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1st
appeared 25 February 1999
Merger Compounded -- but Did Not Cause --
Current Campus Stresses, Says Debas
UCSF Stanford Will Have
Workforce Reductions
During his faculty address on Tuesday, Dean Haile Debas forecast a bright future for both
UCSF and UCSF Stanford Health Care, despite the storm clouds currently darkening the
skies.
Debas acknowledged in this mid-year review, which was attended by a capacity crowd at Cole
Hall, that some -- but not all -- of the "pandemic of stress" on campus is due
to the UCSF Stanford Health Care merger. In fact, Debas said, some pressures at UCSF have
been eased by the merger, especially in the areas of information technology and
pediatrics.
"The merger has been widely identified as the source of all the troubles and
anxieties in the clinical departments," said Debas. "While the merger has indeed
produced its share, there are other equally powerful pressure points completely unrelated
to the merger." Some of these factors include the dramatic reduction in government
reimbursement for health care services, changes in malpractice coverage, and the
"inconvenience and aggravation" caused by the Medicare audit and compliance
requirements, Debas said.
The growing pains -- or "friction costs" as Debas called them -- of merging with
Stanford's clinical enterprises have rippled through the campus' physical as well as
psychological realms. "The merger has exacted a steep psychological price, much
greater than we anticipated," Debas said. "Overnight the institution became
something different, and the change has been experienced as a loss, a loss to be
mourned."
The merger also presented management challenges, including the designation of Executive
Park as the UCSF Stanford home base. "The leadership...spends too much of their time
traveling from one site to another, and are not truly 'home' at either campus. This is
something we will be looking at," Debas said.
It wasn't all doom and gloom at the Dean's Faculty Address. Debas cited several positive
outcomes resulting from the merger with Stanford.
"UCSF Stanford Health Care has invested $100 million in information technology both
to address the Y2K problem, and to establish an integrated financial and clinical system
that will reduce costs and improve patient care," Debas said. "Of this amount,
60% will be invested in the North Campus, $35 million of which is for the computing
infrastructure here at UCSF. This is meeting a critical need on our campus caused by
serious underinvestment over the years in information technology. I do not see how UCSF
could have responded to its information crisis without the merger."
Debas also said that UCSF Stanford has provided $78 million to UCSF and Stanford medical
schools, most of it to support chair and new faculty recruitment and new clinical
programs. Of this, $5 million is new money with $2.5 million going to each school. UCSF
has decided to allocate $1.25 million of this money annually to support teaching, Debas
said.
"We believed then and we believe now that our best shot at surviving this assault was
by joining forces," Debas said. "The rationale for the merger is more valid
today as we face what I call the second revolution in health care." The first
revolution, managed care, began in earnest in the early 1990s and transferred risk from
the payer to the provider. The second revolution, which comes as the first revolution has
reached a plateau, are the Medicare cuts resulting from the Balanced Budget Act (BBA).
"What the guillotine was to the French revolution, the Balanced Budget Act of
1997 is to this revolution -- both deliver drastic cuts," Debas said. "Medicare
and Medi-Cal reduced reimbursement for clinical services and for graduate medical
education at the same time. It is anticipated that the report of the Bipartisan Commission
for the Future of Medicare, due to Congress on March 1, 1999, will recommend further cuts
in indirect GME funding, which is the portion paid to hospitals. We think the commission
will also recommend that direct GME funding, which is the portion that pays for teaching,
will be eliminated as an entitlement and put into the budget appropriations process."
As a result of the BBA, indirect medical education funding will be reduced by 29% and
Medicare payments will go down 10%. "In addition, it is estimated that we will lose
$2 million for every 1% of our Medicare patients that switch to Medicare managed
care," Debas said.
These problems are not unique to UCSF, where Medicare and Medi-Cal patients account for
50% of clinical activity. Many hospitals in California and throughout the US that serve
large populations of patients on Medicare and Medi-Cal are scrambling for ways to stay
afloat.
The government is not the only agency making the waters choppy for academic medical
centers. Under "capitated" managed care, health care providers are paid a set
rate to treat each patient. Currently, 6% of UCSF Stanford's patients are covered by
capitated managed care. For UCSF Stanford, every percentage increase in capitated patients
results in a $6 million loss of revenue.
In addition, a 3% gap exists between the cost of providing health care and what the
government reimburses UCSF Stanford for its services, UCSF Stanford officials said
Tuesday. Meanwhile, the costs of drugs, materials and supplies are rising rapidly. A $100
million shortfall for the year 2000 is projected due to these factors, they said.
Another stress at UCSF is that the faculty are faced with paying for their
malpractice coverage, per a July 1997 mandate from the UC Office of the President.
In addition to this hit on their wallets, the faculty's work is being burdened by
ongoing Medicare audits and compliance issues that have caused them to devote significant
time to chart documentation -- time that used to be spent seeing patients or teaching,
Debas said.
The pressures associated with planning the Mission Bay campus have also resulted in
additional work for faculty and staff, in the form of fundraising and planning. Anxieties
also abound around who will stay at Parnassus Heights and what will happen to Parnassus
after the new campus is built.
"A very exciting proposal has been submitted to the Chancellor," Debas said.
"As exciting as the prospect of a new campus at Mission Bay is, I want to assure you
that Parnassus will not be neglected or abandoned." Debas said that San Francisco
General Hospital Medical Center will be very much affected as the Gladstone and Gallo
Institutes move to Mission Bay. "We must develop strategies to mitigate that
impact," he said.
Debas also mentioned during his address that he will begin a six-month sabbatical on July
1, 1999. He will be going to Oxford University in England to finish writing a book and to
do research on international medical education and health care. He will return
January 1, 2000. Vice Dean William Margaretten will serve as acting dean. Holly Smith will
support him on matters related to Mission Bay, and Lee Goldman on issues dealing with UCSF
Stanford.
UCSF Stanford Will Have
Workforce Reductions
Because expenses are rising faster than their revenues, UCSF Stanford experienced a
first-quarter $10 million shortfall.
"We are now in a position that it's clear we can no longer sustain this kind of
loss," said Bill Kerr, Chief Operating Officer of UCSF Stanford, at the Academic
Senate Town Hall meeting that immediately followed Dean Debas' address. "We'll have
to make some fundamental changes in the way in which we provide care."
Kerr said that during the early implementation of the merger, many of the resulting
problems were solved by "throwing people at them," resulting in an unintended
growth in personnel. Now, Kerr says, a multi-pronged approach will be implemented to
assess where costs can be reduced. "Inevitably there will be reductions in the
workforce," he said.
Kerr said that other interventions to offset some of the organization's recent financial
troubles include: restricting overtime, travel and consulting expenses; reducing temporary
staffing and administrative expenses; identifying potential revenue increases related to
volume and prices; reducing costs through clinical resource management; reviewing programs
not central to its mission; and benchmarking all staffing expenses to create revised
budget targets.
To implement some of these strategies, UCSF Stanford will be asking for "meaningful
involvement" of the UCSF faculty and might revise the organizational structure to
assure accountability for financial results, Kerr said.
Links:
UCSF Stanford Health Care
Faces Fiscal Challenges
UCSF School of Medicine
UCSF Stanford Health Care
Source: Paula Murphy, Daybreak
editor |
