Pinstriped Medicine

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

Lost somewhere on an inside page of its national news, the San Francisco Chronicle buried the Jan. 7 announcement that UCSF Stanford Health Services had selected a new board of directors.

They missed a good story; despite a lot of blather about equal representation between UCSF and Stanford, the end result was that business would rule. What kind of business? Well, a lot of these new board members simultaneously sit on the boards of things like pharmaceutical companies. (For reasons passing understanding, the University of California's legal eagles quickly dismissed this as a source of potential conflict. But see the accompanying sidebar on Page 16.)

Of course, given the players on this financial dream team, it's a good bet that UCSF Stanford Health Services will make money. That's what these people do, most of them quite successfully. And now, if they don't make money, the alternative is even more depressing.

Under the agreement between Stanford and UCSF, if the new corporation dissolves, its assets go back to each of the universities. Nothing, however, prevents the corporation from being sold. And that's what's really scaring the hell out of merger opponents, because willing buyers lurk in the wings.

Specifically, Tennessee-based Columbia/HCA, the nation's largest for-profit health provider, has been making inroads into academic medicine for some time now. It purchased Tulane University's hospital, launched a failed attempt to buy Emory University, and recently bid to contract operations at the University of California at San Diego. (That's the subject of pending action by the Attorney General's Office.)

For-profit ownership would mean that revenue leaves the building, and that demand for a return on investment is, literally and figuratively, the bottom line.

Vishwanath Lingappa, the UCSF faculty member so vocal in his opposition to the merger, worries what would happen if a hospital could not deliver high-quality care for the specified amount that HMOs and the government pay for each procedure. If so: "The only way you can do it is if you're skimping on care in ways that no one other than those inside medicine would know. That's why they have gag clauses," he says, referring to prohibitions against medical professionals discussing higher-cost options with their patients.

"They will give bonuses to whichever doctor comes in under [a specific amount]," he adds. "That's what the for-profit HMOs do."

And, given this money-driven climate, the white coats are inherently skeptical of the pinstripes.

"I have no voice on this board," says another UCSF physician. "And anyone who might represent my interests has no power."

Immediately following the Board of Regents Health Services Committee vote in November, after the police carted off the demonstrators, and while the pinstripes were shaking hands and congratulating one another, Stanford public relations consultant Judy Frabotta stood in front of a clump of reporters dutifully passing out Stanford President Gerhard Casper's phone number.

"He's expecting your call," she told the pack, adding that he was very pleased at the news. Obviously, this was no surprise.

On Nov. 15, two days later and with much less drama, the UC Board of Regents made history, putting their stamp of approval on the deal. Later that same day, 40 miles away, the Stanford Board of Trustees also approved the deal. UCSF Stanford Health Services was officially born.

Where Stanford and UCSF might not have remained competitive standing alone, together they could very well monopolize the high end of medicine. Together they will lead the market in 20 out of 26 medical specialties.

Stanford is one of the nation's leading cancer centers. UCSF is in the midst of completing what will be the first National Institutes of Health-designated Comprehensive Cancer Center in California.

UCSF already does more kidney transplants than any other medical institute. Now, Stanford's transplant work -- particularly hearts and lungs -- will combine with that to create what is likely to be one of the largest organ transplant centers in the country.

The examples go on and on, predominantly in specialized, expensive medical procedures like cardiac care, pediatric surgery, brain surgery, and the reconstruction of body parts.

Those are the kinds of things that community hospitals can ill afford the overhead to continue, unless they're reconstructing a lot of brains.

This is a power shift. The landscape is changing.
No longer will managed care buyers be able to play Stanford and UCSF off of one another to cut costs. They're one and the same now. And together, they hold the cards for highly specialized medicine, which means, to some extent anyway, that they can also control the price.

"They will become a regional power," says the AAMC's Korn. "There are things that Stanford and UC do that are really hard to imitate in a community hospital. By combining forces, you have a citadel of clinical excellence and won't be able to drive prices down to bankruptcy. [Grant-giving organizations] get critical mass by combining the academic talent of the two programs.

"The wealth of talent for a comprehensive cancer center is absolutely dazzling," Korn says.

Hellman's report predicts that the new entity will bring in $50 million more in specialty care during the first two years.

Health care watchers predict that, unable to compete, a lot of hospitals will simply get out of high-end business altogether.

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