues, but the success they have achieved has depended upon the growing appreciation of each other's abilities and assets and the trust that has come from working together. That does not happen overnight; and it will not simply "arrive" on July 1. The Psychology Department is the only department that has such clear overlap between the two Universities; but its experiences provide good predictors of the complications and unforeseen costs that the two universities will encounter when reaching for synergies resulting from the merger. It is clear that attention must be paid, immediately, to these issues if the academic benefits of merger are to be realized in any material way during the 2002-03 academic year, which should be a goal; at the same time, it is clear that producing those benefits will not be without cost, in terms both of time (planning and preparing) and dollars. The Schools, Departments and Programs must begin identifying, examining and planning for potential synergies as soon as possible. Once plans are complete and costs identified, those costs must be budgeted and funds must be allocated for them. Because the budgeting process for Academic Year 2002-03 will be virtually concluded when the merger vote occurs, and because the planning for merger synergies is not well developed, the University must be prepared for those additional costs. The Drexel Faculty Senate has asked the Drexel Board and Administration to confirm that, as part of the merger, "sufficient new investments into academic synergies (combined units, programs and research projects) will be made to ensure those programs' quality in the merged University." The MTT agrees. We recommend that the Office of the Provost be instructed immediately to make planning for such synergies a priority. We also recommend that the University engage or appoint a facilitator to identify and address "culture" issues throughout the University community, and to assist the two faculties in working through potential consolidation issues and opportunities resulting from the merger. Initial proposals suggest that the cost for such assistance would be between $100,000 and $250,000; if this recommendation were to be pursued, more definitive proposals would be requested. Significant progress has been made in three years toward restoring the organizational and financial stability necessary for the faculties of MCPHU to merge with those at Drexel and, as one institution, build quality educational, research and clinical programs. The combined entity will be poised to excel to a far greater extent than either could have alone. There has been a cost to get to this point, however: needed investments in educational, research and clinical programs have been deferred as both universities worked together to reduce costs and restore basic corporate functions at MCPHU. The Team had concluded that it is imperative to acknowledge that this will not be a cost-free merger, and recognize that with this merger there must come a new investment in academic quality. In most mergers, the recognized and accepted cost includes an investment in the development of new initiatives that will enable the new entity to compete and thrive. So too, in this case, the President must place the Invest in Quality Initiative at the top of the institution's agenda as soon as the vote to merge occurs. The Initiative should serve as a venture capital fund; to be effective, it must be funded at a level appropriate to an institution of the size, mission and function of the new Drexel University; and it cannot be at the expense of operating funds or existing budgets. While the Team understands that it is the role of the Board and President to make the final decision as to the amount and rate of investment, it is recommended that this investment in quality should be no less than $10 million (that is approximately 2% of the combined operating budgets), begin as quickly as possible, and continue over a period of five years. The Team recommends that the President involve faculty, student, and college administrators in the process of selecting projects that meet the Initiative's objectives. C. Transportation The experience of the Psychology Department has proven that one unbudgeted expense was transportation. The University must make plans to provide a shuttle service. The merged Psychology Department has estimated the cost of transporting faculty members back and forth among campuses for its own departmental purposes to be $3,000 per year. This past year, the members of the faculty paid those costs personally. The costs of transporting students for departmental purposes was also unbudgeted, and that cost was absorbed by students. In a similar effort at integration, a Drexel van was necessary to transport Nursing Co-op students three times each week between MCPHU and Drexel for classes during this past winter term. This expense was not predicted, and not budgeted. Beyond academics, integration of the student social communities needs to be considered. Assuming current student fees are not changed, as the MTT recommends, no student organization is going to