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.

Further, the majority of faculty at both Stanford University and UCSF are big dogs in research and medicine, which tends to make them independent types. And they still operate at medical centers 40 miles apart.

Reportedly, Stanford faculty members believe they are subsidizing UCSF's Mount Zion Hospital in San Francisco, which is losing between $24 million and $50 million a year, depending on who's counting.

But the auditor's report included another interesting fact that passed without mention at last week's hearing. Stanford University doctors, on average, make significantly more money than do their counterparts at UCSF. And part of the plan to stem losses at UCSF Stanford Health Care includes cutting the docs' money.

"Physician support [will total] $20.5 million in fiscal year 1998-99, ranging from $148,000 at UCSF to $290,000 at Stanford per primary care clinical employee," the audit states.

The Hunter Group is recommending that the average support -- including salaries and other research expenses -- for physicians at UCSF be reduced to $140,000 in fiscal year 1998-99, $125,000 in fiscal year 1999-2000, and $100,000 in 2000-2001. During the same period, the consultants recommend reducing the average support for Stanford doctors to $200,000, $150,000, and then $125,000.

Adding insult to injury, doctors and department chiefs all describe having been left out of the loop with regard to structure and cost-cutting, particularly on the question of closing all or part of Mount Zion.

"I'm saying to you that the savings [from closing Mount Zion] will not happen because faculty will leave," Dr. Laurel Hodgson, medical director of emergency services at Mount Zion, warned at the legislative hearing. "You are destining UCSF to no growth and if you have no growth, you die."

Dr. Laura Esserman, one of UCSF's top cancer specialists, echoed those feelings. Esserman is a key player in the new federally designated cancer center connected to Mount Zion.

"The idea is to have all the services [together] there," she told legislators. "If I had to run lab activities, administer the grants, see patients, and run up and down to Parnassus [UCSF's other hospital] ... I don't think I could tolerate that kind of atmosphere."

Of course, cuts to the academic side of things are also likely to further anger the faculty doctors. The corporation's turnaround plan includes a $12 million (up to 10 percent to each university) cut in support to the university medical schools.

The presidents of both universities are set to review the merged entities' structure and make a recommendation on its future Oct. 1.

In the meantime, corporate heads and their consultants continue to run the four hospitals under the USHC umbrella and try to stem their losses. The effort has led to some downright strange activity, the aforementioned laundry saga being a case in point.

Before the merger, UCSF had its own laundry facility at Oyster Point, a facility that had been created about a decade before, to wash the tons of sheets, robes, and other linens that hospitals require every year. The Stanford hospitals, meanwhile, contracted with an outside vendor for their laundry services. One of the first acts of the merged UCSF Stanford Health Care was to combine the laundry services of all four hospitals into the Oyster Point facility.

"By simply using UCSF's existing in-house laundry service, the merged organization expects to save $288,500 annually," Lou Saksen, head of general services for UCSF Stanford, said at the time. In fact, the corporation was so proud of how things were working at Oyster Point that it offered tours of the facility.

Strangely, by early this summer, everything had apparently changed. UCSF Stanford Health Care closed down the Oyster Point laundry operation and laid off the 90 or so workers who ran it. Instead, USHC contracted with Sodexho Marriott Corp. in Gilroy, again saying the move would save money. This time, Saksen said that contracting the laundry to Sodexho Marriott would save $1.9 million a year.

By mid-August, rumors began circulating that some sheets were coming back from the laundry -- headed for patient beds -- still stained with feces and blood. USHC managers flatly denied any such thing was occurring. But an Aug. 19 internal memo contradicts the official denials.

"At a Medical Surgical nursing division meeting held on August 12, there were several reports of linen noted to have fecal smears, blood, hair, dirt and tape," says the memo, which was written by infection control officers to Nick Gaich, a USHC administrator.

Questions have also arisen about whether Marriott is washing linens used on patient beds along with dirty laundry from animal research labs. (As research facilities, both UCSF and Stanford have facilities where diseased animals are studied.)

Asked about the mingling of human and animal laundry, a hospital spokeswoman said it has always been done that way. "We do not separate the linens used for animal care and patient care and we never have," says USHC spokesperson Laurie Itow. "All medical centers follow the same procedure."

But at least two former laundry employees told SF Weeklythat -- before the laundry service was contracted out -- human and animal linens were alwaysseparated. State regulations don't specifically spell out what is required in this area, other than to say "soiled linen shall be handled, stored and processed in a safe manner that will prevent the spread of infection."

In the Aug. 19 memo, the infection control officers stated "there is the concern regarding separation of linen that may have had contact with animal care procedures especially with respect to Q fever [a flulike sickness with which some animals at UCSF are infected]."

The infection control officers recommended that the linen from animal care and patient care be segregated.

When the laundry service was contracted out, Speier's office had asked that UCSF at least keep all the laundry equipment it owned at Oyster Point until the merger's future is resolved -- in case UCSF winds up doing its own laundry again.

But eyewitnesses say Sodexho Marriott has already taken small equipment, such as folding machines, sewing machines, and laundry carts, from Oyster Point. The equipment may well have been a part of the deal to contract out the linen, which would be perfectly legal. Except that, the laundry equipment belonged to the University of California and, under the merger agreement, was leased to USHC.

Underneath all the fray over management and contracting and service lines, the mess at UCSF Stanford Health Care is a tragic metaphor for the state of public health care. The suits that run the hospitals are trying to cut costs. The folks wearing the lab coats are trying to find out what causes cancer. The patients want clean sheets.

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