Volume 23 • No. 8 • August-September 1999
C O L U M N S:
N E W S x I T E M S:
University presidents call for restructuring of UCSF Stanford Health Care
Stanford and the University of California are conducting a joint review of the UCSF Stanford merger with an eye to restructuring the organization in a way that might better serve both partners.
The review was initiated on August 5 by Stanford President Gerhard Casper and UC President Richard Atkinson, who said that while the merger has proved valuable in some respects, the "current structure has not given us the flexibility to deal with the complexities unique to our respective institutions."
Four days after the announcement of the review, Peter Van Etten, president of UCSF Stanford, and William Kerr, the organization's chief operating officer, offered their resignations, which became effective August 16. Isaac Stein, chairman of the board of directors of UCSF Stanford Health Care, has put the Hunter Group in charge of UCSF Stanford for the interim. The Hunter Group is a St. Petersburg, Fla.-based health care consulting firm. In the meantime, the assets, accountability and management of UCSF Stanford will revert to local control at the north and south campuses, Eugene Bauer, dean of the School of Medicine, informed the Stanford faculty at an August 11 meeting.
"The goal of the next six weeks is to restructure the organization in a way that will return the major responsibilities of the organization to local control," Bauer said.
While successful components of the merged organization, such as integration of children's services, information technology, joint contracting and purchasing, will be retained, day-to-day operations will be managed at a local level, Bauer said.
"If this entity is preserved, the central functions will be massively reduced in scope. Stanford will be responsible for its own well-being - expenses and profits, if there are any," Bauer told the faculty. He praised Malinda Mitchell, the chief operating officer at Stanford, and said Stanford will continue to benefit from her excellent leadership.
Bauer said he hopes that the Hunter Group would consider Stanford's academic and clinical missions while they construct a new business plan, which is expected to be completed by October. He tried to reassure faculty members that their voices would be heard during this period of restructuring and promised he would keep them informed of organizational changes as they occur.
At the same time a new business plan is being devised, staff members from both campuses are looking at various options for restructuring the organization and will deliver their recommendations by Oct. 1. The review is being directed by Mariann Byerwalter, vice president for business affairs and the chief financial officer for Stanford University, and William Gurtner, vice president of clinical services development at the University of California.
The review comes during a period of growing financial losses at UCSF Stanford, which are expected to reach $60 million by the end of the fiscal year. The organization has nearly completed implementation of a plan to cut $170 million, including a reduction of 2,000 full-time positions, to enable it to break even next year.
A major portion of the current year's losses - $56 million - is related to financial problems at UCSF/Mount Zion Medical Center in San Francisco. UCSF Stanford officials had considered various money-saving options for Mount Zion, including possible closure of inpatient services and the emergency room, but their proposals met with widespread objections from the community and from local and state lawmakers.
Haile Debas, dean of UCSF School of Medicine, said in a UCSF faculty meeting August 11 that he would recommend that Mount Zion remain open in its current form until it can be replaced by a new hospital in five to seven years. To accomplish that, however, UCSF would have to return to public control, so that it could obtain public funds for support of the medical center, Debas told the faculty. That would demand a restructuring of UCSF Stanford Health Care, Debas said.
"The current difficulties with existing issues are relative to our ability to move more effectively in the public and private sectors," UC's Gurtner said. "We have been unable to take advantage of some funding opportunities, and we want to explore whether it's because of the public/private issue."
The restructuring of UCSF Stanford could take various forms, Malinda Mitchell told medical center managers at an August 5 meeting. The universities could choose to create a holding company to manage all aspects of the organization, form some kind of joint venture or as a last resort, dissolve the merger altogether, she said.
Mitchell said she believes the merger has had some major benefits and that these should be preserved. Patient volumes and patient satisfaction have remained high, purchasing and other costs have been significantly reduced, outside contracting opportunities have increased and new information technology systems have been installed, among other things, she said. The university presidents also encouraged the continuation of some of the clinical and academic collaborations that have been fostered by the merger, including those in children's services, gynecologic oncology and laboratory services.
"There are some positives that we don't want to lose," Mitchell said. She noted that when the merger took place in November 1997, it was a merger of equals. But, "things aren't as equal as they were in the beginning. Things have changed," Mitchell said.
While UCSF's losses as of June 30 stood at $56 million, largely as a result of Mount Zion's financial problems, losses for the same period at Stanford and Packard totaled $6 million, she said.
Next year, UCSF is projected to lose $20 million, while Stanford is expected to have a $20 million profit, Mitchell said.
With a restructuring, "That would allow for enough independence so the profit and losses stay with each organization,"avoiding a situation in which one campus is subsidizing the other, Mitchell said.
Dean Bauer still cautioned that Stanford cannot be complacent, as the health care marketplace remains highly unpredictable. "Stanford must keep its feet to the fire," he told the faculty.
