Temperature Rising

The UCSF-Stanford merger goes under a (symbolic) gun

The political temperature around the University of California's plan to merge its UCSF Medical Centers with those of Stanford University (see "Pinstriped Medicine," Jan. 29) is clearly rising. Senate Judiciary Chairman John Burton's hearing on the deal last Friday was a blatant effort to turn up the heat.

But all of the protests, politicking, academic discourse, legal wrangling, and, most recently, legislative probing that the merger has spawned may well mean nothing in the end. That's because, alone among the occupants of the state's ever-changing health care universe, the business side of University of California-run medical centers is almost completely free of state control.

Blame the framers of the California Constitution. They zealously protected the autonomy of the university system -- and the Board of Regents that runs it. Too bad they never anticipated managed care.

The framers ensured that the regents never had to answer to elected officials. Today, the $11 billion University of California system, though funded in large part by the state, cedes no control to the Legislature in exchange.

That's fine when matters of academic freedom are involved. But such broad autonomy leads to a staggering absence of oversight for the potential transfer of a hefty asset like UCSF's $400 million, publicly owned Medical Centers.

Contrast the UC medical centers' unique freedom with the way the law treats some of its competitors. California's 43 public, or district, hospitals can only transfer significant holdings after a popular referendum. The state's 331 nonprofit hospitals answer to the attorney general, due to a long-standing law that says they must dedicate their assets to the public trust. Other laws regulate what health maintenance organizations can do with their hospitals. But the university medical centers remain under the purview of the University of California, and its Board of Regents.

"The university is a pubic trust, but it has rarely been tested what that means," says Phil Isenberg, former Sacramento mayor and assemblyman, and author of state legislation that expanded the attorney general's authority over health facilities moving from nonprofit to for-profit status. He also testified before the Burton panel.

"As medicine becomes more and more a profit-making business, the charitable and government worlds are increasingly involved in that," Isenberg says. "That's fine if there are no public funds involved. But [in the UC transaction] there are.

"There is no doubt that the university is arguing a position that it is free of public review and public scrutiny," says Isenberg. "I just can't imagine a way they are going to keep enough control over the deal to satisfy their fiduciary responsibilities and give up enough control so that they don't have to be liable for the consequences of the action and the labor contracts." The last is a reference to the thorny question of how UC's current employees will fare under the new, private entity. A review of the merger proposal done by investment banker Warren Hellman predicts that at least 120 of UCSF's 4,940 employees will lose their jobs because of the deal. The report also anticipates that within five years, an increase in specialty care will generate at least 108 new UCSF positions -- but not the same jobs that were lost.

For now, the matter rests in the hands of the San Francisco Superior Court, which is hearing a lawsuit filed by the California Nurses Association and other unions representing UCSF employees. They are arguing, among other things, that the regents acted improperly in approving the merger. The case has no legal precedent, although there are plenty of legal opinions on both sides.

Should the court find that the regents exceeded their constitutional authority in agreeing to the deal, or that the merger violates the public trust, or that it is otherwise illegal, it could be voided. But the wheels of justice move painfully slowly while the merger continues at full speed. In practical terms, the arrangement may well be consummated by the time a decision is handed down. Not to mention appeals heard and ruled on.

In the Burton hearing last Friday, a few of the Bay Area's key political players engaged in what amounted to a four-hour game of rhetorical kickball with the suits of UCSF the targets of the kicks. Under the law, UCSF officials were under no obligation to show up, since the Legislature has no legal authority over them.

Of course, that doesn't preclude a noisy fight, even if the sound doesn't signify anything. Burton's tone indicated he was spoiling for a showdown. Before the event was over the senator had compared the merger to "a sweetheart deal," repeatedly blasted the regents for trying to scuttle away from the light of public scrutiny, and at least once referred to the university presidents as mere "bureaucrats."

Furthermore, Burton and S.F. Assemblyman Kevin Shelley promised they would introduce legislation requiring the newly merged entity -- officially a private, nonprofit corporation for public benefit -- to abide by public reporting and open meeting laws. That would strike at the heart of the whole deal and could cause Stanford to pull out. It also defies UCSF Medical Centers leaders who have said that requiring public accountability would fatally compromise the operation's ability to compete with the private sector.

Expect more fireworks soon. The Legislature is about to enter into budget hearings, during which UC officials are likely to be called on the carpet yet again. Even if it's only a symbolic scolding.

 
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