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Bloomberg report on Caribbean medical schools says DeVry on St. Maarten lures US medical school rejects

TUESDAY, 17 SEPTEMBER 2013

~ Takes advantage of loophole for US federal funding ~

CUPECOY–A report on medical schools in the Caribbean issued by Bloomberg.com on September 11 claims that DeVry, which owns American University of the Caribbean (AUC) in St. Maarten, accepts hundreds of students who were rejected by US medical colleges and is taking advantage of an offshore loophole that allows US federal funding to be released to students attending a medical school that is not accredited in the US.

Attempts by The Daily Herald to reach AUC management for comment were unsuccessful.

The report said these students amassed more debt than their US counterparts. The article quoted Salt Lake City native David Adams, a paramedic who wanted to train to become a physician after graduating from University of Utah in 2009 with a Bachelor’s degree in health promotion and education, but was rejected by two dozen U.S. medical schools.

He earned a Master of Science degree in medical health from Touro University, Nevada, three years later and applied again. Adams was accepted to American University of the Caribbean School of Medicine, which is owned by the Illinois-based DeVry Inc. (DV), the article read.

Adams, now 31, moved with his wife, Jessica, and their two young children to a two-bedroom apartment on the Dutch part of St. Maarten that, according to the article, smelled of dog urine and had a broken stove, on January 1.

After financing his first two semesters with $67,000 in US government-backed loans, Adams expects to leave medical school with as much as $400,000 in debt and about a 20 per cent chance of never practicing as a physician in the US.

“I understand that I am coming from behind a little bit, attending a Caribbean medical school,” Adams said as he stood on his apartment’s terrace watching sailboats glide by on the deep blue waters of Simpson Bay Lagoon.

DeVry, which has two for-profit medical schools in the Caribbean, is accepting hundreds of students who were rejected by U.S. medical colleges, the article reads. These students amass more debt than their U.S. counterparts – a median of $253,072 in June 2012 at AUC versus $170,000 for 2012 graduates of US medical schools.

That gap is even greater because the US figure, compiled by the Association of American Medical Colleges, includes student debt incurred for undergraduate or other degrees, while the DeVry number includes only federal medical school loans.

Many DeVry students quit, particularly in the first two semesters, taking their debt with them. While the average attrition rate at United States medical schools was three per cent for the class that began in the fall of 2008, according to the AAMC, DeVry says its rate ranges from 20 to 27 per cent.

Of those who remained, 66 per cent of AUC students and 52 per cent of students at DeVry’s other Caribbean medical school, Ross University School of Medicine, finished their programme – typically two years of sciences followed by two years of clinical rotations – on time in the academic year ended on June 30, 2012.

Although neither AUC nor Ross, on the island of Dominica, is accredited by the body that approves medical programmes in the US, students at both schools are eligible for loans issued by the US Education Department, the article at Bloomberg.com read. The loans, which totalled about $310 million in the year ended June 2012, leave the U.S. taxpayer, not DeVry, on the hook if students should fail to find jobs and be unable to repay them.

The article said DeVry also was paying hospitals in the US to take its students for the two years of clinical training they need to complete their degrees. US medical schools typically provide the training hospitals with benefits such as a faculty appointment and access to a medical school library, not cash per student per week, said Glenn Tung, associate dean for clinical affairs at Brown University’s Warren Alpert Medical School, who has studied for-profit medical schools.

According to the article, DeVry’s pay-for-play model has drawn the ire of the American Medical Association. In June, the state of Texas passed a law prohibiting foreign medical schools from sending students to the state.

Congress needs to examine the law that makes foreign for-profit medical schools eligible for federal loans, said Senator Dick Durbin, a Democrat from DeVry’s home state of Illinois. “These schools are taking advantage of an offshore loophole that allows federal funding to be released to students attending a medical school that is not accredited in the U.S.,” Durbin said. “Until Congress acts, these schools will stop at nothing to keep the American taxpayer dollars flowing.”

The article said Durbin, in a September 10 letter to Education Secretary Arne Duncan, had called for an examination of the medical schools in the Caribbean that have federal loan access, yet may be subject to standards below those set for medical students in the US.

