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Giving Away the Hospital 

University of California regents are set to vote next week on finalizing a merger of the UCSF Medical Center with Stanford University's health service. Supporters claim the merger -- a transfer of $380 million in public assets to the private sector --

Wednesday, Sep 10 1997
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The Transition Times is a weekly newsletter designed to keep employees at Stanford University and the University of California, San Francisco abreast of developments in an ongoing merger of the two schools' medical centers. The June 24 issue of the newsletter includes an item appropriately titled "Merger Synergies: SHS's [Stanford Health Services's] Dirty Laundry Creates Jobs."

That item describes the efforts of an enterprising group of bean counters who determined that consolidating the laundry operations of all UCSF and Stanford hospitals at UCSF would save money.

The consolidation, projected to save hundreds of thousands of dollars a year, was implemented immediately. Even union leaders who are fighting the UCSF-Stanford merger seemed to think the laundry combination was good news. After all, it created 23 new jobs, and provided comfort to employees who fear a merger will mean nothing but staff reductions.

The move was also good news for Winfield Industries, a San Diego company that sells laundry supplies to UCSF. And good news for Winfield would certainly appear to be good news for John Davies, chairman of the Health Services Committee of the University of California Board of Regents. According to a financial disclosure statement he filed with the state in March, Davies is a member of the board of directors of Winfield Industries.

And at the end of 1996 (the last date covered by the disclosure), he owned more than $100,000 of stock in the company. Davies did not return phone calls seeking comment on his relationship with Winfield and its connection to his service as a UC regent. But there is a connection.

The UC Board of Regents will take its final vote on the massive UCSF-Stanford merger next week. Whether Davies can vote on the merger depends on whether he still owns stock in Winfield Industries and how large of a financial benefit a merger would confer upon the firm. Davies has participated in previous merger votes, but state conflict-of-interest law would prohibit him from voting on Sept. 18 if he continues to own more than $1,000 in Winfield Industries stock and if the merger were determined to have a "material" effect on the financial fortunes of Winfield.

Davies, a lawyer who serves as Gov. Pete Wilson's secretary for judicial appointments, is presumably familiar with California's conflict-of-interest law and the procedures for obtaining legal advice on what constitutes a material benefit.

In coming weeks, many other regents and decision-makers may need the same kind of advice, because the UCSF-Stanford medical merger -- a massive, unprecedented privatization of a public-interest institution -- is suffused with seeming conflicts of interest and surrounded by apparent opportunities for private, personal gain.

For nearly two years, the leaders of the University of California, San Francisco and Stanford University have been discussing, negotiating, and planning to merge their medical centers into one behemoth of high-end health care.

Such a merger would move an estimated $380 million in UCSF assets into the private sector -- a transfer that almost certainly represents the largest privatization of a governmental function in the history of California.

Both medical institutes are consistently ranked tops in the nation as research and treatment centers. Together, they lead the country in organ transplants, cancer treatment, AIDS care, and the discovery of the new drugs and techniques that extend the length and improve the quality of human life. These medical centers are home to the brightest minds in science.

They are also enveloped in a rapidly changing health-care arena, where business often comes before science, and the player with the most profits usually wins. Academic medicine was never supposed to be profitable. It was created to serve the public interest, in a broad sense.

But because both UCSF and Stanford treat real patients in the real world, they are forced in some ways to compete in the cutthroat realm of corporate medicine, where research means little or nothing and managed care cost-cutting reigns supreme. Faced with what appeared to be an increasingly dismal bottom line, the leaders of the two universities decided to join in the private health care game.

At least, that is the justification they gave in public.
On the surface, their plan looks like this: A merger of the two medical centers creates a new, nonprofit corporation known as UCSF-Stanford Health Care (in fact, the corporation has already been formed), governed by a board of directors composed of top officials from both universities, as well as some outside business players. The new entity takes over and runs the assets and liabilities of UCSF's Moffitt/Long and Mount Zion hospitals, the Stanford University Medical Center, Lucille Salter Packard Children's Hospital (at Stanford), and all of the clinics and clinical practices of the doctors of both universities.

In exchange, UCSF-Stanford Health Care funds the medical schools of both universities -- schools that remain separate -- at a level to be determined by the new board of directors.

But you should make no mistake: The impending merger is not about teaching, research, or patient care. During the merger debate, the mission of academic medicine has gone all but unremarked. None of the experts hauled in to render an opinion on the deal has been charged with examining educational or public pol-icy questions.

This merger has always been about money, as evidenced by the plethora of wealthy players who have orbited the deal since it was announced publicly. But when it was announced, the merger seemed to have a compelling raison d'étre. If a merger was not effected, proponents of such a move claimed, the UCSF Medical Center would lose more and more money with each passing year, eventually forcing the medical school to cut educational programs.

But the stated reasons for the merger are thinning with the passage of time. Heroic treatment -- a merger -- no longer seems justified by the disease, if there ever was one. The UCSF Medical Center not only hasn't lost vast amounts of money, as was predicted by advocates of the merger, but made more than $20 million during the past fiscal year.

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Lisa Davis

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