BRADENTON, Fla. — Vanderbilt University in Nashville, Tenn., plans to restructure its medical center over the next year allowing it to adapt to health care's rapidly changing financial environment, university officials said.

The medical center is part of VU's administrative structure. In addition to issuing consolidated financial statements, both entities currently have the same governing board as well as legal, financial, and other shared services.

The new structure under development will include reconfiguring Vanderbilt University Medical Center as a nonprofit academic medical center that is financially distinct from the university, according to VU Chancellor Nicholas S. Zeppos.

While the medical center will remain tied to the university academically and by name, a new governing board will have representatives from the medical center and VU, under a structure similar to that used at other major institutions such as Harvard and Northwestern universities.

VU has a total of $1.34 billion of outstanding debt on its consolidated financial statements.

The Nashville & Davidson County Metropolitan Government Health & Educational Facilities Board issues most of VU's bonds.

The bonds are rated AA-plus by Fitch Ratings, Aa2 by Moody's Investors Service, and AA by Standard & Poor's. All have stable outlooks.

When asked how much debt is attributable to the medical center or if the university would continue paying the debt after the restructuring, spokeswoman Elizabeth Platt told The Bond Buyer that the university does not provide that information to individual groups or people.

In an October rating report, Fitch said while affirming its AA-plus ratings that the university's "strong financial profile remains tempered by its significant exposure to the health-care sector, via the operations of the Vanderbilt University Medical Center."

While it is not clear how the debt will be handled under the new governance structure, or how much, creating the new health-care enterprise will lead to a substantial change in the university's profile, said Moody's analyst Dennis M. Gephardt in a Nov. 21 comment.

The credit and rating impacts will depend on the ultimate form of the structure of the separation and various financial decisions, he added.

"The resultant entity is likely to be significantly smaller, given that two-thirds of the consolidated university's $3.9 billion of fiscal 2014 revenues are derived from patient care," Gephardt said. "However, the restructured risk profile of this nationally reputable and well-endowed university may be relatively unaltered."

The legal separation as anticipated by Vanderbilt will include ongoing transfers from the new clinical entity to support Vanderbilt's research and educational mission, according to Moody's. There also is likely to be some transfer of available cash from the university to the new entity.

Management is also considering several alternatives related to the debt currently reflected on the university's consolidated financial statements, but full details are not yet available, Gephardt said.

"While the financial and legal structure will be remade, the strategic ties between the new entity and the university will remain an important component of its credit profile," he said. "The health system continues to be financially sound, with healthy operating cash flow."

Vanderbilt, chartered in 1872, is the largest private employer in middle Tennessee, and the second-largest private employer in the state.

VU has more than 3,100 full-time faculty members and more than 23,000 of support staff. Some 12,795 full- and part-time students were enrolled for the 2013-2014 fall session.

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