In Sickness and in Wealth

And, while this is not a replay of the Wells Fargo/First Interstate Bank merger, there are likely to be job realignments at the least and layoffs at the most, something that's got the Coalition of Unions Representing Employees at UCSF up in arms and already planning demonstrations. University officials, meanwhile, are extremely guarded on the subject.

"While future employment decisions would be up to the new organization, and we cannot know the future, we emphatically believe that a combined organization would be in a stronger position to continue, over the long term, to provide competitive salaries, benefits, and jobs than neither UCSF or Stanford would be by attempting to survive on its own in the new managed care environment," Haile Debas, dean of the UCSF School of Medicine, said in a prepared statement.

But the roughly six months of weekly negotiations behind closed doors have only added to the alarm and speculation.

"There's too much at stake here for this to be all handled in the dark without public input," adds Brill.

UCSF spokeswoman Carol Fox says that the university has had discussions with most of its employees about the proposed merger, but not the sort of detailed information they want to hear.

"There are a lot of things that we just don't know yet," Fox says.
Any proposal must be approved by Stanford's Board of Trustees and the UC Board of Regents, a more complicated arrangement than your average deal. Open meeting laws prevent more than five regents from even being in the same room together without a public agenda, let alone discussing anything. Meanwhile, Stanford is not beholden to the same sort of public scrutiny of its affairs and UCSF and Stanford are still competitors. In order to protect the two universities' business secrets, the accounting firm of Ernst & Young is acting as a repository for the specifics of the deal.

In some ways, the very thing for which Stanford and UCSF are so renowned -- the advancement of medical science -- led to the current financial plight of hospitals. More than half of all surgeries are now done on an outpatient basis. Patients don't stay nearly as long in the hospital as they did in years past. Hospice care has taken the terminally ill home. Consequently, there are fewer patients in the hospital. And those who remain are sicker and more costly.

Patient counts have been tumbling for years. Hospitals that were operating at 70 percent capacity in the '70s find themselves looking at numbers closer to 45 percent two decades later. But relatively few have closed their doors. Executives who close hospitals are about as popular as serial murderers: Employees don't want to lose their jobs; doctors don't want to move their practices; communities don't want to say goodbye.

Meanwhile, managed care has reshaped the health care business, especially in California, which leads the nation in HMOs. Health insurance premiums have been skyrocketing for years, leaving employers unwilling to pay high premiums for health care. And the providers, which have already merged into powerhouses like Foundation Health, Kaiser, and Pacificare, have the muscle to dictate the market. They're demanding lower costs, and they're shopping the competition. If you don't play their game, you won't get their patients.

The result is hospitals, clinics, and physicians corralled into networks that partner with providers. The leftovers don't get patients. And no patients mean no money.

"It's a matter of economies of scale and concentration of resources," says Tom Dolan, president of the American College of Healthcare Executives in Chicago. "If you're running a tertiary [specialized] care facility, you need to have someone referring patients to you. Hospitals around the country are forming networks, and you don't want to be left out."

In the Bay Area alone, the mergers, acquisitions, and realignments during the past few years are head-spinning. For instance, Pacific Presbyterian and Children's hospitals merged in 1991 to form California Pacific Medical Center, owned by San Francisco-based California Healthcare System. Then, last year, California Healthcare System consolidated with Sacramento-based Sutter Health to form the giant Sutter/CHS, with 21 hospitals under its umbrella.

Experts estimate that the Bay Area will likely wind up with about four or five regional systems when all is said and done -- among them, Sutter/CHS, Kaiser, Catholic Healthcare West, and Columbia/HCA.

But there is no global plan to map out which hospitals will close or consolidate and which will remain intact. There is no oversight, nor authority to connect hospitals with need. For the most part, these are private businesses. And there is nothing to prevent needed hospitals from closing, or to ensure that those remaining are needed.

The pressure to be cost-competitive is no less within the world of academic medicine. In some ways, it may even be stronger.

University hospitals have traditionally cared for the poor and the uninsured. Nearly 45 percent of all charity patients in the nation are seen at teaching hospitals, according to the Association of American Medical Schools. Thirty-seven percent of Stanford and 42 percent of UCSF patient payments come from Medicare or MediCal.

Medicare pays universities for patients using a fairly complex formula designed to compensate for the fact that schools treat a disproportionate share of uninsured patients and those with severe and complex problems. However, now that HMOs en-roll Medicare patients, those payments go to the HMOs, which, in turn pay the hospital bills. Consequently, university officials say, they are cut out of the compensation loop.