anticipate or budget for the costs necessary to transport students from one campus to attend events at another. The University must plan for this. Currently, the MCPHU campuses are linked by a shuttle service that is provided by Tenet (because it is hospital-based). There is a shuttle service that links Hahnemann to Drexel, but that service is scheduled to end this spring, when Drexel stops offering off-campus housing to students. The Administration is quite correct when it suggests that an appropriate transportation schedule must reflect the actual demand for transportation, but there is no way to project that demand because the academic units have not yet identified where there will be needs to transport students or faculty (that is, the synergies have not been identified). Because this is a true cost of merger, however, its costs must be budgeted. The Team recommends that the Administration start with, and budget for, a shuttle service that runs at least twelve hours each day, running every half hour, five days a week, between Drexel and Hahnemann (with Tenet continuing to provide the buses linking the MCPHU campuses). The cost of doing so would be approximately $310,000 for the four quarters, comprised of the following elements: two 29-seat shuttle buses (@ $105,000) and $100,000 in operating costs per year. The actual service requirements might be different than that, but it would be appropriate to ensure, and be able to advise present and future students, that this service is anticipated. D. Videoconferencing. MCPHU has an elaborate videoconferencing system. With it, people at eight different sites can participate in a single conference. This technology includes:
It is currently being used to connect various rooms from the Queen Lane Campus, MCP Hospital, St. Christopher's Hospital, and the New College Building; and it can link Drexel's one site in the Korman Building. MCPHU currently uses two internet systems and one intranet, and is making good use of a huge bandwidth that is has for distance learning, school-wide and departmental faculty meetings, committee meetings, special lectures, and "grand rounds." By contrast, Drexel has limited video-conferencing capability, but does have several locations which are prime for equipping to support video-conferencing. It is also substantially underutilizing its bandwidth. When Drexel and MCPHU merge, there will be many reasons for joint communication, from classes and seminars to team advisories, departmental meetings, and meetings of the faculty government organizations (and committees). While video- technology will not solve the geographic challenge of merging Drexel and MCPHU, it is clear that technology has already solved many of the problems of linking several campuses. Drexel's IRT Department has proposed a plan for upgrading and creating new video conferencing facilities at Drexel University, at a cost of $514,000 (not including ongoing support or upgrade costs). It is attached at Tab C. The Team recommends its implementation. Recommendations: The Office of the Provost should be instructed immediately to begin the process of identifying and planning for academic synergies. The University should consider appointing a facilitator to address "culture" issues and to assist the two faculties in working through potential consolidation issues and opportunities resulting from the merger. Estimated cost: initial proposals suggest a range of $100,000 to $250,000. The President should announce a new Invest in Quality Initiative, to provide funds for new educational, research and clinical programs that capitalize on the merger and demonstrate the new University's commitment to academic quality. Cost: at the discretion of the President, but $10 million suggested over 5 years. Drexel should have a shuttle service that runs no less than twelve hours each day, running every half hour, five days a week, between Drexel and Hahnemann; and offer this service pending confirmation that it is of the appropriate level of service. Estimated cost: $210,000 for two shuttle buses and $100,000 in operating costs for one year). Drexel should upgrade and create new video conferencing facilities at Drexel University, to link its campus with MCPHU's several campuses. Estimated cost: $514,000 (one-time equipment purchases and installation) 10. RESEARCH (INDIRECT COSTS) There are many important issues related to the research enterprise especially given Drexel's intent to become a "Research I" university. The Team identified only one issue that requires attention in Phase I, and that is the stark difference in how indirect costs (costs related to facilities and administration) are budgeted at the two universities. Because the universities' researchers work closely together - and because a unified University should encourage collaboration across departments - it is important to address this issue promptly. By way of background, the federal government reimburses universities for the facilities and administrative (F&A) costs of performing federally-funded research. Similar costs are levied against commercial sponsors of research done at