Finance

Rice U. and Baylor College of Medicine Break Off Merger Talks

January 12, 2010

Rice University and Baylor College of Medicine have broken off their talks about a possible merger, the presidents of the two Houston institutions announced on Tuesday.

The presidents' written statement did not explain why the talks ended, but it came amid reports that Baylor University, in Waco, might be courting the medical school it parted ways with 41 years ago. Baylor College of Medicine was granted independent status in 1969, although Baylor University retained the authority to appoint one-fourth of its trustees. The medical college's charter also states that no merger or consolidation can be made without the approval of the majority of trustees at Baylor University, as well as the medical school.

It was unclear on Tuesday whether trustees from the university in Waco had voted to oppose a merger between the medical school and Rice, or whether Rice officials had simply decided a merger was too financially risky.

Two key stumbling blocks have been the medical school's lack of a primary teaching hospital and its debt, which critics of the proposed merger said could drag Rice down as well.

From 2004 to 2009, the medical college's operating expenses have exceeded its revenue by a total of more than $300-million, according to an editorial written by Rice professors opposed to a merger.

In 2004, the medical school ended a primary partnership with Methodist Hospital, and it was unable to sustain a long-term partnership with St. Luke's Episcopal Hospital. Money problems halted plans to build an independent hospital.

Several sources connected with Baylor University, who spoke only on the condition of not being named because they feared retaliation, said they had heard that the university was seriously negotiating with the medical school and had stepped in to block a merger with Rice.

Calls to Baylor University administrators were referred to a spokeswoman, Lori W. Scott-Fogleman, whose only comment was, "We have nothing to say today."

In September, Rice and Baylor medical officials suggested in a letter to faculty and staff members that a merger might be announced by the end of January. Supporters saw the move as a way to add prestige and draw more federal research money to Rice, and to provide the medical school with the financial stability of a university affiliation. Rice officials were intrigued by the possibility of acquiring a top-tier medical school without the expense of building one.

But on Tuesday the presidents of the two institutions called it quits.

"Since we signed a memorandum of understanding in March of 2009, we have been in extensive discussions in an attempt to meet several conditions that both institutions considered to be essential for a successful merger," read the statement, signed by David W. Leebron, president of Rice, and William T. Butler, interim president of Baylor College of Medicine.

After considering the benefits and challenges of merging, and with the memorandum of understanding due to expire this month, "the leadership of both institutions decided it is in the best interests of both BCM and Rice University to strengthen the existing relationship without a formal merger."

The two institutions plan to build on existing joint programs in such fields as neuroscience and global health initiatives, and to create new ones. A committee made up of faculty members from the two institutions identified other potential areas of collaboration.

Officials at both institutions said they had agreed not to make any further public statements.

Moshe Y. Vardi, a professor of computational engineering at Rice who has been an outspoken opponent of a merger, said he was relieved. "I felt such a merger was ill advised, and that the costs had been underplayed and the benefits overplayed," he said.

Mr. Vardi said he believed that the deal was sunk by the medical college's failure to maintain a primary teaching-hospital affiliation, as well as by lingering concerns about the medical college's financial health.

Mr. Vardi, who has kept a Web site laying out the arguments against a merger, said he is nonetheless pleased that Rice will expand its collaborations with the medical school. He called the school "a huge asset to Houston and Texas."