Report on how VCU Health lost nearly $80 million due to a failed project to be released soon

RICHMOND, Va. (WRIC) — The Joint Legislative Audit and Review Commission (JLARC) is gearing up to release its report on Virginia Commonwealth University (VCU) Health’s scrapped “Clay Street Project,” which resulted in a loss of nearly $80 million.

“We need to get to the bottom of it,” said Sen. Creigh Deeds (D-Charlottesville) at a JLARC meeting on Tuesday, May 21, when this topic came up.

In 2021, VCU Health officials finalized a $325 million deal which included constructing a development along N 10th Street and Clay Stree. in Richmond. At the time, VCU leaders like President Michael Rao said it would “play a critical role in supporting a thriving urban center.”

However, that vision quickly turned grey.

“The project highlighted some issues with the health system’s capital process and governance structure,” said a JLARC spokesperson at Tuesday’s meeting.

The plan was laid out before the COVID-19 pandemic. Years later — but shortly after signing the papers — VCU Health leaders realized that, by the time construction would begin, the COVID-19-era supply chain issues, inflation rates and other economic troubles would take a major toll on the initial plan. It would have ended up costing far more than expected.

Unfortunately for the health system, backing out of the project wasn’t cheap, either — VCU Health had to pay $73 million. This money came out of reserved operating funds, which potentially stripped funds from future hospital resources.

“This is an issue that we’ve heard from a number of people who care about the university,” Deeds said. “But we’ve heard both sides.”

State leaders, like former governor Doug Wilder, called the mistake an “enormous waste.” He also called on JLARC to pinpoint how this happened and how the system’s officials can prevent it from happening again.

At Tuesday’s meeting, JLARC representatives provided further context about how they plan to do that.

“[We are] looking at a number of study issues, including the effectiveness of the health system’s capital project planning, construction and oversight,” the spokesperson said. “[We are looking at] board membership, executive leadership and VCU’s involvement in health system governance, how that compares to other health systems.”

VCU Health said this cost made up less than 2.5% of its annual budget. Deeds is eager to hear the commission’s report.

“I’m glad to see this is on your agenda,” he said after the researching spokesperson finished the briefing.

Representatives presented their action plan at Tuesday’s meeting. JLARC will present its actual findings regarding this specific topic in June.

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