Cancer institute founder Huntsman Sr. blames University of Utah for fight, says it owes $54 million

By AND | The Salt Lake Tribune

Dispute » Cancer institute founder, foundation CEO say the university had agreed to pay operational expenses but didn’t; school officials, lawyers say they see accord differently.

A $54 million dispute over how much the University of Utah should pay toward the Huntsman Cancer Institute appears to be at the heart of an ongoing rift that flared into public view in April.

In a two-page newspaper advertisement published Friday, institute founder Jon Huntsman Sr. asserted that the U. “instigated” the quarrel and pointed to what he considers an unfulfilled promise to pay the institute’s operating expenses. While the U. declined to comment on the ad’s content, one of its attorneys indicated the school has seen that obligation differently.

A 2014 agreement lists two types of payments the U. must make to the institute: A 50 percent share of Huntsman Cancer Hospital’s margins, for investment in research, and coverage of the institute’s operating expenses, at no less than $13.5 million a year.

It appears that the school and the Huntsmans differ on whether those payments are separate obligations, or whether the U. can count the margin payments toward the operating expenses.

 Attorney Alan Sullivan, who was hired by the university to broker a new agreement for funding and managing the institute, said Friday that “my understanding is that the university has paid operating expenses to Huntsman Cancer, and that a portion of those have come out of net [cancer hospital] revenues.”

Sullivan declined to comment on specifics, including whether the U. paid those expenses using the share earmarked for the institute or with the 25 percent share retained by the cancer hospital.

“Keep in mind that the reason that we are seeking to retain an auditing firm to do a financial review is to get to the bottom of the financial relationship,” he said.

A December presentation created by the U. appears to show one source of university payments to the institute, with figures that correspond to half of the hospital margins.

The Huntsman Cancer Foundation ­— which raises millions for the institute each year —­ paid the institute’s operating expenses over its first decade. That funding continued as the Huntsman Cancer Hospital, which opened in 2004, separately shared half of its gross operating margins.

Foundation CEO Peter Huntsman said the 2014 agreement wouldn’t have made sense, from the foundation’s point of view, unless the U. was committing to pay the $13.5 million toward operations in addition to the institute’s portion of cancer hospital revenues.

Otherwise, “Basically, we would have been cutting funding,” he said.

Huntsman said it’s his opinion that the operational expenses aren’t being paid.

“I’m sure they’ve got some clever people that probably think they are,” he said, adding that his family’s complaint is with “a very small number of people” in health sciences and that most at the U. are “exemplary.”

The $13.5 million annual minimum, over four years, totals $54 million, which Huntsman Sr. listed in his ad as the U.’s “unpaid balance” under the 2014 agreement.

U. spokesman Chris Nelson acknowledged last week that “reasonable people can look at the facts and the data and reach very reasonable, but different, conclusions.”

As the cancer hospital’s revenues have increased, the December presentation shows, the amount of the U.’s 50 percent payments to the institute have surged, from $5 million in fiscal 2012 to a predicted $32 million in fiscal 2017. The hospital doubled its capacity in a 2011 expansion.

Huntsman Sr.’s ad defended the finances and work of the state-owned institute, saying that it has discovered more genes for inherited cancers than any other cancer center in the world. It tallied contributions by the Huntsmans, the foundation and nearly a million donors since 1995 at $534 million. It also credited the Huntsmans with arranging a $100 million federal loan that was later forgiven.

With state contributions, bonds, grants, revenue from the cancer hospital and other sources, total funding has reached $2.4 billion, it said.

The ad is the latest move in a dispute that intensified last month, after Vivian Lee, then-senior vice president of U. health sciences, abruptly fired institute CEO and Director Mary Beckerle.

Faculty and the Huntsman family sharply criticized the firing, and U. President David Pershing reinstated Beckerle a week later, saying she would now report to him. Since then, Lee has resigned and Pershing has announced that he will be stepping down early.

The ad stated: “The unnecessary and distracting actions of the past several weeks — instigated by the University of Utah Health Sciences — must not impede our lifesaving work.”

And on the Doug Wright Show on Friday, Huntsman Sr. remained critical of the U., accusing its health system of inappropriately putting money that belonged to the institute into its own budget.

“I think the University of Utah health care has tried to, for some reason, cover up what we’ve done,” he said.

But Huntsman Sr. said he is optimistic the relationship can be fixed, citing his discussion with Lee’s interim replacement, A. Lorris Betz.

“Lorris Betz sat down with me yesterday. He understands it. He gets it. He’s a smart guy. He’s going to turn this thing around and have us work together,” Huntsman Sr. said.

He said his three main concerns are resolving the owed operating payments, the governance of the institute, and the need to sign a new agreement, which will include a pledge of an additional $120 million in donations from his family and the foundation.

“We’re building this cancer center over 30, 40, 60, 100 years until we’ve defeated cancer and eradicated it from the face of the earth,” Huntsman Sr. said. “The people of Utah and particularly the Legislature should be saying thank you every day.”

The U. declined to comment on the ad’s content but said in a statement: “We will work with key stakeholders to strike a balance between Huntsman Cancer Institute’s autonomy as a self-directed research institute and its collaboration and integration with our entire University health system.”

In a conference call with reporters Wednesday, Sullivan had said it was time to end the bickering.

“Public statements intended to disparage the university and its people and the institution are really counterproductive to the shared objectives of the university and the Huntsman Cancer Foundation,” Sullivan said. Responding to earlier criticisms by Huntsman Sr., he added: “The university health system is not failing, nor is it bloated or mismanaged.”

Pershing wrote in a Wednesday email to health sciences faculty and staff that the U. has been “noticeably, and perhaps uncomfortably, quiet during the past few weeks” as negotiations continue.

“That’s because we believe we have a process in place — at the negotiation table with outside counsel and neutral third parties — that will produce the best result for all stakeholders, and most importantly — our patients,” he wrote.

Tribune reporter Alex Stuckey contributed to this report.

Editor’s note • Paul Huntsman, a son of Jon Huntsman Sr. and brother of Peter Huntsman, is the owner and publisher of The Salt Lake Tribune.

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