universities. The F&A costs are a real expense to the University in conducting research; Many universities, including Drexel, provide Research Incentive Awards (RIAs) to the principal investigators (PIs), departments, and colleges that are connected by an algorithm to the F&A generated during the previous fiscal year, but the actual funds are obtained from different sources. The connection of the RIA to the amount of F&A generated during the previous year is viewed by the institutions as a good way to incent the growth of sponsored research, to provide investigators with the unrestricted funds that are necessary to sustain continuous funding, and to make important purchases that might not be allowed by the sponsors. The amount contributed each year by Drexel to its Research Incentive Awards is set at 32% of the previous year's recovered F&A costs. The RIA moneys are found and budgeted centrally from other sources. At MCPHU, there are no RIAs. The decision not to create a RAI Program was prompted by the extraordinarily difficult financial position at the university on November 11, 1998. Recognizing the stark difference between the policies of the two institutions and the importance of supporting the research mission, the Team considered three issues: (1) Should a RIA Program be created for the MCPHU schools?; and if so, (2) Should a common algorithm be established for both Drexel and MCPHU?, and (3) What distribution model should be used? Discretionary funds are becoming increasingly more important to the PI. Such funds provide opportunities to collaborate with people elsewhere; to develop new research initiatives that are beyond the purview of individual investigators (e.g., "center" proposals and seed funding for multi-disciplinary activities); to buy modest pieces of needed equipment; to conduct pilot studies; to purchase books, manuals and other professional materials; to attend meetings that are not properly charged to a current grant; to cover parts of salary for colleagues who are stepping into new areas of research; and so on. Given the narrow limits imposed on grant expenditures, RIAs provide crucial freedom of action for those faculty who are supporting themselves, their colleagues and staffs. Similarly, distributing the RIAs through a predictable formula provides financial recognition that it is departmental resources that are most heavily used in support of the research operation. Finally, allowing the PI to receive a portion of the funds provides an incentive for obtaining other funded research initiatives. The Team supports the view that a RIA Program that accrues value in proportion to the amount of F&A costs recovered by the university is a good way to earmark funds in support of the research mission. The Team recommends that the Drexel policy of allocating a portion of the RIA to the college, department and the PI be applied to the MCPHU schools. The algorithm used at Drexel (32%) exceeds the rate given at other, similarly-situated institutions, where the rate is typically 15% - 20%. Because this University aims to be a Carnegie I research institution, the Team recommends that the rate remain at 32% for the next five years; but that it be evaluated in the fifth year to determine whether it is continuing to be effective as an incentive to growth of sponsored research. The Team also recommends that the RIA distribution model employed now at Drexel be specifically adopted and continued: 12% to the college, 12% to the department, and 8% to the PI. This distribution recognizes the shared costs necessary to support a competitive research program and the shared responsibilities for growing the program. Finally, the Team supports the recommendation of the faculty sub-committee on research that should a RIA Program be established for the MCPHU schools, it be in addition to current funding to the units and not represent an amount that would be given in one form and taken back in another. MCPHU currently receives approximately $7 million in indirect cost return on grants. If the proposed policy were to be immediately and fully implemented, it would result in a $2.24 million negative impact on the budget. The Team recognizes that such a large negative impact is not feasible or appropriate at this point, and therefore has recommended that the new policy become effective on July 1, 2002, and be applied only to new grant awards. The first pay-out under the policy would not occur until July 1, 2003, and it would be computed only on new awards. This plan results in a financially manageable approach to supporting the research mission by incenting growth. Recommendation: The Drexel policy of providing a research incentive award (set at a percentage of the F&A costs earned on grants) to the units performing the research, should be maintained in the merged institution. The current allocation used at Drexel (32%) should be continued for five years, with 12% going to the college, 12% to the department, and 8% to the Primary Investigator. Allocations made through this Research Incentive Award Program should not replace current funding at the MCPHU schools. This Program should be evaluated in the fifth year for effectiveness; and if the decision is made at that time to reduce the rate, then mechanisms for that purpose should be developed with department chairs and college administrators before they are implemented. Cost: no cost in FY03, because first reconciliation and allocation would not occur until FY04; total cost, fully implemented, of $2.24 million at current MCPHU grant levels. 