Dirty Laundry

Literally and figuratively, the UCSF-Stanford hospital merger gets fouler every day

While a report from the Bureau of State Audits last week indicated that there might be some hope for salvaging the disastrous merger that created UCSF Stanford Health Care, a legislative hearing following on the heels of the auditor's report presented a much more dismal picture of the troubled hospital system's future.

The hearing in Sacramento last Thursday, in fact, sounded much like a discussion of the Civil War, with movements, casualties, and financial losses assigned either to "The North" (UCSF) or "The South" (Stanford). The obvious conflict between the two, once independent, systems even led state Sen. Jackie Speier, who chaired the inquiry, to wonder whether anything was ever merged other than the new company's administrative offices at 3Com Park. To be sure, chaos and general dysfunction continue to grow in San Francisco and Palo Alto.

The $1.3 billion UCSF Stanford Health Care (USHC) was created in November 1997 by merging the hospitals and medical centers of Stanford University and the University of California, San Francisco. The move essentially privatized the UCSF Medical Centers, taking what had been publicly owned hospitals and giving them to a newly created private, nonprofit corporation. The merger was supposed to save money, but quite the reverse has happened, for reasons initially reported by SF Weekly ("Inside the Big Flop," Aug. 11) and now confirmed by the state auditor's findings.

Jo Rivers

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Earlier this year, USHC reported projected losses of more than $60 million this year, and along with the financial hemorrhaging has come a steady stream of tales of mismanagement and accounting chaos.

The North population seems to be under the general impression that the South is raping and pillaging its medical centers, taking UCSF equipment, and shortchanging its budget for everything from complex hospital operations to library books. In fact, one of the biggest controversies in recent history concerns handling the hospitals' laundry (more on that later).

Meanwhile, the South population seems to believe Stanford is being used as some kind of corporate welfare provider, expending its precious resources to prop up UCSF. And, the South has no patience for the sort of government oversight and public nosiness that constantly surrounds the North, which was once a public entity.

To be sure, a civil war is brewing inside the nonprofit health care corporation.

During the legislative hearing, Speier hit on one aspect of the internal warfare when she questioned USHC board members about a rumored "stop-loss" clause involving the hotly debated closing of Mount Zion Hospital.

The Stanford side wanted to close Mount Zion earlier this summer and stop the fiscal drain caused by the hospital, which serves much of the city's poor and minority community. That idea was halted temporarily when UCSF faculty members, public officials, and the community came unglued. Apparently, the Stanford side is also talking about some sort of stop-loss clause, which would mean that, in some way, the UCSF side would have to eat all the Mount Zion losses.

When Speier asked about the issue, William Gurtner, vice president for clinical services at the University of California and a board member of USHC, responded vaguely. "We are looking at the value of the merger versus the need to be equitable," Gurtner said. UC officials were not available to clarify the issue.

Meanwhile, there is so much strife within USHC that all of the major players wouldn't even come to Speier's hearing to talk about what's going on. Stanford officials declined to participate entirely, which was little surprise. Stanford, a private university, didn't participate in most of the public hearings leading up to the merger in 1997. And, only last week, Stanford representatives were rushing around the Capitol warning legislators that the Stanford faculty wants to uncouple from UCSF.

Perhaps most telling of the entire situation is the fact that a Florida consultant -- David Hunter and the Hunter Group -- is now running, and answering for, the nonprofit organization created by the merger. Hunter would not estimate the cost of uncoupling the two medical centers, except to predict that, were that to happen, UCSF would be in financial trouble immediately and Stanford would be in financial trouble in about two years.

Throughout the hearing, UCSF administrators and faculty members clearly differed on the state of the merger, which is not to mention that labor leaders have been pointing out screw-ups and screaming for divorce at every turn.

The most recent plan to cut $170 million out of the USHC budget and turn the organization around has been met with great skepticism, mostly because few of the business scenarios presented in the past have correctly predicted anything. The organization's architects originally blamed its multimillion-dollar losses on government cutbacks and tight reimbursement rates, and then admitted to bad management. Last week, they added the faculty to the mix.

In his report, the state auditor devoted a fair number of pages to the notion that faculty doctors from the two systems didn't play well with others, and weren't sharing. That, too, is no surprise.

The hospitals merged, but the university medical schools remain separate, and somewhat competitive, entities. Thus, the now-private, nonprofit UCSF Stanford Health Care organization has no real power to force the doctors, who are also faculty members of their respective schools, to do anything.

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