Pinstriped Medicine

How the UCSF-Stanford hospital merger foreshadows the new -- and sometimes frightening -- world of health care

The message: The only way for the premier public medical research and teaching institute to thrive is to hand it over to the private sector. It was an idea that most of the 26 predominantly Republican-appointed businessmen and -women who serve on the Board of Regents enthusiastically embraced.

Regents are appointed by the governor to 12-year terms and take their power directly from the state constitution. And therein lies one of the legal challenges brought by UCSF employee groups. The state constitution allows the regents to manage and convey assets of the university system. In the past, this has mostly applied to land and buildings. There simply isn't precedent for transferring control of a multimillion-dollar business operation over to a private board of directors. So, it's up to the courts to decide whether or not regents have the authority. But that question has not at all slowed UCSF and Stanford from moving forward.

"I doubt we can do this," says Lt. Gov. Gray Davis, who is also a regent and who voted in favor of the merger, despite his apparent legal questions. "I don't see how we have the legal power to transfer the assets of the public to a board that is majority privately controlled. ... I was voting for the least unattractive of the options."

The employee groups filed a complaint with the Public Employee Relations Board and a lawsuit against the regents in San Francisco Superior Court, both of which are still pending. Along with the fundamental question of whether or not the regents have the authority to transfer the medical center to a private entity, issues at hand include the public board's decidedly nonpublic handling of the matter and alleged unfair business practices stemming from shutting labor out of the deal. The merger essentially will result in medical center employees no longer being in the public employee system, and they may very well lose access to some or all of the Public Employee Retirement System; UC refused to disclose such details.

Labor took an initial blow in December when Superior Court Judge William Cahill ruled that, under the public records law, UCSF did not have to disclose anything that might also contain proprietary information from Stanford, because the latter is a private entity. That has meant that everything anyone really wanted to see, such as the business plan for the new entity and its employees, has remained a public mystery.

University officials initially said they were figuring on employee cuts of only 5 percent, but they're not the ones making the call anymore. That decision ultimately will be made by the new board of directors of the new private entity.

It may have been inevitable, though the clandestine manner in which the board handled its business raised doubts. But in any event, it means a number of health care workers are going to join the ranks of S.F.'s unemployed.

"These places are not going to be bigger and employing more people on the service side in the future," says Michael Holt, who follows health care issues for the Institute for the Future in Menlo Park. "It's very much like the steelworkers. This is the kind of stuff that plays out in the end. In the end, workers go find something else to do. In the meantime, you've got months and years of people losing jobs and being kicked back into the community."

Proponents of the merger, including UCSF Chancellor Martin, Medical Center Administrator Kerr, and most of the regents, argue that the deal will cut the loss of jobs in the long run. But that's akin to saying, "Trust me," because they also won't reveal the numbers that support their plan. Needless to say, labor stopped trusting them some time ago.

In many ways, the UCSF Medical Centers began acting like a private entity long before they officially became one. A selected group of leaders huddled behind closed doors in weekly planning sessions. They shared not just financial statements, but their intimate business dealings -- their successes, their failings, and their fears -- with private consultants who were bound to guard them. And in the midst of all of this, one financial wizard in particular quietly became a guiding force in closing the deal.

F. Warren Hellman is a multimillionaire partner in the San Francisco investment firm of Hellman & Friedman. He sits on the boards of a handful of businesses, not the least of which is Levi Strauss (being as he is also a member of the Haas family). Hellman's name is on the short-list of longtime movers, shakers, and philanthropists in the high-society and business crowds. He directed the UCSF Foundation and sat on the UCSF Campaign Cabinet from 1991 to 1996.

When Warren Hellman talks, people listen.
Before the Board of Regents Health Committee even took the merger to a vote at that November meeting, they issued a formal apology to Hellman for Regent Frank Clark's earlier criticism of a report Hellman had done on the pending business deal. "We apologize for the unforgivable treatment you received on Friday," John Davies, chairman of the committee, told the guru. Hellman had been invited by the regents into their inner circle to perform a "third-party review" of the proposed merger deal. He was hardly the first outsider to enter the game. The Lewyn Group, a health care consulting firm based in Washington state, had recommended that the medical centers merge in the first place. The accounting firm of Ernst & Young had crunched the numbers and acted as financial analyst for the actual deal. UCSF refused to disclose either the Lewyn Group or the Ernst & Young reports, and significant parts of Hellman's report.

« Previous Page
Next Page »
My Voice Nation Help
©2014 SF Weekly, LP, All rights reserved.