Students at the two DeVry schools, St. George’s University School of Medicine and, since July, Saba University School of Medicine are also eligible for tuition benefits from the US Department of Veterans Affairs.

Short-changed

DeVry’s policies short-change students, said David Bergeron, who retired recently as head of post-secondary education at the U.S. Department of Education. “If they have to make a choice between students and profit, they choose profit,” Bergeron said of the for-profit Caribbean schools. “Because their students heavily depend on student loans, it creates risk for the student and the taxpayers throughout the system.”

Added Ernie Yoder, dean of Central Michigan University’s newly opened medical school, “I have grave concerns about the financial welfare of some of these kids and how they’re led to believe that they will be successful as physicians and be able to pay back their debt.”

DeVry spokesman Chris Railey said, “Students who don’t succeed academically typically leave school before accumulating a large debt load.”

The article said medical education was crucial to the future of DeVry, which is trying to diversify from its base in undergraduate studies. When DeVry, the number three publicly-traded for-profit education company in the US based on revenue, announced in April that undergraduate enrolment had declined 21 per cent in March from a year earlier, the company’s shares plummeted 20 per cent in a single day.

Once among the fastest-growing US industries, for-profit education faces increased competition and scrutiny from Congress and state and federal prosecutors. “The vast majority of the students are left with student-loan debt that may follow them throughout their lives,” said a July 2012 report by the Senate Committee on Health, Education, Labour and Pensions led by Iowa Democrat Tom Harkin that criticised for-profit colleges.

The article also stated that DeVry had received 34 per cent of its revenue in the year ended on June 30 from medical and health-care education, including a chain of U.S. nursing schools. The unit contributed $673 million of DeVry’s $1.96 billion in revenue, up more than sevenfold from $91 million in fiscal 2005.

“The diversification strategy is working,” Chief Executive Officer Daniel Hamburger said at an investor conference in Chicago in June. “About a third now of our enrolment is in the growing field of health-care education.”

In addition to AUC and Ross, which also trains veterinarians, DeVry owns companies that specialise in prepping students for the U.S. medical-licensing and certified public accountant exams. It is expanding DeVry Brasil, which operates six educational institutions with 30,000 students in Brazil, including a medical school.

DeVry acquired AUC in 2011 for $235 million, attracted partly by the school’s eligibility for federal loans, said DeVry chairman Harold Shapiro (78), a former president of Princeton University.

“Access to federal student loans is very important for a lot of DeVry programmes, including that one,” said Shapiro, an economist by training who plans to retire from DeVry in November after 12 years on the board and five years as chairman. “Obviously, it’s part of what makes it work.”

Shapiro said he had been recruited to DeVry by its co-founder, Dennis Keller, a 1963 Princeton graduate and former trustee who has donated at least $35 million to Princeton. Shapiro joined DeVry the year he stepped down as Princeton’s president.

DeVry is ramping up its capacity to take on more medical students. It is adding a $30 million building at AUC that students were to begin using in September. Including the 3,500 students at Ross and about 1,300 at AUC, DeVry is currently training some 4,800 would-be doctors. Ross typically enrols 900 to 950 students per academic year, who start in January, May or September, the article read.

The article also stated that of the 268 AUC students who applied for medical residencies, 212 or 79 per cent found matches and seven more had one-year slots. The remainder of the students failed to win a residency.

In this year’s match, the largest contingent of residents from AUC went to Nassau.

Those who fail to match can try again the following year, but more than half of those fail the second time, according to 2013 data from the matching programme.

“It gets harder the second time and near impossible the third time,” said Eric Scher, vice president of medical education at Henry Ford Health System in Detroit, which is affiliated with Wayne State University.

Some graduates pursue related fields such as working in insurance or public health, Ross’s Flaherty says. They could also earn Master’s degrees in business, public health or health education, he said. St. George’s offers free tuition for a Master’s degree in Public Health to those who fail to match.

Source: The Daily Herald, St. Maarten

 

DeVry says AUC is accredited, responds to Bloomberg report

WEDNESDAY, 18 SEPTEMBER 2013

CUPECOY–DeVry, which runs American University of the Caribbean (AUC) School of Medicine in St. Maarten, has rebuffed “misrepresentations” in a report from bloomberg.com, including accusations that the institution is not accredited.

