Under the terms of a March 2000 order issued by the Office of the Commissioner of Insurance, Blue Cross Blue Shield United of Wisconsin converted from a not-for-profit hospital service insurance corporation to a for-profit, publicly held stock insurance corporation and provided $630.4 million to endowments held by the Medical College of Wisconsin and the University of Wisconsin (UW) School of Medicine and Public Health. The order specified that 65.0 percent of funds be used for medical education and research and 35.0 percent be spent for public health initiatives.

The Commissioner’s order required that each school obtain a program evaluation every five years. At the request of the Commissioner and both schools, we conducted the first of these evaluations by analyzing:

We conducted the same analyses for both schools, but we did not directly compare their performance because they established separate programs with their own planning and governance systems.

Wisconsin United for Health Foundation was established by order of the Commissioner of Insurance to receive the proceeds of the conversion and distribute the funds to the two medical schools after reviewing and approving each school’s spending plans. Reviews and approvals occurred in March 2004.

The Foundation had formal oversight and enforcement authority during the implementation period. Currently, it serves as a forum for public information and comment.

At each school, a committee of senior administrators or faculty oversees the medical education and research funds, while an oversight and advisory committee composed of health care advocates, community leaders, school representatives, and an appointee of the Commissioner of Insurance oversees the public health funds.

The schools’ endowments conserve most of their principal and use investment income to fund projects. Endowment balances increased from 2004 through 2007 but decreased in 2008 because of the economic downturn. They regained some value in 2009.

At the end of 2009, the Medical College had an endowment balance of $340.1 million, while the UW School of Medicine and Public Health had an endowment balance of $325.1 million.

From program inception through December 31, 2008, the Medical College spent $32.1 million, while the UW School of Medicine and Public Health spent $44.1 million.

From 2004 through 2008, 396 projects were awarded grant funding. We reviewed a diverse sample of 20 medical education and research projects and 20 public health projects funded by each school. Results are summarized in a seperate document (report 10-7).

In our review of the application and award procedures, we found that most applications included the required materials. However, the proposed objectives for 14 of the 80 grants we reviewed were unclear or appeared to be overly ambitious.

For example:

Improving the schools’ application review procedures could help to ensure that program funds are awarded to applicants whose objectives are clear and realistic.

Both schools oversee their grants primarily by requiring grantees to submit periodic progress reports. We identified 6 instances in which the submitted reports did not include sufficient information to determine their progress and 18 instances in which grantees modified their projects’ objectives or activities, typically without formal approval or acknowledgment by the schools.

For example, one UW project that was awarded $299,800 collected information instead of creating a new electronic database of student health information, and a Medical College project that was awarded $50,000 intends to conduct case studies of a sample of participating companies instead of a comprehensive evaluation of those companies’ wellness programs.

We analyzed the activities of the 80 projects we selected for review to determine whether grantees had achieved the objectives included in their original grant proposals.

We found that 46 of the 80 grants achieved all or most of their objectives or appear likely to do so by the end of their grant periods.

For example:

However, 5 of the 80 projects we reviewed either met few of their objectives or are at risk of not meeting them, including:

Both schools have carefully monitored their endowment balances.

As the values of their endowments declined, both schools reduced funding for existing grants and the number of grants they awarded in 2008. However, continued monitoring of endowment balances will be important, as will monitoring of the schools’ conflict-of-interest policies.

We reviewed conflict-of-interest policies for each school’s oversight and advisory committee. The policies in place at the time of our review did not clearly require committee members to abstain from voting on projects proposed by organizations that employed them or with which they had other financial relationships. The policies also did not require oversight and advisory committee members to absent themselves during deliberations on proposals by these organizations.

We also identified several policy issues for which the March 2000 order by the Commissioner of Insurance offered limited guidance. These issues could be addressed by the Commissioner in cooperation with the Foundation and the two schools:

Our report includes recommendations for the Medical College of Wisconsin and the University of Wisconsin School of Medicine and Public Health to:

In addition, we recommend that: