CHICAGO - The Illinois Finance Authority board yesterday approved the University of Chicago Medical Center's plan to restructure $185 million of insured variable-rate debt in a unanimous vote, which came after several protestors voiced complaints charging that the hospital discriminates against the area's poor African-Americans.

The protestors called on the board to defer action on the financing until they could return with additional information and witnesses they said would support their allegations. The protestors believe that a university program that diverts residents who are not in need of urgent care away from the university's emergency room and to local clinics is designed to save money and is discriminatory.

Those complaints are receiving growing national scrutiny because Michelle Obama, the wife of Democratic presidential contender Sen. Barack Obama, was an architect of the program during her tenure at the hospital and Sen. Obama has made overhauling the nation's health care system a priority if he is elected. Articles have appeared in the local press quoting skeptics of the program that include some local organizers, doctors, and Chicago City Council member Toni Preckwinkle, whose ward includes the hospital.

The Obamas are also residents of the Hyde Park neighborhood that houses the hospital and the University of Chicago. Michelle Obama is on leave from her position as the hospital's vice president of community and external affairs.

The criticisms also come as local, state, and national officials have called for heightened scrutiny of nonprofit health care providers and whether they provide sufficient charity care to warrant their exemptions from some taxes and the authority to issue tax-exempt bonds.

A Washington Post story last month on the program, Michelle Obama's role in helping establish it, and the hiring of a firm co-owned by Obama's chief strategist, David Axelrod, to promote it prompted an inquiry from Sen. Charles Grassley, R-Iowa. As the ranking Republican on the Senate Finance Committee, Grassley has pushed for greater oversight of nonprofit hospitals and their charitable efforts.

The protestors at yesterday's IFA meeting also dismissed the university's diversity efforts as a "patronage" program that benefits only African-Americans sponsored by a handful of "elitist" and "politically connected" social organizations while ignoring smaller, grassroots organizations.

"The University of Chicago is one of the most racist universities in the country," said Paul McKinley, a leader with the group VOTE, Voice of the ex-offender.

McKinley criticized both Michelle Obama and Valerie Jarrett, the medical center's board chairwoman and close friend and adviser to the Obamas, as proponents of those policies that they contend seek to exclude poor African-Americans in the neighborhood from jobs and from using the medical center.

IFA board chairman William A. Brandt Jr., took issue with that assertion, saying both woman have strong records and reputations of helping the community.

Key administrators defended the medical center's hiring, contracting, and charity care record. Officials said they established a diversity office in 2002 to help promote the use of minority- and women-owned and local businesses. Minority participation on four major projects ranged from 38% and 55%. The hospital's work force includes 42% African-Americans, 6% Hispanics, and 10% people of Asian background and overall includes 73% women.

"We are very committed to diversity," chief financial officer Lawrence Furnstahl said. "We are proud of our record."

The program that refers the uninsured who don't need immediate care from the emergency room to local providers started as the South Side Health Collaborative and is part of what is now known as the medical center's Urban Health Initiative. It is designed to address the community's health care needs in a more cost-effective and collaborative manner to free up resources for the medical center's educational, research, and patient care missions.

"UHI is motivated by one of society's most vexing problems: How to provide comprehensive, accessible, and affordable care to everyone at a time when financial resources - grants, reimbursements, insurance, etc. - are diminishing," a statement the medical center presented to the IFA board read.

The medical center provides about $64 million annually in charity and under-reimbursed Medicaid care annually and more than 35% of its admissions last year were Medicaid recipients - the highest level in the state, the statement said. The hospital treats about 80,000 in the emergency room annually.

The IFA board took testimony from McKinley and several other protestors - a rare occurrence as members of the public rarely attend meetings - and then allowed the university to respond before voting unanimously to approve the financing.

Brandt said members took seriously the allegations, but cited the authority's enabling statutes that limit its function to ensuring that nonprofit hospitals who meet the criteria have access to affordable financing and he noted that the deal is a refunding and not tied to a new project.

"This board deals with hospital bonds." Brandt said.

The financing will refund variable-rate debt sold in 1994 and 1998 that carries insurance from MBIA Insurance Corp. Since the insurer lost its triple-A earlier this year, bondholders shed their holdings of the debt during remarketing periods and all of the debt ended up in the hands of the deal's liquidity providers. The university medical center has since purchased the bonds using available lines of credit, Furnstahl said.

The medical center intends to issue about $110 million of fixed-rate bonds the week of Oct. 6 and then $75 million of variable rate bonds supported by a letter of credit from Wells Fargo Bank NA about two weeks later. JPMorgan is the underwriter and Jones Day is bond counsel.

The university is rated AA-minus by Standard & Poor's and Aa3 by Moody's Investors Service. The medical center plans about $500 million in new-money issuance in the coming years, beginning next year, to finance a new $700 million main hospital facility.

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