Senior Director of Communications at DeVry Medical International, American University Chris Railey said on Tuesday, that the Bloomberg article clearly misrepresents AUC’s accreditation status. He said AUC is fully accredited by the Accreditation Commission on Colleges of Medicine (ACCM).

The Bloomberg article, an excerpt of which was published on page one of The Daily Herald on Tuesday, September 17, stated that AUC is not accredited by the body that approves medical programmes in the US. Railey said there is no US accrediting body that reviews and accredits medical schools outside the United States. He said, however, that the US Department of Education – via a body called the National Committee on Foreign Medical Education and Accreditation (NCFMEA) – reviews the standards used by foreign countries to accredit medical schools and determines whether those standards are comparable to standards used to accredit medical schools in the US.

NCFMEA has reviewed the standards set by the Accreditation Commission on Colleges of Medicine, AUC’s accreditor, and deemed them to have standards comparable to those used to accredit US schools, Railey noted in response to questions on the article posed by this newspaper on Monday.

In a full response to the Bloomberg article posted on AUC’s website, AUC says the Bloomberg report contains “many misrepresentations and inaccuracies.”

AUC said because ACCM has earned NCFMEA approval, students at AUC are eligible to gain access to the Ford Federal Direct Loan Programme. The institution says this is not a loophole exploited by international schools, but rather a provision that reflects the Department of Education’s recognition that select non-US schools provide a quality medical education and have an important role to play in supplying physicians for the US workforce.

“Our goal is to provide medical education that is comparable in quality to that provided in the US, and prepares our graduates to have successful and sustainable careers in healthcare,” the response read.

AUC said it is in the midst of a multimillion dollar investment in new academic facilities and infrastructure to enhance the learning environment for students in the basic sciences. A new academic building will feature a simulation lab for early clinical skills development, and a cutting-edge anatomy and medical imaging laboratory. These are important investments designed to give students and their faculty the resources and tools they need for a quality medical education, it was stated in the response.

“AUC does not have a local or regional teaching hospital where students can complete clinical training. Therefore, we develop mutually rewarding education partnerships with quality teaching hospitals in the US and UK to provide clinical rotation opportunities for our students. By compensating our partner hospitals, we provide them with much needed support to enhance academic infrastructure and technology, hire residents and teaching fellows, renovate facilities and support indigent care, among other needs.

“AUC’s medical degree programme is challenging with a rigorous, US-model curriculum that tests our students’ endurance and resilience. We work hard to find students who have what it takes to succeed, and then support them throughout their education.

“One of the people quoted in the article states that student’s academic performance in medical school can be predicted by their past academic record. Recent studies, however, have called into question the predictive power of standard predictors of success (MCAT and GPA), particularly for older and non-traditional students. In addition to undergraduate performance and MCAT score, AUC admissions criteria also include personal integrity, life experience, volunteer work, adaptability and social maturity.

“AUC’s investments in instructional technology, facilities, faculty and learning support systems (including a new course that prepares students to succeed on milestone exams) are all aimed at giving students the support they need to succeed.”

AUC said it measures its success by its student outcomes: programme completion, Board exam performance and success securing a residency.

The institution acknowledged that student attrition is an important issue. A review of recent cohorts that have matured to graduation shows that AUC’s attrition rate is between 20 and 22 per cent. “Most of this attrition occurs in the first year of study, before students who are taking loans accumulate a large debt load. We’re concerned about attrition and work to make sure our students receive the support they need to succeed; but while it’s an issue, we will never sacrifice academic quality to show a higher graduation rate.”

AUC said it is very conscious of the financial responsibility that a student takes on in pursuit of their dream to become a physician. “Therefore, AUC maintains a strong commitment to providing financial counselling to students prior to their matriculation and throughout their education, so that they understand the financial commitment and risks they assume when agreeing to the terms of a student loan. We also encourage students to borrow the minimum amount needed.

“AUC has staff dedicated to providing financial counselling in order to promote financial awareness, advises students on repayment and debt forgiveness options, inform students of scholarship opportunities, and encourage responsible borrowing. The three-year cohort default rate for AUC is 1.6 per cent. This is an indication that students are securing employment and paying down their debt.”