11. ISSUES IDENTIFIED FOR PHASE II During Phase I of the Team's work, we identified several issues which we believe do not have to be addressed until after the Drexel Trustees decide on whether or not to merge the two universities. If that decision is made, the MTT proposes to consider the following seven issues and report back to the President by June 15, 2002:
As before, the Team would build on the efforts that have preceded the MTT, consult with both university communities, work with existing committees, and form Subteams on some or all of these issues. 12. CONCLUSION Over the thirteen weeks that we have worked together, the Merger Transition Team has acquired a true appreciation for how complicated the merger of two universities can be. We hope that, by addressing these issues before the merger vote, the President and the Trustees will be more informed about the issues and obligations that will arise once merger occurs, that the students and faculty will be confident of how they will share in the governance of the merged university, and that all employees will know what to expect come July 1. There are more issues to be faced, but we believe we have addressed the critical issues that should be understood at this point in the merger process. We look forward to Phase II of our work. The
Drexel/MCPHU Merger Transition Team Appendix
A Student
Governance Subteam
Faculty
Governance Subteam
Research
Subteam
Appendix
B In FY02 (the current year), MCPHU is paying its 87 tenured and tenure-pending faculty members $17,089,247 ($15,220,427 of which is paid to faculty in the School of Medicine). If the Merger Transition Team's recommendations were to be adopted, and if the tenured clinical faculty in the School of Medicine were to be receive the maximum salary guarantees within the range we propose (that is, set at the fiftieth percentile), adjusted to reflect academic effort, that would represent a maximum annual commitment of $6,124,212 ($4,255,392 of which is due to the School of Medicine):
Using a factor of .29 to approximate the cost of benefits (which is the factor currently applied to full time employees at Drexel), the total annual commitment would be $7,900,233 ($5,489,455 for the School of Medicine)*. * Because of the difference in retirement benefits (primarily), the percentage currently used at MCPHU is 18%. If no change were to be made to MCPHU benefits, the total annual tenure commitment would be $7,226,570 ($5,022,000 for the School of Medicine). Appendix C Proposal
for Upgrading and Creating Drexel University has created limited video-conferencing capability, but it has several locations which are prime for equipping to support video-conferencing. There are three forms of video conferencing which will be addressed in this proposal:
Costs listed are one-time equipment costs and do not include any ongoing support and upgrading costs. Upgrading Current Video Conferencing Resources ISDN Based CAT 178--first fully equipped facility on campus--in need of upgrade of some obsolete components. Cost to upgrade $10K Korman 116--classroom equipped with new video-conferencing equipment; seats 20 students; also equipped with wireless laptops--needs minimal upgrading $5K 1 Drexel Plaza--fully functional with new equipment -- no need for upgrade. Internet based 1 Drexel Plaza--fully functional with new equipment; problem is poor connectivity to Drexel network--schedule to be increased by summer 2002. LeBow--Ross lecture Hall--equipped for audio conferencing; can be incrementally upgraded for video. Cost to upgrade $5K Matheson 208--same as Ross. Cost to upgrade $5K New Proposed Sites--All Internet Based Mandell Theater--seats 450--site of all major musical and theatrical events as well as public forums and such--Cost to equip $50K Disque 103 and 108--newly renovated large lecture halls (seats approximately 300) sites of major high enrollment classes: Cost to Equip $48K each--Total $96 Stratton, Patten, Ruth, and Stein -- These are all medium-sized lecture alls (seating 150-250), heavily used for high subscription classes. Cost to equip each $27.5K--Total $110K There are several "specialty" conference rooms in Engineering, LeBow and other colleges--estimate 1 per college making 5 conference rooms (approximate seating 25-35). Cost per room $15k--Total $75K It would be wise to equip the remaining 7 classrooms in Korman with video conferencing equipment as well. Cost per room $15K--total $105K Mobil Units for Web Casting Propose we provide one per college --all equipment for video taping, encoding, webcasting and archiving--5 carts @ $13k each Total $65,000K SUMMARY
Grand Total = $514,000
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