Negotiations have ended between Banner Health and the Arizona Board of Regents and the University of Arizona on construction of a teaching hospital for the downtown Phoenix Biomedical Campus. After more than a year of struggling to strike a deal, both sides have concluded that agreement is unlikely.

By issuing a public "Request for Information" for potential clinical affiliates, the Board of Regents and UA have effectively announced that they are seeking other options besides Banner for the hospital, a crucial adjunctive facility for the UA College of Medicine-Phoenix in partnership with Arizona State University.

"It was with the best of intentions that both sides entered discussions, and the reality of what we were trying to do became more clear to both sides," said Ted Shortliffe, the Phoenix medical school's dean, in the Business Journal of Phoenix.

Bill Byron, spokesman for Banner, agreed that the decision to end negotiations was mutual. He identified as a particular sticking point the cost of recruiting teaching physicians for the hospital. On top of at least $350 million to build the facility, the hospital would require a faculty of some 300 doctors, costing an estimated $132 million over several years, Byron told the Arizona Republic.

"That is not a cost that Banner would shoulder," he said in the Republic.

The new approach that UA is taking could mean that a single entity would step up to build the hospital and help the medical school recruit and fund faculty, or several medical entities could together enter into affiliations with UA and set up shop on the Biomedical Campus.

"We are building a world-class academic health campus and we are seeking affiliates who share this vision," said Fred Boice, president of the Board of Regents. "Our goal remains the same—to make this a world-class medical school with top-notch patient care and superior research."

UA president Robert Shelton professed similar confidence. "Suspending discussions with Banner over the medical center facility is not an ending, but the beginning of a new process that we are confident will grow into a vital resource for Maricopa County and the state of Arizona," he said.

One actor that may return to the stage is Maricopa Integrated Health System (MIHS), an early contender to partner with UA before negotiations became serious with Banner. MIHS trains more than 400 resident physicians each year, CEO Betsey Bayless said in the Business Journal.

"We continue to believe that Maricopa Integrated Health System is in a unique position to best serve the collaboration of Arizona's three universities to establish and grow a medical school and other healthcare training facilities in the Valley,' she said in the Business Journal.

Other potential partners are likewise interested in the opportunity that the new Request for Information presents.

"To the extent there is now going to be a relatively public process it is a very healthy idea," said Reg Ballantyne, senior corporate officer for Vanguard Health Systems, in the Republic. Based in Tennessee, Vanguard owns five Phoenix-area hospitals.

The timeline that UA is using forecasts construction of the hospital—or some arrangement of clinical facilities—within five to 10 years. By 2012, the College of Medicine wants its class size on the Phoenix campus to reach 150 students.

---

For more information:

"UA, Banner part over costs for downtown campus facility," Arizona Republic, 1/16/2008

"Negotiations fail between Banner Health, state university officials," Business Journal of Phoenix, 1/15/2008