AUC said it recently engaged with a debt management firm that offers guidance to professional students that incur large student loan debt. AUC has more than 5,000 alumni, who are practising in all 50 US states, Canada and more than 20 other countries. Many of them are practising medicine in some of the most prestigious hospitals in the country. Many are chief residents at their hospitals, entrusted with overseeing fellow physicians and responsible for entire divisions of patient care.

Source: The Daily Herald, St. Maarten

 

How the founders of the American University of the Caribbean in Cupecoy got a very sweet deal “They gave nothing and took everything”

09/16/13

St. Maarten / By Hilbert Haar – The departure of the American Associated Group NV – the former owner of the American University of the Caribbean in Cupecoy – has caused quite some controversy, not in the least because AAG seems to have left the island with an extremely favorable way to settle its fiscal obligations. Sources for this story talked to the Today Newspaper under guarantee of an anonymity, reason why we cross-referenced information with different sources. The information in this article has been independently confirmed by at least two and sometimes three sources.

The American University came to St. Maarten from Montserrat in 1996. It did not take long for the owners – founder Paul Tien and his son Yife – to get into a confrontation in court. In February 1998, the tax inspectorate issued assessments for turnover tax over three months in 1997 of 62,500 guilders each. Almost a year later, the university filed an objection that was subsequently denied by the tax inspectorate. In April 2000, the Council of Appeal for tax cases, the tax inspectorate submitted a written argument; the university did not show up for this hearing: it requested a hearing in November of that year.

When the case was finally handled, the university argued that no turnover tax was due over its activities. One of the arguments was that the university was a non-profit organization. The court dismissed this and declared that the university is subjected to paying turnover taxes.

The university also attempted to convince the court that it should be exempted from turnover tax because it considers itself a “non-commercial institution for general benefit” but the tax inspectorate argued that the university is a commercial institution, and the council followed this point of view. “Students pay substantial amounts for the education they receive. The plaintiff has to put forth facts and circumstances and when they are contested, has to make it plausible that the council should rule differently, but it has presented nothing concrete,” the council ruled. Apparently she refuses to open her books. That attitude confirms the correctness of the ruling.”

The 2000-ruling makes clear that the American University is a commercial institution that, just like any other business, is held to paying turnover tax. But while the university lost the battle in 2000, somewhere down the road it won the war, as the government has confirmed recently that the institution did not pay turnover tax.

Whatever the deal must have been – this newspaper will get more information about it in the near future – it sure has cost the government a considerable amount of money. If the university were judged on the 1997 additional turnover tax assessments of 62,500 guilders per month, it looks like the turnover tax liabilities per year were at least 750,000 guilders. Up to the sale to Devry Inc. in 2011, that would add up to 10.5 million guilders over fourteen years.

For years however, the American University happily flew under the tax-radar after its first unfortunate encounter with the Council of Appeal for tax cases. The reason for this, sources told Today, is that founder Paul Tien, a Chinese-born entrepreneur who fled from his country to Taiwan before moving to the United States, was rather generous with his support for local politicians. “He wrote checks for $5,000 to any candidate,” one source said.

In 2011 another peculiarity of the American University came to light. When a professor in Behavioral and Clinical Medicine contested her dismissal in court, it turned out that the university paid part of the faculty salaries from an entity in the Cayman Islands. This way, the taxable salaries in St. Maarten were lower and over the part that came from the Caymans, the university obviously did not pay wage taxes and premiums.

While this newspaper reported on its front page about this Cayman-construction, the government nor the tax inspectorate took action against it.

Sources confirm to this newspaper that employees were forbidden to report their Cayman-income for income tax in St. Maarten. In a memorandum that was written several years ago, the university promised its faculty that it would assist them if problems occurred.

The real trouble surrounding the American University of the Caribbean erupted only after the Tien-family had left the island – with $235 million in their pockets from the sale to the respected American education-company Devry Inc. The Tiens also sold a piece of pricey real estate in Pelican Key – Emerald Field Mansion on Topaz Road – reportedly for $32 million upon their departure.

“They could have easily given a million dollars to the Aids Foundation,” one source said with a bitter undertone. “But those Chinese never have enough. We had to beg every year for the funding for a local scholarship. They gave nothing and they took everything.”

Source: Today Newspaper, St. Maarten

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