Lawmakers pass VCU Health leadership reform following development failure
VCU President Michael Rao speaking at the 2024 State of the University Address. Photo by Andrew Kerley.
Andrew Kerley, Contributing Writer
VCU Health System is expected to remove Michael Rao as Chair of its Board of Directors and require some Board members to be commercial real estate experts following a failed redevelopment plan that cost the university nearly $80 million, according to recently passed legislation.
The changes were recommended by Virginia’s Joint Legislative Audit and Review Commission in a report on VCUHS leadership structure following the failure of the Clay Street Project in 2023. Richmond legislators unanimously passed bills in February that would implement the changes.
The changes would create less overlap in leadership between VCUHS and VCU, which are legally separate entities, according to state code.
Clay Street Project controversy
The deal was for VCUHS to turn the city’s old Public Safety Building, adjacent to MCV, into 17 floors of office space for the medical campus. VCUHS signed a multimillion-dollar lease in 2021, according to the report.
The project was halted in 2022 when the developer said construction could not be completed for the agreed-upon budget due to poor site conditions and rising costs after the COVID-19 pandemic.
VCUHS ended up paying $72.9 million to the City to exit the deal in 2023. They also paid $5 million for the demolition of the construction site.
Art Kellermann, the former VCUHS CEO, pointed out risks before the lease was signed and early on into the project. Kellermann resigned shortly after the news broke under pressure from leadership and at the request of Rao, according to the Richmond Times-Dispatch.
Gov. Glenn Youngkin called on Rao to step down as President of MCV after the deal was terminated, according to a previous report by The Commonwealth Times. He stated the incident was a “wake up call” and VCUHS needed someone “with the experience and time commitment” to lead.
Leadership changes
Rao has been publicly supportive of his own removal. He testified at a Joint Legislative Audit and Review Commission meeting in June 2024, noting that he was the only person he knew across the country who had served as the president of a university and health system at the same time.
“The buck stops with me,” Rao said.
In September 2024, Rao relinquished his title of VCUHS president at the vote of the VCUHS Board and at his own request, according to a previous report by The Commonwealth Times.
Rao is still the Chair of the Board due to state code from when the VCUHS Authority was established in the 1990s. Since then, the law has required the Chair of the VCUHS Board of Directors to be the president of the university. The recently passed bills amend that, as well as eliminate the position of VCUHS President entirely. Rao will continue to serve as President of the university until at least 2030.
Marlon Levy is the current CEO of VCUHS and Senior Vice President of VCU Health Sciences. The legislation leaves Rao and Levy as “ex-officio” members of the board, but only Levy will have voting privileges.
It also enables the VCUHS Board to elect a chair from among their own membership. The number of members will be reduced from 21 to 16 and their terms will be lengthened from three to four years.
The VCUHS Board is currently required to share five of its members with the VCU Board of Visitors. The bills shorten that requirement to one member.
They also include language requiring some members to be experts in business, commercial real estate, finance, health care system management or legal affairs.
VCUHS spokesperson Danielle Pierce declined to comment on the legislation but reaffirmed Rao’s public support for the changes.
Gov. Youngkin has until March 24 to veto bills that passed the General Assembly. His office did not respond to a request for comment from The Commonwealth Times. Without a veto, the legislation will take effect on July 1.
